The government has ruled out taxing capital gains as opposed to the wide-ranging proposal put forward by the majority of its Tax Working Group.
Prime Minister Jacinda Ardern and Finance Minister Grant Robertson outlined the government’s response to the Feb. 21 report.
“The Tax Working Group gave the government, and the country, an opportunity to look at the fairness of our tax system and debate options for change,” Ardern said.
“All parties in the government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus. As a result, we will not be introducing a capital gains tax.”
The prime minister added that while she believed in a CGT, “it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.”
The group, chaired by former finance minister Michael Cullen, couldn’t agree on how far the net should be cast in taxing capital gains. A minority including Business NZ chief Kirk Hope, former Inland Revenue deputy commissioner Robin Oliver and former Belly Gully tax partner Joanne Hodge backed a more refined scheme targeting residential rental property.
The majority proposed a broad extension of the capital gains tax regime, capturing all businesses, commercial land and buildings, and farms. To counter the increased tax, the report recommended lowering tax rates in the lower income thresholds.
The capital gains element of the report has captured the public’s attention, although the work was much broader than simply addressing how capital is or isn’t taxed.
The New Zealand dollar gained after the announcement and was trading at 67.23 US cents versus 67.12 US cents just ahead of the announcement.