The list of those in support of a capital gains tax has grown as Labour considers what it will campaign on in 2026, writes Stewart Sowman-Lund in today’s extract from The Bulletin.
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The tax options on the table
Labour leader Chris Hipkins is currently in the United Kingdom where, reported the Herald’s Jamie Ensor last week, he is meeting with members of the new British Labour government. It comes as the party back home grapples with what to put forward to the electorate as part of its 2026 election campaign. And so far, many of the questions surround tax. Speaking to Newstalk ZB’s Ryan Bridge earlier this morning, Hipkins wasn’t prepared to get too into the weeds around what his party could campaign on. But, writing for The Spinoff this morning, Max Rashbrooke has picked out and broken down the most obvious (and some less obvious) tax options on the table for Labour’s forthcoming election campaign.
The “mainstream” option, he suggested, was the long-debated capital gains tax. New Zealand is virtually the only developed country that does not systematically tax capital gains, writes Rashbrooke, and “no one has ever satisfactorily explained why we remain a holdout”. A wealth tax is a more radical option and would be levied on existing assets as opposed to just the profits from selling them. Both will undoubtedly be considered as Labour prepares for 2026 – and support is coming from some unexpected places.
The debate heats up
A CGT and/or wealth tax has been rule in rule out fodder for Labour for some time now. It’s the issue that won’t go away. For the government, picking at Labour over tax will undoubtedly be a critical strategy. But as more and more people throw their weight behind some form of tax on capital gains, how sustainable will that approach be? Toby Manhire has compiled a fairly comprehensive list of everyone championing a CGT, and you’d have to say it makes the argument for putting it back on the table quite compelling.
Among those in favour, Mainfreight co-founder and rich lister Bruce Plested who told RNZ’s new webseries Rich that he supported a wealth tax, though caveated that by saying he was concerned the government of the day could “squander” the income raised. On another RNZ programme, 30 with Guyon Espiner, ANZ chief executive Antonia Watson said the time had come for a CGT. “In this country, people are investing in housing for the purpose of getting a capital gain on it. And if that’s the purpose of it, why not have that as part of the tax take?” (Christopher Luxon wasn’t so convinced, reported RNZ’s Craig McCulloch: “I love it that the CEO of a big bank from Australia wants to take more money off New Zealanders,” the PM said.)
Recent research based on OECD data and shared here by Bernard Hickey for The Kākā showed that the richest New Zealanders currently pay just a half to a third of the tax rates paid by equivalently rich people in other countries, largely because of how our tax system operates. The IRD is currently consulting on the future of the tax system, including whether a CGT or similar should be introduced. The OECD and the International Monetary Fund (IMF) have also, on more than one occasion, called for a CGT, as Brent Edwards reported in this paywalled report for the NBR. Nicola Willis discarded that advice at the time, telling parliament: “I can confirm there are three things that are certain in this world: death, taxes, and the IMF recommending a capital gains tax.”
A long-debated loophole
Meanwhile, a long-questioned tax loophole relating to companies masquerading as charities, and therefore exempt from paying tax, could be closed by the government. Earlier in the month, the Herald’s Thomas Coughlan reported that finance minister Nicola Willis said it “was on the tax policy work programme”, while the revenue minister Simon Watts recently told The Press it remained “under consideration”. Earlier in the year, prime minister Christopher Luxon said he was “quite open” to it and while it wasn’t a focus, “we will certainly be looking at things like that this term”.
That language all suggests we could finally see some movement on something that has been discussed and debated for decades. In the 1980s, a loophole was closed to stop “some individual taxpayers [avoiding] tax on their business income through the formation of so-called… ‘one-person’ charitable trusts”, reported The Press, noting that the “measures were aimed at removing the anomaly of the contrived tax-exempt status of businesses ostensibly conducted as charities”. But churches and “recognised” charities were left alone.
Could Labour get there first?
Before last year’s election, The Spinoff’s Toby Manhire argued that tackling the charity and churches loophole could have been a crafty move by National as it mulled how to fund its pricey tax cut package. That ultimately didn’t eventuate. But could Labour pick it up? The UK, where Hipkins is currently on his policy tour, closed the loophole over a century ago. Speaking to media last week, Hipkins said that charities engaging in commercial activity for profit should pay their share of tax. “We need to be careful we’re not making life more difficult for genuine charities, but where they are operating as commercial enterprises, I think that is a loophole that needs to be closed.”
Will either party put it squarely on the agenda?