Three of the eleven members of the Tax Working Group do not favour the Group’s recommendations on capital gains tax.
Group members BusinessNZ Chief Executive Kirk Hope, former Bell Gully tax partner Joanne Hodge and former Inland Revenue Deputy Commissioner (Policy) Robin Oliver do not recommend that the Tax Working Group’s proposed capital gains rules should be implemented.
Their view is that administration costs, complexity and investment distortions that will result from the rules would outweigh the revenues that could be gained from a comprehensive capital gains tax as proposed, and it would not significantly reduce overinvestment in housing or increase tax fairness.
The minority group considers that a more limited capital gains tax could be appropriate if focused on rented residential property where most revenue could be raised.
The minority group does not support a capital gains tax on business assets, saying this could discourage investment and innovation and tend to lock businesses into current asset holdings. Concerns with the ‘valuation day’ approach (taxing growth in the value of assets from the proposed commencement date of 1 April 2021) include its vulnerability to conflicting valuations of assets.
The minority group has concerns with taxing both shares and business assets on the grounds that this could create double taxation, penalising New Zealanders owning shares in New Zealand, and making overall taxation on investment less consistent.
The minority group recommends retaining New Zealand’s current relatively simple and efficient tax system while amending some specific current rules and better enforcing others.