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New Zealand already has a capital gains tax – you may not know it | Instant News


Two University of Auckland researchers argue New Zealand already has taxes on its books that can be used to tax property investors. Photo / 123rf

Prime Minister Jacinda Ardern may waive the capital gains tax, but there is already a tax on books that can do the job.

This is according to two University of Auckland researchers, who say that the CB6 section of the Income Tax Act has existed since the 1970s but is not widely known because it is rarely enforced.

However – if given a simple change – it could be turned into an effective capital gains tax that targets the profits investors make when buying and selling homes, Michael Rehm and Yang Yang said in a new research paper.

They argue that the recent skyrocketing house prices have brought the tax debate back into the spotlight.

And instead of considering the new tax, CB6’s section already states that anyone who buys land with the intention of making a profit from resale must pay income tax on those gains, Rehm said.

The government has not enforced this in the past because they think it is too difficult to know the intention of the buyer when making a purchase.

But Rehm said his decade-long analysis of rental housing purchases in Auckland showed nearly all had incurred initial losses and counted on the gains on resale to be considered a wise financial investment.

“This cash flow based stuff is a complete dog,” he said.

“The only rhyme or reason you’re going to invest in property is that you expect to get some sort of payment in the end.”

That means investors can safely be said to be acting as speculators hoping for house prices to rise – and that has broader consequences for society, Rehm said.

Auckland’s average selling price has now jumped to $ 1 million for the first time in October, while national prices have also ballooned to new highs, the Real Estate Institute reported.

This kind of price hike has further transformed housing from where Kiwis seek refuge and raise their families to golden geese treated as egg nests, Rehm said.

one stop

It has two problems.

This helps create a rift in society between the rich, those who own property, and those who don’t, Rehm said.

And that’s funneling billions of dollars of investment from KiwiSaver accounts, stocks and businesses into real estate, where it yields less broad economic benefits, he said.

Politicians across many of the political spectrum have expressed similar concerns over rising prices.

Labor, the Greens and even the Reserve Bank this week suggested broader taxes were needed to help curb rising house prices.

Investors are already taxed like capital gains in the form of what is called a bright line test.

First introduced by the National Government in 2015, it initially required property investors who sold homes within two years of purchase to pay tax on their profits.

In early 2018, the Labor-led Government then extended the bright line test to five years.

Last week, Treasury Secretary Grant Robertson asked the Treasury Department to investigate further extension of the bright line test.

But changing taxation policies is fraught with political risks, given that opposition parties now accuse the Government of canceling its promise not to impose new taxes.

Researchers Michael Rehm and Yang Yang from the University of Auckland's Department of Property.  Photo / Provided
Researchers Michael Rehm and Yang Yang from the University of Auckland’s Department of Property. Photo / Provided

The Minister for Housing and Labor Revenue did not answer questions about whether they would consider investigating or implementing Rehm and Yang’s suggestions.

The Inland Revenue said it conducted a “very similar” study in 2014.

“It was concluded that there is systemic evidence of the turnover rate of residential properties, which is higher than normal,” he said.

“However, identifying possible speculative activity based on analytics and having enough evidence to prove speculative behavior are two different things.”

Rehm admits – even though the CB6 section already exists – enforcing it politically is another matter.

“I am not naive, I know this is a bitter pill that any politician should throw,” he said.

“I’m just trying to show that there’s a solution that’s already in the book.”

Two University of Auckland researchers argue New Zealand already has taxes on its books that can be used to tax property investors.  Photo / 123rf
Two University of Auckland researchers argue New Zealand already has taxes on its books that can be used to tax property investors. Photo / 123rf

He said the enforcement of the CB6 section would be more thorough than the bright line test because there was no time limit and also thought the analysis behind his paper was thorough.

His team used a new method to identify 117,000 rental property purchases in Auckland between 2002 and 2016, he said.

To calculate the profitability of purchasing a lease, his team then weighed the costs involved in running the various properties – such as home loan repayments, property management fees, and maintenance costs – against the rental income.

