Newman Muriel: Income Tax Bill — Instruction to Committee In Committee Third Reading 
Newman Muriel: Income Tax Bill — Instruction to Committee In Committee Third Reading 
[Volume:616;Page:12096] 
Dr MURIEL NEWMAN (ACT) 
: 
 I take a call with regard to the Income Tax Bill and in particular I will draw the Committee’s attention to clause CB 1 which deals with the amount of money that people derive from a business. In particular it states that the amount that a person derives from a business is regarded as income of that person. There is an exemption for amounts of a capital nature. The Minister in the chair Dr Michael Cullen can correct me if I am wrong but this is the clause where if section 2 which is the exclusion were removed it could be used to introduce a capital gains tax as I understand it. The exclusion is there so this clause does not include capital and therefore this bill does not introduce a capital gains tax. 
But I will use this opportunity to talk a little about the fact that when a rewrite bill like this Income Tax Bill is in front of Parliament it is an opportunity for people to put up ideas and suggestions. A little while ago under the Official Information Act we asked the Minister whether anybody had been recommending capital gains taxes or any other such mechanisms. We received a response indicating that Mr Copeland from United Future had written to the Minister of Finance to suggest that a capital gains tax on residential rental properties would be a good idea. 
At the time Mr Copeland was very concerned that people’s investment in rental properties was crowding out their investment in other business opportunities so he suggested that the Minister of Finance might like to consider the idea of introducing a capital gains tax on rental properties. That would of course be of enormous concern to hundreds of thousands of New Zealanders who invest in rental property these days often as part of their superannuation investments to help fund their retirement. 
I am pleased to say that when the Minister’s advisers at Treasury looked at this request from Mr Copeland and considered the pros and cons of introducing a capital gains tax they said it would be difficult because it would be quite hard to establish whether when somebody invested in a rental property he or she was investing in the long term—in other words with no intention to sell it—or in the short term with a desire to turn it over realise the capital gain and maybe reinvest that money; in effect to trade in property. So the officials advising Dr Cullen suggested to Mr Copeland of United Future that at this stage a capital gains tax was maybe not the right thing to do. 
 But then they did go on to say that the depreciation rate on properties might be a more fertile area for the Government to look at if the Government was going to consider trying to gain more income from the rental property investment market. So I understand that the Minister is looking at depreciation rates. He is now looking at halving depreciation rates on rental property investments—the amount they can claim back. I wonder whether the Minister wants to comment on whether this was partly stimulated by Mr Copeland’s suggestion but I am pleased to see as this very large Income Tax Bill goes through that the spectre of a capital gains tax has been put in the coffin. Mr Copeland might like to reflect on whether raising these issues is sensible given that it is discoverable under the Official Information Act.