- 29 April, 2016
- Land, Tax
The evidence on foreign buyers could be just two weeks away.
A land tax to dampen demand by foreign-based buyers would be a complete flip in the Government's insistence that overseas speculation has not been a problem in the heated property market, and a switch from its focus on increasing supply.
The Prime Minister told the Herald any land tax could also apply to Kiwis abroad with property in New Zealand after an exemption period of perhaps three years away.
But such an exemption could potentially contravene New Zealand tax treaties with other countries.
If it did, the tax would apply at the same time to all foreign-based buyers who are tax residents elsewhere, including Kiwis abroad.
"Subject to our capacity to do so, New Zealanders living abroad would be exempt but you could do it for a period of three years at which point if they retained the property, they might have to start paying [the tax]."
Why is the Government suddenly talking about a land tax on foreign-based property buyers?
It wants a Plan B in case data due soon shows a large number of overseas-based buyers in the New Zealand market.
Why doesn't it just ban them?
That would be a problem in some of New Zealand's free trade agreements which say foreign investors should be treated the same as local ones.
What about applying stamp duty?
That is a problem in the Korea FTA; a land tax is allowed but stamp duty isn't.
What would the TPP allow or prevent the Government doing if it is passed?
It allows the Government to impose both a land tax and a stamp duty on foreign-based buyers from TPP countries but not to ban sales.
What about a capital gains tax?
After opposing CGT for years, the Government passed one last year on property sold within two years of purchase, other than the family home, inheritance or matrimonial property.
What new data is the Government getting?
From October 1 it required tax residents elsewhere buying property in New Zealand to supply their equivalent of an IRD number.