OLLY NEWLAND: Capital gains tax is not the answer

When the Labour Government of the 1970s brought in a version of the tax to curb rampant property speculation, the result was a further rapid rapid rise  in property prices — on top of the 50% rise up until then! Sellers rather withdrew their properties from the market than pay the tax. It follows that Less stock = Higher prices. (This ain’t rocket science.)
The ’Property Speculation Tax’, as it was then called, was abolished a few years later by the Muldoon government, and I am proud to say that I was partly instrumental for that. It was in those days that I first organised public meetings, wrote newspaper articles, gave interviews on TV and radio to quietly and logically explain that that sort of tax would not work. (Well, OK, I argued and lobbied hard against the tax.)

A master stroke in the PR war was a stunt where I ‘sold’ a property to a near destitute Pacific Island family on $10 down and the balance interest free — with a condition of sale that no Property Speculation Tax was payable due to the transaction. If the tax was levied the needy family would be evicted immediately. (Yes, I said it was a stunt.)

This was all over the news, breathlessly, and culminated in a call to Wellington to meet a red-faced and embarrassed Minister of Finance, Bill Rowling. From that chilly meeting flowed changes over the next few months which saw some of the draconian aspects the tax modified. (I’ve written more about this episode in chapter 3 of Climbing the Property Ladder.)

Perception versus reality