The TWG was set up by the government shortly after it took
office in late 2017 to make recommendations on the fairness,
balance and structure of the tax system.
While the CGT was the most significant of the TWG's
recommendations, the group's final report included numerous
other recommended changes to the tax system, and the government
has indicated it will consider including a number of those
other recommendations on its tax policy work programme.
The Prime Minister also reiterated that the government would
soon release a consultation paper on a digital services
Capital gains tax rejected
The decision not to implement a comprehensive CGT is not
unexpected. The junior coalition partner in the government (the
New Zealand First Party), whose support would have been
required to implement a CGT, had previously voiced its
opposition to a CGT. The opposition National Party had also
vowed to repeal a CGT if it were enacted.
In rejecting the CGT recommendations, Prime Minister Ardern
stated: "It's time to accept that not only has a government
that reflects the majority of New Zealanders not been able to
find support for this proposal, feedback suggests there is also
a lack of mandate among New Zealanders for such a tax
She also ruled out a CGT under her leadership in future.
Refreshed tax policy work programme
A refreshed tax policy work programme will be released
mid-year. The government is considering the following as high
priority for inclusion:
- The TWG's recommendations regarding a
regime that encourages investment in nationally-significant
- Allowing depreciation for the costs of
seismic strengthening of buildings;
- A review of tax loss trading (potentially
in tandem with a review of the loss carry-forward rules for
- Strengthening the enforcement of the rules
for closely held companies.
Prime Minister Ardern also stated that following the group's
recommendations, "the coalition government has agreed to
tighten rules around land speculation and work on ways to
counter land banking".
New Zealand has a benign tax regime for property investors
and speculators that are perceived to have contributed to
increasing house prices.
Such investments are not subject to stamp duty or similar
transaction taxes, and in many cases, gains on disposal would
be a non-taxable capital gain.
As a starting point, the government has directed the
Productivity Commission to consider vacant land taxes as part
of its review of local government body financing.
Digital services tax consultation
While the TWG did not recommend specific international tax
changes, it did note its support for "New Zealand's continued
participation at the OECD", and recommended that "the
government stand ready to implement a digital services tax if a
critical mass of other countries move in that direction".
The government had already acted on that recommendation by
announcing, prior to the release of the group's recommendations
that New Zealand will proceed with a digital services tax, with
a public consultation on "options for introducing a digital
services tax" to start soon.
Brendan Brown (email@example.com) and Matt Woolley
Tel: +64 4 819 7748 and +64 4 819 7303