Nicola Willis Slams Labour’s Capital Gains Tax Plan: ‘It’s a Terrible Idea’

Finance Minister Nicola Willis stands in for PM’s weekly interview to attack Opposition policy, while tax experts and the Deputy Prime Minister offer contrasting views.

Finance Minister Nicola Willis has labelled the Labour Party’s newly proposed capital gains tax (CGT) as a “terrible idea” and a “massive tax” that would put the New Zealand economy at risk.

Labour has announced it will campaign on a new, targeted capital gains tax covering only property—specifically excluding the family home and farms—to help fund a new healthcare initiative: three free doctor visits for every New Zealander via a new “Medicard” scheme. The tax would be set at a rate of 28 percent and would not be retrospective, kicking in from July 2027.

Willis: ‘A Massive Tax’ on the Economy

Willis, who is also National’s deputy leader, told Morning Report the policy would be “a massive tax on the New Zealand economy at a time when it could least afford it.”

“This will put the economy at risk. It’s a terrible idea,” she stated.

While the policy is being discussed by Labour as a “narrow” tax, Willis argued that the reality is “anything but.”

“It is certainly not narrow; they have said it would be a tax on every piece of commercial property in the country. That will hit many, many businesses, from a corner dairy to a manufacturing facility,” she said. “It will also hit everyone who saved and put money into KiwiSaver, because some businesses in their KiwiSaver will now face a new tax. And it will hit every Kiwi who saved hard for a rental property or an investment in a commercial business. To call it narrow is completely misleading.”

Willis also criticised the companion policy of free GP visits, saying it ignores the fundamental issue of doctor shortages and difficulty in securing a consultation. She said the coalition government is instead focused on training more doctors, encouraging international recruitment, and maintaining targeted subsidies for low-income families.

“This seems to me a classic Labour policy. It is not designed well. It has shades of KiwiBuild,” she concluded.

Tax Expert: ‘Cleanest, Simplest’ CGT to Boost Productivity

In contrast, University of Otago professor and tax expert Craig Elliffe, a member of the government’s 2017 Tax Working Group, argued that Labour’s approach is indeed narrow and targeted, not covering as much as similar tax regimes overseas.

“It focuses only on investment properties and commercial industrial properties,” he told Morning Report on Tuesday. “All other assets outside the net, ones that are normally within international norms of capital gains—so things like shares, retirement savings—they’re all excluded, and other assets, you know, collectibles like paintings and those sorts of things.”

Elliffe called it the “cleanest, simplest, most administratively simple form of capital gains tax,” which tackles a “consistently valued” asset class—property—and would be “very straightforward” to implement.

He noted that while it would raise a “reasonable sum,” it would be nowhere near the amount raised by a comprehensive CGT, partly due to design features such as excluding capital gains from inheritances and setting the rate at 28 percent, which is lower than the highest marginal income tax rate.

Elliffe brushed off the criticism that it would impact small businesses, saying they “really won’t be affected unless… their [property] assets are part of that business.” He argued that the tax, which would primarily hit property investors, would serve a greater economic purpose by pushing investment money into productive sectors, helping to solve New Zealand’s long-running issue with low productivity.

“You only need to look across the Tasman or to any other countries that have capital gains tax and see that they are not less productive, they are more productive than us,” Elliffe said.

Seymour: The ‘Tall Poppy’ Policy

Deputy Prime Minister and ACT leader David Seymour also weighed in, labelling the policy “divisive.”

Speaking on First Up, Seymour argued that New Zealand already has comparatively high tax revenue, taxing a higher percentage of the economy than the average OECD nation. “It’s not that New Zealand lacks government revenue. It seems to be about that old chestnut, the tall poppy,” he said.

Seymour suggested the policy is simply presented as an easy solution where “someone else” has to pay to solve the country’s problems. He added that it seems every couple of years a different group of people is deemed to have caused an issue and must be “taxed or punished in some way.”