Tax on goodwill

Press, Volume CXV, Issue 33929, 23 August 1975, Page 14

Tax on goodwill

Sir, — Property speculation tax is, I believe, being: applied by the Inland Revenue Department to the [goodwill figure in the sale of a business. This seems iniquitous to me. A seller of a business being a poor operator shows low profit from poor trading, and gets the goodwill he deserves. The new operator, through proper training and the application of good business practice improves the business to qualify for a higher [goodwill, sells and passes i his abilities on to the new : owner. This seller then has ito pay 75 per cent tax on the increased goodwill if he sold within 12 months of buying. What is the Labour Government trying to do? This has no bearing on preventing “speculators” operating in the section and; house field which was thej objective in speculation taxi Ordinary income tax I go[ along with, but why speculation tax? Would the Labour Government prefer to retain the inefficient operators? Would the National Party: repeal this section pf the Act? — Yours, etc., alan McConnell.

August 12, 1975. I [The Acting Minister of Finance (Mr Douglas), reIplies: “Property speculation ■ tax is assessed on profits derived from the sale of land i where a property has been owned for less than two years. There are, of course, certain specific exemptions ■ from the tax. Where a business is sold and the assets realised include land which has been owned for less than two years, the portion of the .proceeds received which relate to the land are taken into account in ascertaining if there is any liability for property speculation tax. In no circumstances would property speculation tax be assessed on goodwill from the sale of a business as Mr McConnell suggests.”]