Trust lobbying and foreign property purchases come back to bite
The old saying that a week is a long time in politics came true for John Key and his National-led Government last week with two jolts, one carefully judged and the other quite the opposite.
Just over a week ago National was cruising along blissfully watching Labour’s poll support tanking and increasingly looking to the prospect of a fourth term.
Then came two reversals — the issue of a land tax and an error in judgement on the part of Key’s lawyer Ken Whitney.
By saying a land tax for non-residents could be part of the answer to the property bubble, Key is tacitly admitting that foreign owners have played a big part in Auckland’s overheated market — something the Government has tried to deny.
The proposed tax would have a three-year exemption for expatriates who own houses here.
It is much softer than a 2010 proposal by a tax working group the Government formed, which it rejected. A 1 percent across-the-board land tax could raise ?$4.6 billion and reduce taxable land value, which at present totals $670 billion, by 16.7 percent.
On the plus side for the Government, polls show that the tax would actually be popular — particularly if it provided long-needed help for first-home buyers.
Key’s larger problem last week was the revelation that Whitney had written a letter to a Minister, using the Prime Minister’s name, to initiate an industry lobbying effort against IRD proposals to tighten foreign trust laws.
Whitney, who is a boutique trust specialist, wrote the letter to the then Minister of Revenue Todd McClay in December 2014.
Labour gleefully seized on this piece of manna from heaven to call for a wider, independent inquiry of the sector for the sake of New Zealand’s reputation and the fairness of the tax system.
It was a good move from the party’s finance spokesman Grant Robertson, with many people feeling the Government is too close to powerful business interests. Lobbying of government ministers is a growth industry and happens all the time, but Key might be having a word with his long-time lawyer.