Leaders clash over tax plans

05:12, Sep 04 2014
CAPITAL IDEA: The Labour Party says a capital gains tax is a "must do"

Labour leader David Cunliffe says a capital gains tax is a "must do" but he has backed away from his comment yesterday that it would apply from a month after a house was inherited.

He told reporters today the one month period of grace was "an example he was given" and the fine detail would be worked out by an expert advisory group Labour would set up.

"We are happy to take expert advice on that."

Other countries had different rules on the period of grace. In Australia it was two years, some countries used it from the point of death, others from the point of settlement.

"There will be a grace period from the point of death or settlement where no capital gains tax (CGT) is payable on a family home."

He said CGT was fair and the Government did not like it because it affected property owners and speculators.

It would protect the revenue base and help investment flow to where it did the most good.

"That's why it's a must do."

He tried to turn the argument back on Prime Minister John Key saying he should explain why he exempted property speculators and why he was promising tax cuts now before the books were back in the black.

"They are starting to spend before they've earned."

Key, however, continued to attack the policy, claiming Cunliffe was expecting Kiwis to vote on a plan when it was unclear how it would affect their largest asset, their home.

"By any definition it's a complete and utter mess. They've had the policy for four years. In the last 36 hours David Cunliffe has made a number of either mistakes or he's been unable to answer some really basic questions about the family home."

Key seized on comments Cunliffe made that CGT would apply a month after the death of a parent triggered an inheritance.

Key said today that whether it was one month or longer, it showed the "minefield of complexity" of capital gains tax.

"Either you set [it] up in a position where you can drive a bus through it, and the policy doesn't work, or alternatively New Zealanders don't know how it would affect them.

"This is a key policy for Labour and they can't tell New Zealanders when it comes to their number one asset, the family home, how it will be treated."

Key said Cunliffe was the architect of the tax as he was finance spokesman when it was developed, yet it seemed Labour would not provide key details of the policy until after the election.

"Yesterday he [Cunliffe] told New Zealanders 'you have one month to sell your parents' house after they have passed away and if you don't sell it within that timeframe, it starts to accrue capital gains tax'. It's not just how big that tax is, it's the complexity of complying with that," Key said.

"So you've just lost your parent or parents and the Labour Party is saying the number one priority should be going off to your accountant."

Key dismissed comparisons with National's fiscal plan, which was expected to signal tax cuts without giving any detail of how large they would be. He said he would give the amount of headroom National believed it had, the possible time frame and caveats which might force a change of plans.

There was "absolutely no question we are going to keep the country in surplus," Key said when asked if recent drops in dairy payouts and lower long term forecasts for commodity prices would mean there was less scope for tax cuts.

While National is not expected to detail how much individual taxpayers may get in the hand as a result of the possible cuts, Key said people would work it out.

"I'm sure lots and lots of either economists or political commentators will go and work those numbers out to what they might mean," Key said.

"It won't be large but it will be a step in the right direction."