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At the moment the media is dominated by news about a report prepared by a working group on tax reform. The group is recommending, among other things, a cut in the top tax rate to 30% and corporate tax to 25%. They have recommended imposing a land & capital gains tax and increasing the GST to 15%. Their main grouse is against the property investors who, they feel,  have jilted the government of millions in taxes. They feel that the investors should not be allowed to claim depreciation against their rental property thereby reducing their taxes. Some commentators who seem to have a perpetual axe to grind against the property investors are having a ball. They are all over the media like rash and are saying that property investors have done well all these years and should therefore, be made to suffer now. At least one gloom merchant is known to spout off to get in the news; usually before one of his inane books is about to get published. He was holding forth on the talk back yesterday. The whole thrust of the argument of these self appointed experts is that over the years investors have claimed lot of tax benefits and now they should be penalised. They feel that the money can be used to fund the cut in income tax rates and channeled into so-called productive sector.

Obviously the reaction from property investors has been vigorous. They expect that the investors will leave the property market in droves. One commentator said it would make the lives of 1.4 million tenants miserable. Privately owned rental properties,according one estimate, are around 460,000 and valued at $165 billion. HNZ manages 69,000. Currently 3500 out of that are privately owned but leased and managed by HNZ.

Whether the working group looked at the overall impact on the tenancy market or they were looking at only the tax aspect I am not sure. What I am sure is that the likes of Bernard Hickey (one of the self anointed expert who gets plenty of media space)  are definitely blinkered. Just consider  what he said when asked where the tenants would live if there was a shortage of rental properties. He said they will live with their families and friends!!!. Imagine nearly a million people wanting to move in with their families and friends. I hope Bernard has a big house. There may be a queue outside his house.

Everyone seems to be taken up by the  tax dollars that the property investors are apparently not paying the Government. Nobody is considering the impact of investment property industry on the domestic economy. We are a nation of builders, plumbers, electricians, chippies, earth movers, painters, tilers etc. All these trades people are gainfully employed by this industry directly and indirectly all the real estate agents, mortgage brokers, valuers,accountants, solicitors,city council workers and many more are employed. There must be thousands and thousands of people who fall in these categories. I know most of these will find another livelihood over a period of time if this industry bites dust. But pray why do this when this is a thriving industry? Just to satisfy some academics of Victoria University and some moth-balled journalists who call this 'tax reforms'. In fact Bernard says that if John Key and Bill English do not accept the recommendations they will be considered as not interested in reforms. Just consider that the current value of the houses under home lease programme of  HNZ is a couple of billion dollars. Where will the Government get money to provide housing to the needy who cannot afford their own home? Where from except tax payers money. Several billions are already channeled into benefits and now if these recommendations are accepted government has to find more moeny.

In 1990 I moved from Wellington to Auckland. I used to go generally on Friday nights to The Cossie club in Takapuna. I used to see a number  of chippies, electricians etc. At that time there was a down trend in the property market and these guys finding it difficult to find work. You could get them to do job for $10 per hour when the going rate was more like $25 per hour. I have seen most of them slowly prosper with the increase in the construction activity. I would hate to see the day when most of them are again twiddling their skilled thumbs doing nothing. Most of them had a difficult 2008 and 2009. Only towards the end of 2009 have the things started picking up and now these so called experts are trying to nip the momentum in the bud. The experts (?) expect that the average Joe Bloggs are going to invest their money in industry if the rental property industry is killed off. Wake up guys, it is never going to happen. Show me one brave man who is going to borrow $100,000 against their home and invest in share/bond market. Grow up guys and more importantly shut up!