Hugely disappointing or the right decision? Mixed reaction to capital gains tax backdown

Prime Minister Jacinda Ardern has ruled out enforcing the much-debated capital gains tax.

While many business organisations are cheerful, with some commending NZ First, others say a growing wealth gap is a disservice to the country's most vulnerable.

The Employers and Manufacturers Association said it was relieved with the decision to not proceed with the tax because it would hamper the ability of small to medium-sized businesses to grow.

"It wasn't something that was going to meet the objectives of reducing over-investment in housing and increasing tax fairness, and it would have been at a significant cost for SMEs," chief executive Brett O'Riley said.

"Dropping the CGT is one less issue for SMEs to deal with, especially with the volume of change this government is trying to introduce in the workplace."

The Road Transport Forum said a new tax would have been a burden on transport businesses.

"For transport companies, a CGT would have covered vehicles, premises, land, equipment and other business assets. The compliance alone would have been extremely onerous," RTF chief executive Nick Leggett said.

"There would be less money to hire more staff, invest in professional development and training, purchase more modern equipment and generally make businesses more productive."

Role of New Zealand First 'pivotal'

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    The Government today announced it has abandoned plans to introduce the CGT tax. Source: 1 NEWS

    Canterbury Employers Chamber of Commerce chief executive Leeann Watson said the decision highlighted the government's commitment to the business community.

    "We are pleased that the government has embarked on a strong, robust consultation process with all members of the community ... and ultimately made the right decision to rule out a new tax that could have adversely impacted all New Zealanders - and in particular small and medium-sized enterprises, which make up the majority of our country's employers," she said.

    Ms Watson said the chamber had always advocated for a balanced and efficient tax system, and addressing areas that were not working, rather than introducing new measures.

    "We look forward to working further with the government to help shape a regulatory environment that promotes business and supports those who seek to create jobs and prosperity for the whole community."

    "We acknowledge the role that New Zealand First has played in this outcome."

    The decision also went down well with Federated Farmers.

    "It seems to us that New Zealand First has been pivotal in this decision, and we appreciate their pragmatism," Feds economics spokesperson Andrew Hoggard said.

    He was glad that the government would look at the compliance cost reduction ideas mentioned in the Tax Working Group's report.

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      Up to $2 million was spent on the exercise, with over 90 recommendations made to government. Source: 1 NEWS

      "There were a number of these that are worth looking at, including increasing various thresholds (eg for provisional tax) and simplifying depreciation and Fringe Benefits Tax, and removing resident withholding tax on close company-related party interest and dividend payments," Mr Hoggard said.

      He was also pleased that there would be no resource rental for water or fertiliser tax - at least in this term of government.

      Business NZ commended the government and said it was clear that NZ First has played a "significant role" in a capital gains tax not proceeding, and the business community would thank them for "not compromising their concerns".

      Its chief executive Kirk Hope said members did not see the justification for "an expensive new tax that would have reduced the competitiveness of the New Zealand business sector for no discernible gain".

      "Business NZ was appreciative of being included in the working group process and commends much of what is in the report, but in the end could not support a capital gains tax."

      However he says it made another 90 proposals for the government to consider.

      Path to 'persistent wealth inequality'

      However, NZ Council of Trade Unions president Richard Wagstaff said the decision was "hugely disappointing".

      "Working people need a fairer New Zealand, a place where we can all thrive. Ensuring that everyone contributes their share is a key part of that.

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        The National leader says Jacinda Ardern hasn't been able to deliver her flagship economic policy. Source: 1 NEWS

        "A fairer tax system remains part of the solution in building the country we want New Zealand to be."

        Mr Wagstaff said the government needed to stop favouring businesses and property owners over working New Zealanders.

        Similarly, the Public Service Association (PSA) said it was disappointing that there was no appetite for implementing some form of capital gains tax.

        "That was certainly not the opinion of the majority of the Tax Working Group, nor a number of New Zealand's leading economists, nor a large cross-section of community interests and ordinary citizens who were gaining a voice through networks such as Tax Justice Aotearoa New Zealand," PSA national secretaries Glenn Barclay and Kerry Davies said.

        They said the PSA was anxious to see what this year's Budget would deliver to underpin how to cover the costs of meeting the wellbeing needs of all New Zealanders - especially those who were "struggling to make ends meet and do not have the luxury of untaxed capital gains".

        Today's decision left the way open for "persistent wealth inequality" in New Zealand to go unchecked, they said.

        Auckland Action Against Poverty (AAAP) condemned the government for not fixing a tax system which benefited a wealthy few.

        "The government's refusal to implement bold tax reform to address the growing wealth gap is a disservice to our most vulnerable", AAAP coordinator Ricardo Menendez March said.

        "Those who are on low-income, homeless, or most impacted by out-of-control speculation were not listened to throughout the Capital Gains Tax debate leading up to this decision."

        Instead, he said the government "allowed wealthy landowners to control the narrative" over what sort of tax system Aotearoa should have.

        "Wealthy landlords held the debate hostage by threatening to increase rents if their obscene profit margins from speculative gains were threatened."

        Because of this decision, housing in New Zealand would continue to be seen as an "investment to make a profit out of instead of a fundamental human right".

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          Renters and first home buyers aren’t so happy, however. Source: 1 NEWS