21-01-2010
Land tax must be universal, say property investors
NZ Herald
Real estate industry insiders have mixed views on some of the Tax Working Groups recommendations, which are designed to start taxing property investments harder.
A land tax, along with an axing of property owners rights to claim depreciation on their buildings, is included in recommendations put forward by the group.
Martin Evans, president of the Property Investors Federation of New Zealand (PIFNZ), said that as long as the land tax was universal, it would be a "fair tax".
He said the Government would find a way to exempt from the land tax properties with low per-hectare values.
"Which rules out farms and iwi, which gets [the Government] around that one," Evans said.
He said the axing of property owners rights to claim depreciation could hurt some investment property owners, who often factored the depreciation they could claim back into "the equation" when buying a property.
"So if anything like that is introduced it's going to have serious effects on them."
Evans said axing depreciation claims could send some Kiwi investors overseas, where they could get more value from their investments.
He said it was a common misconception that rental property owners do not contribute to tax revenue.
The statement that rental property owners reduce tax available to Government by NZ$150 million is often stated as fact, but is actually quite misleading, Evans said.
"The often quoted fact is an anomaly that occurred in 2008 when interest rates were at their peak, making it extremely difficult to provide rental properties," he said.
He said depreciation claims by rental property owners allowed them to keep rental costs low, and if their ability to claim were to be withdrawn, they may be forced to sell their properties.
This could leave Kiwi workers - a third of whom live in rented properties - without a roof over their heads, said Evans.
"To target landlords and tenants with the cost of paying for these tax deductions is completely unjust," he said.
Realestate.co.nz CEO Alistair Helm was upbeat about the Tax Working Groups possible recommendations.
"I think there's great economic benefit that everyone pays fairly in tax systems," he said.
"The depreciation allowances on rental properties have certainly been an advantage beyond other investment opportunities."
He said he did not believe any of the proposed tax changes would dramatically change the property market in New Zealand.
"I think our market is still balanced between investment properties and traditional home ownership, and traditional home ownership is clearly not affected by these taxes," said Helm.
By Christopher Adams
Source: NZ Herald