JAT Volume 21 Issue 2 Article 5 – Maples and Yong

THE TAX WORKING GROUP AND CAPITAL GAINS TAX IN NEW ZEALAND — A MISSED OPPORTUNITY?

Abstract

There has been much debate in New Zealand concerning the need for a separate and comprehensive capital gains tax (‘CGT’), especially after the appointment of the Tax Working Group (‘TWG’) in 2017. The arguments for a CGT include equity, base broadening, certainty, additional tax revenues and remedying the housing affordability crisis. On the other hand, counter-arguments such as tax complexity (in the design of the CGT), overstatement of projected tax revenues, and high tax compliance and administrative costs have been raised by opponents of the tax. The TWG identified three socio-economic challenges facing New Zealand (among others) — housing affordability, income/wealth inequality and fiscal sustainability — all of which it is argued have a link to the tax system. Ultimately, for political reasons the government decided not to pursue the TWG’s recommendation for a CGT. This paper considers whether this is a lost opportunity to address these three challenges.

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