1. Professor Rick Krever Institute Director Taxation Law & Policy Research Institute Tax, Land and Homes

2. 2 Tax Subsidies and the Price of Housing The market works: tax concessions are quickly capitalised into the price of houses “imputed rent” – using an investment for yourself capital gains negative gearing Tax, Land and Homes

3. Imputed rent law assumes that there is always a positive return from a house investment – no one would take out a mortgage unless they got a benefit exceeding the interest usually low – 2 to 3 percent 3Tax, Land and Homes

4. Capital gains some countries have special capital gains concessions for family homes rare is concession as a complete exemption 1974 model was 1972 Canadian exemption price was quickly capitalised into the price of homes have been no attempts to address the concession 4Tax, Land and Homes

5. Capital gains (cont.) favours urban over rural; city centre over suburbs; high income over low income 5Tax, Land and Homes

6. Negative Gearing deduction for expense to derive gain but allowed to defer recognition of the gain and then only half is recognised two attempts to address the issue; 1983 and 1985 6Tax, Land and Homes

7. Imputed rent unlikely to reinstate former law proposal for applying to second property surrogates such as land tax 7Tax, Land and Homes

8. Capital gains simple removal may be politically untenable proposals include: limiting to houses exceeding a value gains exceeding an absolute value deemed cost of home 8Tax, Land and Homes

9. Negative gearing problem is deferral and half exemption most countries have opted for indirect solution (matching or “quarantine” or “ring- fencing” rules) US / European “passive loss” rules Scandinavian “dual income tax” system 9Tax, Land and Homes

10. Packaging overcoming the political challenge: US experience shows “packaging” is the key to reform so there are a majority of winners emphasise recognition of losses as well as gains 10Tax, Land and Homes