Capital Gains Tax

Question 1

Currently in New Zealand:

Answer 1

some capital gains are taxed as income.

Question 2

A criticism of the way New Zealand currently taxes capital gains is that the approach:

Answer 2

is ad hoc and unclear.

Question 3

Arguments in favour of introducing a capital gains tax include:

Answer 3

Equity

Increased revenue for the government.

Question 4

Recognised design issues with respect to a capital gains tax include:

Answer 4

Exclusions from the tax.
Accrual versus cash basis of measurement.
Taxing nominal or real gains.

Question 5

Which of the following statements are true?
i. Comprehensive capital gains taxes tend to be complex and costly to
administer.
ii. Lock-in is not a problem with comprehensive capital gains taxes.
iii. A problem with the accrual basis of taxing capital gains is that taxpayers do not have an associated cash flow to pay the tax.

Answer 5

Comprehensive capital gains taxes tend to be complex and costly to
administer.
A problem with the accrual basis of taxing capital gains is that taxpayers do not have an associated cash flow to pay the tax.

Question 6

The cash basis of taxing capital gains:

Answer 6

is the method used by other tax jurisdictions.

Question 7

It is most common for _________________ to be excluded from capital gains taxes:

Answer 7

the family home.

Question 8

______________ erodes capital gains. Generally, OECD countries tax ______________ gains, but some have other concessions such as a _____________ flat rate.

Answer 8

inflation, nominal, lower.

Question 9

The concept of ring fencing applies to:

Answer 9

capital losses.

Question 10

Taxing capital gains on a cash basis at the marginal income tax rate of the individual:

Answer 10

can be criticised as being unfair due to progressive tax rates.