The New Zealand Minister of Finance, Michael Cullen, and the Reserve Bank have been scrambling around the last few weeks trying their hardest to lower inflation, cool the economy and lower the ever rising kiwi dollar. Exports have been having a hard time of it recently with the New Zealand dollar rising to record highs against the US dollar. So while they are artificially raising the cost of the Kiwi Dollar they are also raising the interest rates thus bringing huge sums of money into the country.
In order to cool off the property market, Cullen has suggested that the government removes the tax breaks from investment properties. This would stop the offset of property losses against other income such as wages or salaries.
Another option which is being bounced around is the introduction of a capital gains tax. Both tax changes are intended to take the heat out of the property market.
The government introduced the ability for investors to offset their losses back in 1991. Since the introduction property investors have grown from 75,000 to over 200,000 today.
The public seem to be divided on the change. Many feel that changes to the property tax system will open the doors for landlords to neglect the upkeep of properties. Many landlords may cash out their capital investments and just purchase bread and butter properties and never maintain them, resulting in slums.
Dr Cullen has not brought the proposals in from of Cabinet as of yet as it is not believed that the support for the changes are there.
It is apparent that most people are not in favour of more taxation and also getting rid of loss offsetting could lead to landlords raising rents and the property values may be forced down.
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