The Government has this afternoon confirmed they will not introduce a capital gains tax (CGT).
Prime Minister Jacinda Ardern said she was disappointed, as the introduction of a CGT was one of the main issues she campaigned on, and she believed it could have made New Zealand's taxation system "more fair".
"The Tax Working Group gave the Government, and the country, an opportunity to look at the fairness of our tax system and debate options for change," she said in a statement.
"All parties in the Government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus.
"As a result, we will not be introducing a capital gains tax.
"I genuinely believe there are inequities in our tax system that a capital gains tax in some form could have helped to resolve. That's an argument Labour has made as a party since 2011.
"However after almost a decade campaigning on it, and after forming a government that represented the majority of New Zealanders, we have been unable to build a mandate for a capital gains tax. While I have believed in a CGT, it's clear many New Zealanders do not.
"That is why I am also ruling out a capital gains tax under my leadership in the future.
"The Tax Working Group was a valuable exercise that has delivered some useful suggestions well beyond just the debate on CGT, and I want to thank the Group for its work.
"In fact the majority of recommendations will either be investigated further or have formed part of our work programme.
"There are other things that can be done to improve the fairness of our tax system. As such the Coalition Government has agreed to tighten rules around land speculation and work on ways to counter land banking.
"Work will also continue to cut red tape for business and crack down on multi-nationals avoiding paying their fair share of tax in New Zealand. We have already made changes to address base erosion and profit shifting, and we will shortly release a discussion document on options for introducing a digital services tax."
The Tax Working Group, led by Sir Michael Cullen, reported in February, recommending a capital gains tax be introduced.
The group gave advice in its report that intellectual property, business assets, shares, investment properties and land should all be put under the new CGT scheme.
WINSTON PETERS SAYS TWG REPORT GOOD VALUE AT $2M
New Zealand First Leaders and coalition partner Winston Peters said while a capital gains tax was not one thing to come from the Tax Working Group report, there were several other recommendations which would be followed up.
"it's a very worthwhile exercise," Mr Peters said.
He said recommendations around multi-national business tax, land banking and speculation, and tax policy encouraging investment in the national interest would be among the recommendations looked into.
He refused to be drawn on whether cross-party tensions were behind a CGT not going through.
FINANCE AND REVENUE MINISTERS: TWG POINTS WERE NOTED
Finance Minister Grant Robertson said in a statement that the Tax Working Group report found that New Zealand's tax system is working well, but that it also made a number of recommendations which will be assessed.
"The final report covered all aspects of the tax system, and a number of the recommendations will now be considered for inclusion in the Government's Tax Policy Work Programme," Mr Robertson said.
"That includes exploring options for targeting land speculation and land banking.
"We intend to direct the Productivity Commission to include vacant land taxes within its inquiry into local government funding and financing," Mr Robertson said.
Revenue Minister Stuart Nash said "officials have been directed to prioritise work on the TWG's recommendations on ways to encourage investment in significant infrastructure projects and improve the integrity of the tax system to crack down on tax dodgers."
POLITICIANS AND INTEREST GROUPS REACT
Reacting to the news, Opposition Leader Simon Bridges, who had strongly lobbied against the introduction of a CGT, was quick to claim victory, writing on Twitter that "National's relentless opposition to the CGT forced this result".
"The CGT debate wasted millions of taxpayer dollars and over 18 months weakened our economy by scaring businesses owners, investors and mum & dads out of getting ahead," Mr Bridges wrote.
"Jacinda Ardern still says a Capital Gains Tax would make a difference & the tax system is unfair. Ambiguous reforms are still coming. New Zealanders can't trust Labour on tax."
New Zealand First leader Winston Peters welcomed the decision.
“There is already an effective capital gains tax through the Bright Line test brought in by the last National Government and New Zealand First’s view is that there is neither a compelling rationale nor mandate to institute a comprehensive capital gains tax regime,” said Mr Peters.
Green Party Co-Leader James Shaw released a statement saying his party is disappointed with the decision, especially "that the Tax Working Group’s unanimous recommendation to implement a capital gains tax on investment properties isn’t going ahead.
"Taxing income from capital the same way we tax income from work would reduce the wealth gap, fix the housing crisis and build a more productive, high-wage economy" Mr Shaw said.
"The Green Party will continue to work with Labour on ways to make the tax system fairer, more progressive, and to advance other proposals in the Tax Working Group report such as pollution pricing."
Business industry group Business Central welcomed the announcement, saying "businesses and employers are breathing a sigh of relief they will not face this stifling and costly new tax.
"A capital gains tax would have worsened the business environment, dis-incentivised owners from growing their businesses, and greatly increased compliance costs.
"Our members across the region are glad that common sense has finally prevailed."
Federated Farmers economics spokesperson Andrew Hoggard also backed the decision to not introduce a CGT.
"It's clear the coalition partners have listened to widespread concerns that a Capital Gains Tax has too many downsides, including massive administration costs and the potential to put the handbrake on the progress of small and medium businesses vital to our economy," he said.
"The Prime Minister spoke this afternoon about new measures to tackle land banking and land speculation, an approach that has a much better chance of tackling our housing affordability issues than a CGT."
Former United Future party leader Peter Dunne tweeted that it was the "right call" to not introduce a CGT.