Land tax too little too late?

Herald: The Land Tax proposal, too little too late?

We haven’t got any land tax yet so it’s not even too little, it’s currently nothing but a possibility.

The Herald also addresses the land tax proposal in their editorial today:

Vacant land the proper focus for tax

The Prime Minister’s talk of a new tax on land is a sign that he is worried by the resurgence in house prices, as he should be.

A land tax, should it be adopted, will need to apply to all investment housing, and arguably it should.

Not just foreign owned property, but this gets a bit complex with local property investments.

Land is the precious commodity, not housing. Land values are the rising element in real estate prices.

The Government has long blamed the scarcity entirely on the Auckland Council’s efforts to contain the city’s sprawl but it was never that simple. A great deal of land zoned residential spends many years lying unused as its value appreciates. Vacant residential sites can be bought and sold and amalgamated and sold again, returning good profits for no investment in buildings or any other improvements. Its value purely reflects the popularity, or potential popularity, of its location, which in turn reflects the investment others have made in that area, individually by building homes, collectively by supporting schools and other public amenities.

An annual land tax could recover some of the added value that owners of idle land are reaping for no effort on their part. Just as important, it could entice them to build on the land in order to obtain more value from it.

Landowners will point out they already pay a land tax in the form of rates to local bodies, which all households pay. But an additional land tax was studied by a tax working group for the Government six years ago as a way of taxing those who can avoid income tax and found its value for that purpose limited because, like capital gains tax which the group also considered, it is liable to be riddled with political exemptions. John Key would exempt houses owned by New Zealanders living overseas – trade agreements permitting – if the tax is to be imposed only on non-resident buyers.

But there is no case for exempting expatriates, or indeed investors domiciled here. If a land tax is to help increase the supply of houses it needs to be applied to all property lying vacant and accumulating unearned wealth.

But it sounds like a land tax is only under consideration so is presumably quite a way off, if it happens at all.

Unless the Government is trying to hide their intentions in next month’s budget.

 

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11 Comments

  1. Blazer

     /  27th April 2016

    a succinct cartoon,that really says it all from a focus group driven ,reactive administration.

    Reply
  2. Brown

     /  27th April 2016

    But what if China says “No”?

    Reply
    • Blazer

       /  27th April 2016

      plenty of Americans buying too.

      Reply
      • artcroft

         /  27th April 2016

        Really? You must have an advanced copy of the info Key is waiting for. Be a good chap and pass it along to him and us so we can all have a look. Unless you’re simply going to spin some I know a mate, who know a friend BS.

        Reply
        • Blazer

           /  27th April 2016

          Keys feeble excuse for the last few years ,not enough data, was convenient,….don’t waste your sarcasm on me.

          Reply
  3. duperez

     /  27th April 2016

    “… what John Key proposes is not a “new tax”, but a proposal to reinstate a limited version of our old land tax. The old land tax used to be the backbone of government revenue stream and the key factor mitigating speculation and rising inequalities. Gradually weakened in response to special interest pressures throughout the 20th century,”

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11629054

    Anyone know who the “special interest pressures” were?

    Reply
  4. Goldie

     /  27th April 2016

    First, there is already a land tax – it is called “rates”.
    Second, what is the problem? If the problem is that Auckland house prices are rising too high, then a nationwide land tax would, (a) do nothing for overheated Auckland house prices (which are a function of supply and demand), and (b) be a pointless tax on the rest of New Zealand (and likely to be very fiercely resisted by farmers who have significant land but marginal and volatile profitability).

    This is a media beat up based on a throwaway comment by John Key.

    Reply
    • duperez

       /  27th April 2016

      A “throwaway” comment? Like “your ad lib lines were well-rehearsed”?

      Reply
  5. Goldie

     /  27th April 2016

    “The old land tax used to be the backbone of government revenue stream and the key factor mitigating speculation and rising inequalities. Gradually weakened in response to special interest pressures throughout the 20th century,”

    It is also complete and utter bollocks. Whoever wrote this is just making stuff up.

    The biggest source of revenue by far was customs duties (about half Govt. revenues), railway charges and stamps (a big revenue earner) – the land tax made less than 10% of Government revenues. Either way, the NZ government in the 19th century was absolutely tiny. The idea that it mitigated speculation is ridiculous, as the history of boom-busts and rampant land speculation in the 19th century shows. The land tax was replaced because it was insignificant anyway, and couldn’t raise anything like the revenues needed to support the welfare state, let alone the enormous costs of WW1.

    You don’t have to believe me – the old Yearbooks detailing Govt. revenues is online on the Stats website – you can see for yourself that the NZ Herald writers are just making stuff up. Serves you right if you believe anything that is printed in the NZ Herald.

    Reply
  6. Pantsdownbrown

     /  27th April 2016

    The debate is wasted – anybody with good insights into the housing market knows that it is New Zealander’s themselves (mainly investors) that are the major force driving up Auckland housing prices.

    Reply
    • Gezza

       /  27th April 2016

      I think there should be a limit on how much land can be bought by foreigners. Beyond that, they can only lease.

      Reply

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