Winston Peters '100 per cent' behind ditching of capital gains tax - Sir Michael Cullen

The Tax Working Group chair, Sir Michael Cullen, says Winston Peters is "100 per cent" behind the Government's decision to ditch the proposed capital gains tax.

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The Tax Working Group chair says he's disappointed but not surprised the Government isn't adopting its recommendation.

Prime Minister Jacinda Ardern announced this afternoon that the Coalition Government will not proceed with the Tax Working Group's recommendation for a capital gains tax, saying the parties have been unable to find a consensus on it.

It's a major policy u-turn for the Government and Sir Michael says he's disappointed but not surprised by the decision.

"I always thought it would be very difficult to get New Zealand First and Mr Peters over the line on capital gains tax," he told 1 NEWS.

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In an embarrassing flip-flop, Prime Minister Jacinda Ardern has been forced to ditch the controversial capital gains tax. Source: 1 NEWS

"So Labour and the Greens don't have the numbers between them, so there's no point in proceeding."

Asked how much of a factor he thinks the New Zealand First leader was in the decision, Sir Michael said: "Oh 100 per cent."

He said there was no doubt that both Labour and the Greens would have voted for some form of capital gains taxation, not necessarily very broad based.

"But it's clear that Mr Peters is opposed to any form. And that's the reality of MMP politics. You have to have 61 votes in Parliament, and Labour and the Greens aren't 61 votes."

Sir Michael, a former Labour finance minister, said "there's clearly just strong difference of opinion".

And he thinks the decision means "probably capital gains taxation is off the agenda for the far distant foreseeable future" for Labour.

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

Sir Michael said the decision means that "in the longer term low to middle income people will be paying more in tax to support our social services than would otherwise have been the case".

He said it also means there will be continuing "over investment" into land-based assets, and land has been increasing in value over a long time

"So young people trying to move into a house, young people trying to move onto a farm, increasingly are being priced out of that market."