Is the Government looking to bring in a capital gains tax by stealth? The Act Party thinks so

The Government is being accused of planning to introduce a capital gains tax by stealth, after Finance Minister Grant Robertson asked Treasury for advice on extending the brightline test.

The Act Party has raised an eyebrow at the development, given Jacinda Ardern has already ruled out implementing a capital gains tax (CGT) while she is Prime Minister.

Yesterday, Robertson revealed a letter he had written to Reserve Bank Governor Adrian Orr, which asked him to consider adding house price stability to its remit.

In addition to this, he said the Government was looking into a number of demand-side measures – this included extending the brightline test.

The brightline test, introduced by the then-National Government in 2015, is in many ways similar to a CGT.

It means that if someone sold a residential home within two years of its purchase, they are required to pay tax – but there are a number of exceptions, such as if it was a family home.

In early 2018, the Labour Government extended the brightline test to five years.

A CGT is a broader tax, lumped on the sale of a house but without a fixed time period like the one mandated in the brightline test.

When the Tax Working Group was asked to investigate implementing a CGT in New Zealand, it was told that it would not apply to the family home.

But, despite the group ultimately recommending New Zealand should adopt a CGT, Prime Minister Jacinda Ardern ruled it out.

“Under my leadership, we will no longer campaign for, or implement a CGT – not because I don’t believe in it, but because I don’t believe New Zealand does,” she said in April 2017.

Act leader David Seymour said today that by asking the Treasury to investigate extending the brightline test, “Labour is planning to introduce a CGT by stealth”.

Seymour points out that when the brightline test first went through Parliament, he had said that it might extend far outside the two years it was originally mandated for.

“It is a measure that will grow from two years to five to 10 to 15 years. You watch: it will eventually apply to a wider range of homes. It is the acorn that the National Party has planted that will grow into a full-blown CGT.”

Despite this, Act voted in favour of the bill at its third reading, in 2015.

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