The results were clear, he said.

Leased property investment almost always goes bad compared to comparable investments when capital gains are excluded, Rehm said.

That means everyone is speculating on expectations the price will go up, he said.

“We beat our chests and said speculation is bad behavior and it needs to stop,” he said.

“But nothing has been done to try to persuade people not to continue speculating.”

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Brazil faces a $ 112 billion refinancing gap in early 2021 | Instant News


BRASILIA, Nov 24 (Reuters) – Brazil’s debt has swelled to unprecedented levels due to the COVID-19 pandemic and the government faces a $ 112 billion refinancing gap early next year, with April funding needs the highest for a month.

Publicly, at least, Treasury officials in Latin America’s top economies insist there will be no problems getting investors to lend to them. The so-called liquidity cushion can cover at least three months of the loan.

In addition, nearly all of Brazil’s debt is denominated in reais and more than 90% of it is held by domestic investors, many of whom are forced to hold it by banking regulations.

Financial analysts also see little risk of a boycott by lenders, which is likely to trigger a serious crisis and wreak havoc on Brazilian financial markets.

But the likelihood that the Ministry of Finance may have difficulty repaying debts, due to sudden unfavorable political, economic or market conditions, is not zero. And it will likely pay a premium to shift so much debt at once, analysts say.

According to Treasury Department figures, about 605 billion reais ($ 112 billion) of domestic federal debt is due in the first four months of next year. That’s 14.1% of Brazil’s 4.82 trillion reais pile of domestic debt.

The month to watch is April, when the 283 billion reais of debt will need to be extended. That is 6.6% of Brazil’s debt and will be the largest single month of maturity debt on record, according to the Ministry of Finance.

“It’s a huge number, and if people want to reduce their exposure a little bit for whatever reason, that’s a significant amount,” said Sergi Lanau, deputy chief economist at the Washington-based Institute of International Finance (IIF).

“It’s not a good situation, but it would be much worse if it was foreign debt. We are not too worried about the pile maturing. If something goes wrong at that point, then you will be exposed,” he said. the word.

The IIF analysis shows that the government’s domestic debt maturing in April amounts to 3.7% of GDP, also an all-time high for a month.

Economy Minister Paulo Guedes said he saw “no problem” for the Ministry of Finance to reimburse the debt. About half of the 600 billion reais due early next year may already be covered by cash inflows from central banks and public sector banks, he said.

STEP CURVE

The government’s surprisingly aggressive fiscal response to the pandemic, particularly through direct income transfers to the poor, has driven its deficits and debt to records that are far above most other developing economies.

Brazil’s main deficit, excluding interest payments, is estimated at nearly 12% of GDP this year, with overall debt rising to around 95% of GDP, according to the government.

That has forced the Treasury Department to borrow more, more and more in short dated paper because it’s cheaper and as growing concerns around the fiscal outlook mean investors are reluctant to lend to the government long-term loans.

While reducing average debt maturity lengths and record low official interest rates have brought average interest costs down to a record low, the so-called “roll over risk” for the Treasury has increased sharply.

“The problem is if we can’t sell any bonds. But we don’t have to worry too much, there’s money in the system,” said an interest rates specialist at a hedge fund in Sao Paulo.

“The treasury won’t run out of cash: that’s not the case. But it will continue to pay higher interest rates and see a steeper curve,” he said.

The difference between long-term and short-term interest rates has widened sharply. Before the pandemic, the difference between the January 2022 and January 2027 futures rates was 180 basis points or less. That tripled to 460 basis points in September, and is now creeping back to that all-time peak.

The Treasury has failed to sell the full allocation of bonds offered at several auctions in recent weeks, both the fixed rate ‘LTN’ note and the floating rate ‘LTF’ note linked to the central bank’s official Selic rate.

To attract buyers, the Ministry of Finance has to pay a higher premium. It also relies on other sources of financing, including a recent transfer of 325 billion reais from the central bank.

