Today’s Labour leaders must simply lack the spine which led Sir Bob Hawke and Paul Keating to introduce just such a CGT regime to Australia in 1985.
Jacinda Ardern baulked when the late Sir Michael Cullen’s recommendations on this score set the hares running.
Ardern was — and is — blessed with superior communication skills. But she took the Cullen recommendations off the table during her prime ministership rather than fine tune them and make the case to New Zealanders to adopt a pared down regime.
The opportunity is there now for Hipkins to calmly make a logical and moral case for New Zealand to finally adopt a comprehensive capital gains tax regime following the next election.
Particularly as Inland Revenue’s findings in their survey of New Zealand’s most wealthy families do invite a policy response.
You don’t have to move to a wealth taxation regime where unrealised gains in asset prices are taxed each year. This can lead to a disastrous outcome when markets slide, as most governments will have priced in the appreciation in asset values, spent the additional taxation they received, then find themselves with a large revenue hole if the unrealised asset losses have to be absorbed, thus reducing the government’s tax take.
Far simpler to adopt a regime where taxation is applied to the income realised on the sale of houses and commercial properties, farms, businesses or other assets such as art, and a fair formula can be applied.
It’s difficult to understand why New Zealand remains an outlier in this area.
It’s tempting to run a thought experiment to consider whether the significant numbers of politicians who do own considerable assets, judging by their disclosures to Parliament, do in fact let personal interest in retaining the status quo override the need to adopt the kind of regime which is commonplace in the Western world. They should be questioned on that.
When the Hawke/Keating Government introduced a capital gains tax in Australia on September 20, 1985, the CGT applied only to assets acquired on or after that date, with gains (or losses) on assets owned at that time, called pre-CGT assets, not being subject to the tax.
It’s bounced about a bit over the years and has been fine-tuned by successive governments.
But here’s the thing. This capital gains tax regime has not deterred waves of New Zealanders from moving to Australia to make that country their home. They know it is rational and fair.
And besides, the tax probably acts as a motivator to be productive and make more wealth rather than passively sit on assets as is frequently the case here.
But successive Labour prime ministers here have baulked at the chance to take the moral high ground and lead on this
That very same Hawke Government also laid the ground for the introduction of compulsory superannuation in Australia in 1991, ensuring that the Australian funds industry built up huge capital reservoirs which paved the way for a good deal of prime New Zealand companies to be acquired.
Cullen, who was the architect of KiwiSaver, argued for it to be made compulsory in 2017 — nothing has happened.
The Australians are gradually moving to lift the pension age from 65 to 67 — but again, nothing has happened here yet.
There were some great moments in Brisbane last weekend.
They included Albanese and Hipkins standing together, shoulder to shoulder, on Sunday singing Advance Australia Fair at the conclusion of a citizenship ceremony in Brisbane.
Some 200 new Australians — many, if not most of them Kiwis — lustily sang along the Australian national anthem. How could these new Australians not rejoice in being “one and free”?
And what about the invitation to those “who’ve come across the seas” to share Australia’s boundless plains and “with courage let us all combine to advance Australia fair”?
The anthem was apposite.
The direct path to citizenship will clear the way for New Zealanders who’ve been in Australia for four years and kept their noses clean to become Australians.
Finally, a reversal to fairness between our nations.
Now let’s see what our politicians can do here.
