The bach-tax proposal is purely a tax on wealth

by Bill Ralston / 15 January, 2019
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The Government needs to lift people out of poverty, not punish the “wealthy”.

Sitting on the bach deck, soaking up the sun, watching the surf roll up the beach, I find it hard not to feel fortunate to be able to live the Kiwi dream every summer. Every spring, summer and autumn, actually, with the winter proving just a little too cold and wet even for me.

Before I go any further, I should point out that we are not rich, at least not by my standards. There are three other families with a share of the place. In high summer, it is similar to a mini commune, with a dozen or so folk sunning themselves, whipping up a meal on the barbecue or sitting around the deck yarning over a beer. As I implied, it’s idyllic.

Recent speculation that the Tax Working Group is considering a bach tax doesn’t worry us. That is because we don’t own the shack – we lease it. It may be of more concern to the Māori family who have title to the property, but I presume some tax must already be paid on the earnings from our rent.

There are a couple of dozen ramshackle but charming old places sited on ancestral land along our surf beach. Some are leased to folk like us and others are periodically occupied by members of the owners’ family. The bach-tax proposal is not an income tax or a capital-gains tax, it’s purely a wealth tax, with the Inland Revenue Department assessing the potential income from a bach regardless of whether it is rented out. Curiously, the family who own our one don’t look wealthy at all, nor do the remainder of their bach-owning relatives on the beach. They just look like regular Kiwis.

I suspect elsewhere in the country there will be other bach-owning families nervously patting their pockets at the prospect of such a tax and, should it become law, divesting themselves fairly quickly of a property that will become a liability. Actually, they better sell the family holiday home fairly quickly because in a year or two, there could also be a capital gains tax and a sizeable chunk of the sale price could go into the Government’s coffers.

There is no guarantee there will be a bach tax. Like a capital-gains tax and a host of other revenue-gathering ideas, the Government says any new tax proposals it decides to implement will first be put to New Zealanders at the next election. The danger is that a new tax regime then becomes a highly politicised election issue, a battle between the supposed “haves” and the “have-nots” that will rip a great divide in our society.

Quite why we need a new tax regime isn’t that clear. Finance Minister Grant Robertson has been chuffed to tell us the Treasury is forecasting hefty tax surpluses over coming years. This means the Government is theoretically already collecting more in tax than it is actually spending. Therefore, it’s hard to avoid the conclusion that it simply wants to punish anyone it considers “wealthy”.

The trouble is, the Government’s definition of “wealthy” may include those average Kiwis who have the misfortune to earn a good wage and are somehow keeping their heads above water.

Is it naive to hope a government that aims to close the income gap in New Zealand might concentrate on raising up those at the bottom rather than pulling down those who are precariously a little higher up the income ladder?

This article was first published in the January 19, 2019 issue of the New Zealand Listener.

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