Stephen Knight

Why do you think New Zealand should have a capital gains tax?

Well, I did see that the tax working group estimated that taxing more income from capital gains could raise $8 billion over the first five years.

It's huge.

Okay.

Now, the way that I think about tax, though, if I can jump in here with my argument against the capital gains tax.

If we think about taxing cigarettes, why are we doing that?

We tax cigarettes.

We want to make them more expensive so that fewer people smoke.

If we think about alcohol, okay, we tax that because we want less drinking.

Some countries tax sugar because they want people to eat less sugar.

And so I think we're all comfortable with this idea that if you tax something to either increase the price or decrease the return from doing that activity, you get less of it.

And so the way I think about it is, well, if we want people to be wealthy,

If we're going to tax wealth creation, you're going to get less wealth creation happening.

And that same tax working group we just mentioned before, they did warn that extending a capital gains tax would both increase the complexity of our tax system and potentially bring in higher compliance costs because it's very easy to tax income, right?

It's very difficult to figure out, well, okay, we're going to tax the capital gain.

That's going to happen when somebody sells their property or when somebody sells their business.

But there are sales costs involved with that.

There are other costs as well.

Okay, are we going to tax inflation as well on top of that?

It just becomes a lot more complex, whereas taxing income is very, very simple.