OECD backing for capital gains tax
A broader capital gains tax is being backed by a top OECD official and former Australian minister who is visiting New Zealand on a scholarship.
David Bradbury, who served as assistant treasurer in Australia until 2013 and now heads the Organisation for Economic Cooperation and Development’s tax policy and statistics division in Paris, said introducing a broader capital gains tax would be fair. It would also bring New Zealand into line with other developed countries.
The tax working group headed by Sir Michael Cullen is considering a broader capital gains tax on the likes of investment property and shares as a possible linchpin reform of the tax system that would take effect after the country’s next general election.
The idea remains unpopular with many New Zealanders, in part because of concerns it could discourage investment in new housing and push up rents, and because of compliance costs.
But the OECD would be arguing for the merits of implementing a capital gains tax as a ‘‘sensible’’ and equitable measure to broaden the country’s tax base, Bradbury said.
‘‘If New Zealand is building a tax system for the future, then you need to think about where the growth taxes might be.
‘‘Careful design can overcome most of the challenges. This has the potential to be a very significant reform, in the long term.’’
The Treasury has previously estimated that a broad-based capital gains tax, which excluded gains on owner-occupied housing, could raise $2.7 billion a year – increasing the total amount of tax Inland Revenue collected by between 3 and 4 per cent.
Bradbury is visiting New Zealand on a scholarship partly funded by private company Tax Management NZ, in honour of former Inland Revenue deputy commissioner Robin Oliver. He will be giving lectures in Christchurch, Wellington and Auckland, and speaking to Inland Revenue and Treasury officials.
Tax working group member Geof Nightingale, who is a tax expert at PwC, said the working group was in the midst of considering the 6700 submissions it had received in response to its March discussion paper.