Is New Zealand Smarter than Other Countries or Simply Special? Reconsidering a Realisation-Based Capital Gains Tax in Light of South Africa’s Experience

New Zealand Journal of Taxation Law and Policy, Vol. 16, No. 3, pp. 269-306

37 Pages Posted: 22 Jul 2010 Last revised: 4 Mar 2011

Chye-Ching Huang

University of Auckland

Craig Elliffe

University of Auckland - Faculty of Law

Date Written: July 20, 2010

Abstract

This article tries to find a new way through old arguments about whether or not New Zealand should have a realization-based capital gains tax. Instead of revisiting the first-principles analysis of the costs and benefits of a capital gains tax, it starts by observing that many countries have already done that calculation, and decided to adopt a realization-based capital gains tax because they concluded that having such a realization-based CGT is better than not having one. In believing differently, New Zealand sits apart from the OECD norm, and apart from many non-OECD countries. New Zealand’s outsider position could be reasonably justified on two bases: (1) the countries that have implemented a capital gains tax made the wrong decision which they secretly regret; or (2) New Zealand is different to those countries in a way that is relevant. (New Zealand policymakers have relied often on the first justification, but have presented no compelling international evidence for it.) This article gently tests both of these possible justifications for New Zealand not having a CGT. It tests the first by examining the experience of a jurisdiction that relatively recently decided to implement a realization-based tax, namely South Africa. The evidence suggests that South Africa was correct to do so. The article tests the second justification by identifying ways in which New Zealand differs from South Africa (and from OECD countries) that could suggest that a realization-based capital gains tax would be not worth doing in New Zealand even if it is elsewhere.

Keywords: tax reform, New Zealand, capital gains tax, South Africa, evidence of costs and benefits, realization based capital gains

JEL Classification: K34

Suggested Citation

Huang, Chye-Ching and Elliffe, Craig, Is New Zealand Smarter than Other Countries or Simply Special? Reconsidering a Realisation-Based Capital Gains Tax in Light of South Africa’s Experience (July 20, 2010). New Zealand Journal of Taxation Law and Policy, Vol. 16, No. 3, pp. 269-306. Available at SSRN: https://ssrn.com/abstract=1646146

Chye-Ching Huang

University of Auckland ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Craig Macfarlane Elliffe (Contact Author)

University of Auckland - Faculty of Law ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Register to save articles to
your library

Register

Paper statistics

Downloads
384
rank
68,578
Abstract Views
2,973
PlumX