The Government announced yesterday that there will be no Capital Gains Tax (“CGT”) introduced because no consensus could be reached within the Government. There was also insufficient support across the country by voters for CGT. Although this may not be entirely unexpected by commentators, it is a significant announcement given this has been a Labour Party focus for many years.
Some may breathe a sigh of relief that their business assets and New Zealand based shares will not fall into the capital gains net. Others, who have invested in residential property for example, may wonder why they are still caught within the bright-line rules if they sell within five years, and could be taxed on their capital gains, whilst investors in other asset classes are not.
The focus now will be on other steps that can be taken to improve the fairness of the tax system, including the changes already implemented around land speculation. The Government also released responses to the 99 other recommendations from the Tax Working Group, which included confirmation that there would be no wealth or land tax introduced. There will also be no reduction in the top individual tax rate or the company tax rate.
Whilst many of the responses are to maintain the status quo, the suggestion is that they will look to tighten rules around land speculation and work on ways to counter “land banking” of bare residential land, potentially including working with local councils to combat this. There will also continue to be a crack-down on multi-nationals avoiding paying their fair share of tax in New Zealand, and options for introducing a digital services tax will be considered.
Hence, there are likely to be several tax system changes in the pipeline, but these may be largely “sector or industry” focused. One thing is for certain; taxation will continue to be a focus of change in the foreseeable future.