RBNZ floats capital gains tax 

Capital gains tax has again been raised as a way to control soaring property prices, but this time the suggestion comes from the Reserve Bank in the form of a submission to the parliamentary finance select committee.

The Reserve Bank has suggested the taxation policy be more in line with that in Australia where realised capital gain on rental property is taxed at half the normal tax rate.

Green Party co-leader Russel Norman has welcomed the move, saying it wants the tax considered as a measure to stabilise the housing market beyond the existing use of the Official Cash Rate by the Reserve Bank.

He argues a capital gains tax on property, excluding the primary family home, is a viable option. Norman says it is becoming harder for people to buy their first homes so that is why urgent policy steps are needed.

However, Prime Minister Clark has ruled out the idea.

National Party finance spokesman Bill English says the Reserve Bank is claiming the tax system is biased in favour of housing investment, yet this directly contradicts the view of  IRD which holds tax rules on housing are same as any other asset investment.

English says the Reserve Bank should check its views with IRD who he says are the experts.

The Property Investors Federation has also rejected suggestions the would check soaring house prices.

Federation spokesman Andrew King says using such a tax as a tool to bring down house prices has not worked in other parts of the world.

He says although Australia has capital gains tax, it still has high house prices and growth there has been even higher than in New Zealand.

Long-time investor Ollie Newland says a property speculation tax put in place in the early 1970s simply pushed up rents and prices, and caused tremendous distortions in the market.