Is the government looking to introduce a capital gains tax on the sly? The Act Party thinks so

The government is being accused of planning to stealthily introduce a capital gains tax after Finance Minister Grant Robertson asked Treasury for advice to extend the bright line test.

The Act Party has raised an eyebrow at development, given that Jacinda Ardern has already ruled out implementing a capital gains tax (CGT) while she is Prime Minister.

Yesterday, Robertson revealed a letter he had written to the Governor of the Reserve Bank, Adrian Orr, asking him to consider adding housing price stability to his tenure.

In addition to this, he said that the government was studying a number of demand-side measures, including expanding the bright line test.

The bright line test, introduced by the then National Government in 2015, is in many respects similar to a CGT.

It means that if someone sold a residential home within two years of its purchase, they must pay taxes, but there are a number of exceptions, as if it were a family home.

In early 2018, the Labor government extended the bright line test to five years.

A CGT is a broader, pooled tax on the sale of a home but without a fixed period of time as required in the Brightline test.

When the Tax Working Group was asked to investigate the implementation of a CGT in New Zealand, it was told that it would not apply to the family home.

But even though the group eventually recommended that New Zealand should adopt a CGT, Prime Minister Jacinda Ardern ruled it out.

“Under my leadership, we will no longer campaign or implement a CGT, not because I don’t believe in it, but because I don’t think New Zealand will,” he said in April 2017.

Law enforcement leader David Seymour said today that in asking the Treasury to investigate the extension of the bright line test, “Labor plans to introduce a CGT on the sly.”

Seymour notes that when the bright line test first passed in Parliament, he said it could extend well beyond the two years for which it was originally ordered.

“It is a measure that will grow from two years to five, to ten or fifteen years. Look: it will eventually apply to a wider range of households. It is the acorn that the National Party has planted that will grow in a blown CGT.”

Despite this, Act voted in favor of the bill on its third reading, in 2015.