Ardern scores higher abandoning Capital Gains Tax

Ardern scores higher abandoning Capital Gains Tax

Thakur Ranjit Singh     
Auckland, April 21, 2019  

Prime Minister Jacinda Ardern: “Many New Zealanders do not believe in CGT (RNZ Picture by Ana Tovey)

There is a Fiji-Indian anecdote, bordering on stupidity, and hilarity, where an armed robber breaks into a rich lady’s mansion, and demands, putting a loaded gun at her head:

“Choose – life or money.”

The rich lady replies” Take my life, as I will need the money in old age.” 

Thakur Ranjit Singh (File Picture)



A difficult choice

Prime Minister Jacinda Ardern had faced the same choice- either be blamed for ditching her promise, or losing an opportunity to do anything good for the underclass at all.

And you can only do that if you survive as a government.

Like the rich lady being robbed, she had two choices. Either choose survival of her government, and coalition deal, and chance of a second Labour term, or delivering on the promise of a Capital Gains Tax (CGT), winning the battle, but losing the war, and a second chance.

She had to choose from keeping on holding a very contentious and controversial hot potato, or blowing the wind out of Simon Bridges and National Party’s 2020 election sail.  National Party was already gearing up to have CGT as Ace of trumps for next election. Now that sail has fallen flat (wait for Simon to follow suit!) without any wind from CGT.

I completely disagree with those who say that the Prime Minister failed the country, failed CGT supporters within her Party, and failed to use her popularity to sell this issue.

Earlier rejections

She showed her brilliance, lost a battle, but won a war. You can be certain that she was afforded the best advice, mostly from former Prime Minister Helen Clark (Tax Working Group Chairman Sir Michael Cullen) who themselves rejected CGT during their nine years in government.

From their past experience, Labour knew that the details of CGT was hurting them at the Polls, and hence found it safer to park it, after reviewing and weighing it from economic as well as political reality. In doing so, Ms Ardern deprived the National Party of leadership stability, and heads may roll there soon.

Other measures soon

Labour Party rightly opted for other ways to fill this vacuum, like transfer of wealth though Working for Families.

Ms Ardern admitted that there were other steps that would be taken to improve the fairness of the tax system, pointing to measures taken to tighten rules around land speculation and their upcoming review of “negative gearing”(transfer of rental losses to reduce income tax from other sources) rules.

Her opponents need to appreciate that Labour Party realises a CGT is not the only way to address inequality.

As one letter writer in the New Zealand Herald observed, people need not get too excited over the cancellation of CGT, as the Budget was coming in May.

Remember the cliché, “There is more than one way to skin a cat.”

The robust debate helped by media, resulted in showing light in other alternative areas.

Misplaced criticisms

Criticism of New Zealand First and its Leader Winston Peters is misplaced.

They deserve credit for articulating the concerns of small and large businesses, from within the Government. The MMP allows them the veto right, which they rightly used.

And Labour has no mandate to impose CGT. With their 36.9% of the vote and Greens 6.3%, the total makes to 43.2%.

Looking at National at 44.4%, opposition to CGT is even greater than Labour and Greens combined. Hence, rejecting this, Ms Ardern was correct to say that there was a lack of mandate from New Zealanders for CGT.

Caring Leader

The credit that Ms Ardern gets as a caring leader is that she listened and acted on what she heard. The main purpose of the proposed tax was to fix housing shortages and dampen house price inflation, but the tax working group was unable to show that imposing a CGT would achieve these goals.

What would you expect an effective leader to do, especially, with advice from those who have walked on that path when she was still in her teens?

So you are saying that Ms Ardern is a coward and secured Labour Party a second chance by ditching CGT? And so you are saying she should be the sacrificial lamb at the CGT butchery and deny Labour Party the chance to implement numerous of other progressive, benevolent and socially conscious policies that National ignored by being “A Government of Landlords?”

Thakur Ranjit is a Media Commentator and runs his blog called, ‘Fiji Pundit.’ He lives in Auckland.

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