Not as much tax in residential property as TWG says
Friday, March 19th 2010, 4:08PM 
3 Comments
I wasn’t expecting an Auckland University think tank on retirement income was the sort of crowd who would drop a bombshell on the Tax Working Group, but that’s exactly what they did yesterday.
The Retirement Policy and Research Centre, headed by well-known superannuation commentator Michael Littlewood released a paper which questioned the accuracy of one of the TWG’s numbers on the property market. By questioning the group’s predictions on the size of the residential investment market it also casts significant doubt over the assumptions made about how much revenue the government can raise by putting new taxes on property investors.
To his credit Finance Minister Bill English was quick to comment on the research and even acknowledged it may mean changes to their thinking.
He says Treasury analysis was showing that changes to property tax would make a smaller contribution to government tax revenue than what was estimated by the TWG.
Pity his side kick Peter Dunne on the revenue side hasn’t listened. He made a speech today with the same old line that changes to the tax treatment of property were likely, to make the rules fairer and more equitable for all taxpayers.
Some of the questions one has to ask is what other fundamental errors did the TWG make? Also one wonders whether they were in fact just a ginger group set up to stir up a debate and prepare Kiwis for radical – and unpopular changes – as opposed to an objective working group.
I know last week’s Blog, where we talked about some numbers produced by the NZ Property Investors Federation. It calculated that if the government goes ahead with changes to depreciation rules for residential property investment then rents are likely to rise. Landlords, it estimates, would lose on average $1750 a year if they lost the tax deduction and this amounted to $34 a week, which would be passed on to tenants.
These calculations provoked a response that that this numbers from the federation where use political statements lacking analysis.
Judging by what we have seen from the Retirement Policy and Research Centre there are questions that need to be asked about the TWG and its plans.
The good news out of this is that maybe there is hope that the government will not be as harsh on the residential property sector as first indicated. We will know on May 20 – Budget Day.
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Comments from our readers
On 22 March 2010 at 12:15 pm Jay said:
Any figures released must be scrutinised. I would like to know whether Mr Littlewood owns any rental properties before judging the validity of his numbers. Indeed, the TWG's figures are only estimates only. No-one will know what the tax savings are going to be until the law is implemented. On 24 March 2010 at 9:32 am Michael Littlewood said:
Jay
I am unsure what the relevance of the question is but it so happens I do not own any rental properties, residential or otherwise. But that doesn't change the numbers. Numbers are numbers. I suggest you read the original PensionBriefing.
On 24 March 2010 at 1:18 pm anita said:
Jay - your statement "no-one will know what the tax savings will be until the new law is implemented" is indeed a shocking statement, which just goes to prove any changes should not be implemented until correct research/information/figures/stats are accurately established to know if there is actually a problem and not just all talk!! The information/figures are simple not accurate to make any assumptions let alone law. What is even more shocking is that other government departments are using the same information/stats and also possibly incorrectly assessing it. What a mess!!! Commenting is closed
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