Capital Gains Taxes
For over a decade now, one of the most contentious issues in New Zealand politics has been the capital gains tax (CGT). All bar a handful of the OECD’s 38 members have a CGT, and even those that don’t will still tax capital gains – the income made from selling assets – more thoroughly than New Zealand does.
The idea is back on the table for the 2026 election, as Labour is proposing a stripped-down version, taxing only the gains made on residential property investment. So what does the evidence tell us about what that CGT – or a more comprehensive one covering shares and businesses – would do New Zealand’s economy and society?
Capital Gains Taxes: An evidence review finds that both the supportive and the critical claims about CGTs tend to be overstated (although sometimes there is little evidence either way.) A CGT will neither fix nor destroy New Zealand’s economy.
For all the hot air shed on the subject, the economic and housing-market effects would likely be small in either direction. In part that’s because so many other factors have a greater bearing on investments and rent prices.
The effects of a CGT on equity (a.k.a. fairness) effects are potentially much more substantial. In some countries with CGTs, 60% of capital gains are recorded by the best-off 1%.
Whether we should increase their tax rate is a subjective judgment. In fact, much of the case for or against a CGT rests on such judgments about fairness and revenue use, rather than on empirical questions. But by surveying those questions, Capital Gains Taxes: An evidence review helps people make judgments – and have election-year arguments – on a solid grounding in fact.