Feedback: Government backs down on CGT

The government has announced a total rejection of any Capital Gains Tax – citing a lack of mandate, or consensus, for its adoption.

Chartered Accountants Australia and New Zealand (CA ANZ) has praised the Coalition Government for listening to feedback on the challenges of wide-ranging tax reforms and the importance of maintaining the integrity and simplicity of the tax system.

“As was acknowledged at the start of the Tax Working Group exercise, New Zealand has by international standards a largely simple and efficient tax system,” said CA ANZ Tax Leader, John Cuthbertson.

“The announcement reflects that, and it was good to see the Prime Minister emphasising the need to maintain the simplicity of our tax system and minimising the risk of creating distortions.”

Cuthbertson praised the working group for giving the tax community the opportunity to explore the detailed design of a range of tax issues including measures to support small businesses, the integrity and administration of the tax system such as dealing with multinationals and finally, the viability of a capital gains tax.

“A lot of the groundwork has been laid for the future.”

However, he said the tax community won’t be relaxing any time soon, with many important recommendations targeting small business, start-ups and compliance costs being pushed onto Inland Revenue’s tax policy work programme.

CA ANZ is disappointed that the recommendation to establish a taxpayer advocate service to assist with the resolution of tax disputes will not be progressed. “We believe this feature would have made a significant contribution to enhance taxpayers’ trust in the tax system,” Cuthbertson said.

Chartered Accountants Australia and New Zealand also believes key long-term issues facing New Zealand’s tax system will require more work, in particular the reliance on a small number of individual taxpayers as the largest single source of the country’s tax revenue.

Individual income tax is New Zealand’s highest revenue earner with more than 40 percent of the total tax take.

“It is crucial that we continue to think about the sustainability and future of our tax base, and the risks posed by a shrinking income tax pool due to advances in technology, the changing work landscape and ageing population.