The problem with a wealth tax is that the perception is that if it's set to low, those who are required to pay it start to feel that they are being "unfairly targeted" and, once that happens, the amount of tax avoidance/tax evasion starts to increase. In 1983, the highest tax rate was 67% and it dropped down in 1984 to 33% by the Labour Government..... yet, the amount of personal tax paid to the government increased. Why? Because more of those trying to avoid paying tax stopped "hiding" their income as they felt the tax system was fairer.The flight from wealth tax claim is debatable at best.
Wealth tax: the debate continues
www.taxjournal.com
BTW Paedo app? I disagree with you man. Didn't take you for a conspiracy theorist.
A wealth tax is designed to provide money to the government quickly while a CGT is long term in that tax is only realised when something is sold. Even if the "wealth flight" doesn't lead to wealthy people leaving the country, they will look at ways to transfer their wealth out of here or put their money into riskier investments. Why? Because if inflation was 3% and a managed fund had a 4% return, a 2% wealth tax means their wealth is reducing 1% PA while those not subject to the wealth tax a still making a slight inflation adjusted return.
I'd suggest there would be a lot of money turned into crypto currencies to be sold overseas and reinvested into assets in tax havens.
Personally, I feel sorry for FHB who will have their deposits decimated if a CGT is introduced. Most of the increase in returns on a KiwiSaver Growth fund is currently untaxed gains on the capital increases in share values as they are primarily made up of growth assets such as shares and not income assets such as interest.
In my opinion, one of the only areas the Greens have right in their alternative budget is the desire to introduce an inheritance tax (should also be in conjunction with a Gift Duty) to help reduce the transfer of intergenerational wealth.
