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Negative gearing is not necessarily unfair

Comments on Antony Ting "Why negative gearing is not a fair tax policy", 17/07/2015

While a good attempt, your analysis has some fatal weaknesses. For example, you have one paragraph that reads as follows:

"Should mortgage interest on an investment property be deductible? Investment properties generate two kinds of income: rental income and capital gains (if any). As capital gains on investment property can enjoy a 50% tax discount if the property has been held for at least a year, strictly speaking only 50% of the interest expenses related to the capital gain should be deductible."

Why only 50% of the interest expenses related to the capital gain should be deducted, as opposed to 75%? Interest expenses can also be used to generate the rental income, while you seem to reason it is only used for generate capital gains.

You also argued the following two paragraphs:

"Many countries resolve this issue by quarantining losses on investment properties. It means that losses generated from negative gearing cannot be used to offset against other sources of income, for example, salaries or business income. Instead, the losses can be carried forward to future years to offset against income from the investment properties.This policy is fair in the sense that the same tax principle for deductions applies to both taxpayers with and without negative gearing. Many countries adopt this quarantine policy, including major developed countries such as the US, the UK, France and Japan."

That policy is not necessarily fair if one carries investing in properties as an enterprising, together with their other incomes. You think that is fair because you failed to understand the links between those incomes.

Furthermore, your following paragraph is in comprehensible and it may be self contradictory if you explained it better:

"Some countries have even stricter tax rules on investment properties. For example, China allows a fixed 20% deduction of the rental income, and the Netherlands tax property investors on a deemed yield rate of 4% on the value of the properties. In other words, these countries do not allow deduction of any tax losses on investment properties at all."

Another point is why didn't mention that in the US, people can deduct interest expenses even or their own principal residency.

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