Treasury says tax system out of kilter
In a speech to the New Zealand Institute of Managers, Whitehead said the department thinks the tax system is unfairly weighted towards property investors because of the way property is treated for tax purposes.
He said the government needs to stop the tax system creating the wrong incentives, such as losses made through property investment offset against income, as it was encouraging investment in a class that typically made losses rather than profit.
"By illustration, 1996 was the last year that more people made profits than losses from rental properties and there were 115,000 private rentals (according to Inland Revenue Department data), yet the number of private rental properties has very significantly increased since then."
Whitehead questioned why an increasing number of people invest billions of dollars collectively in an area that was unprofitable, saying "it's hard to believe it's not because of some of the tax advantages".
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