Govt identifies problem, let's see the solution

Government identifies problem, let's see the solution, say PEC

In commenting today that "there is some evidence at the moment that the recovery could consist of a pickup in housing," Finance Minister Bill English went on to tell reporters that "now that's more of the problem than we had before and it would be a concern particularly if it goes with a high exchange rate that punishes our exporters."

Productive Economy Council spokesman Selwyn Pellett says that while the government is 100% on target in identifying the problem that real wealth creation for the country can only come from exports, the PEC remains unconvinced about its commitment to solving it.

"Real economy jobs and incomes only flow from investment in that sector and until we remove the tax bias on property no government can truly say they are doing all they can to solve the problem," says Pellett. It's also true that a hot housing market here affects the carry trade and drives the NZD up so it has a double effect, says Pellett.

The Productive Economy Council however welcomes Bill English's statements that he is prepared to look at Capital Gains tax even though John Key has described it as an onerous tax.

"Clearly there are divergent opinions within the Government benches but as long as everyone is voting in the national interest we are confident that New Zealand will see the introduction of Capital Gains Tax on secondary property within the next six months," says Pellett.

The country has been slow to wake up to both the damage property speculation has caused our economy and the injustice of the tax treatment. The current tax laws are nothing short of a "poverty tax" where a property speculator can claim the operating shortfalls on a rental against his or her PAYE.

"This means those not engaged in property speculation - 90% of the population - are picking up the extra tax burden required to meet the government's tax revenue targets. Worse, as we are currently in deficit we are actually borrowing to give these deductions causing a double insult to non-speculators as they get to inherit a larger government debt to put money into someone else's investment vehicle," says Pellett

"It is true that the current tax laws, well policed, have the teeth to deal with this problem but the reality is that the policing is just too difficult when its tax treatment is based purely on intent. Intent is a very big hole to crawl through and no equivalent size tax loophole exists anywhere else in our tax system and it's just good governance to shut it down and make compliance much easier," he says.

"We hope that Bill English and John Key can quickly come to agreement on this issue as we are getting mixed messages, while more and more exporters are hitting the wall. Our dairy sector is in a power of hurt and if we let property speculation drive up both interest rates and the dollar, then we are not managing the economy based on national interest but bowing to the self interest of small but powerful factions," says Pellett.

ENDS

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