Waldery Rodrigues, special secretary of the economy ministry, said last week that a central bank selling part of its foreign currency reserves to pay debt is “on the menu” for next year, although the decision rests with the central bank.

($ 1 = 5.40 reais)

(Reporting by Jamie McGeever; Editing by Tom Brown)

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Worry figures, skepticism and certainty – SWI swissinfo.ch | Instant News


(MENAFN – Swissinfo) Things have taken a very serious turn in Switzerland since I last wrote about the coronavirus six weeks ago. We are now entering the second wave of the pandemic with higher absolute numbers of positive cases, hospitalizations and deaths than seen in the spring. Among the highest rates in Europe.

This content is published on 21 November 2020 – 08:00 21 November 2020 – 08:00 Clare O’Dea

Clare reports on scientific developments in Switzerland

More on the author

Around 1,600 lives were lost due to Covid-19 here in the last four weeks alone bringing the total deaths over the nine months of the pandemic to around 3,500. As you can see from this Federal Office of Public Health (FOPH) data, it looks like the worst is over – for now. This information comes from the coronavirus specialty website FHOP which posts the latest numbers every morning from Monday to Thursday.

swissinfo.ch

More reasons than ever to welcome the latest advances in vaccine development. First, we asked Pfizer and BioNTech to announce on November 9 that their vaccine candidate had proven to be more than 90 percent effective in preventing Covid-19.

Next comes Moderna with news about a 95% effective messenger RNA (mRNA) vaccine, also in clinical trials in tens of thousands of people. As previously mentioned, Moderna has production sites in Visp, Switzerland through its Swiss partner, Lonza. You can read our latest story on vaccine approval and procurement in Switzerland here.

Skepticism

This week, we asked our readers if they would be vaccinated for Covid-19, and the responses varied widely. (Let us know what you think by joining the debate here!)

Several people I know have expressed doubts about the safety or efficacy of vaccines being developed so rapidly, and these concerns are understandable. The issue is best explained in this Twitter thread by Mark Toshner, a clinical trials doctor from the University of Cambridge who responded to allegations that a vaccine ‘usually takes 10 years’. Apparently most of those 10 years were usually spent waiting.

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Most of the Germans have lost faith in coach Low | Instant News


Most Germans have lost faith in national team coach Joachim Low after the 6-0 midweek crash in Spain, according to a survey published Saturday.

Asked whether Low was still the right person to succeed with the team again, 77.7% of the 1,045 people surveyed by Civey’s agency answered no or not.

Only 12% said that Low was still the right person, and the remaining 10.3% were undecided.

Tuesday’s defeat in Seville was Germany’s biggest in a competitive match and their biggest overall since 1931.

Low has worked since 2006 and led Germany to the 2014 World Cup title.

However the team was then eliminated at the group stage in 2018 and Low has so far not managed to reshape the team in such a way that success can be expected at the upcoming big events starting with next year’s Euros.

News reports say German Football Federation (DFB) director Oliver Bierhoff will present an analysis of the state of German football to the DFB leadership on December 4, which could determine the fate of Low, who has a contract until 2022.

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Most of the Germans have lost faith in coach Low | Instant News


Most Germans have lost faith in national team coach Joachim Low after the 6-0 midweek crash in Spain, according to a survey published Saturday.

Asked whether Low was still the right person to succeed with the team again, 77.7% of the 1,045 people surveyed by Civey’s agency answered no or not.

Only 12% said that Low was still the right person, and the remaining 10.3% were undecided.

Tuesday’s defeat in Seville was Germany’s biggest in a competitive match and their biggest overall since 1931.

Low has worked since 2006 and led Germany to the 2014 World Cup title.

However the team was then eliminated at the group stage in 2018 and Low has so far not managed to reshape the team in such a way that success can be expected at the upcoming big events starting with next year’s Euros.

News reports say German Football Federation (DFB) director Oliver Bierhoff will present an analysis of the state of German football to the DFB leadership on December 4, which could determine the fate of Low, who has a contract until 2022.

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