NZ Finance Minister Revisits Possible Property Tax

by Mary Swire, Tax-News.com, Hong Kong

05 November 2009

New Zealand’s Finance Minister, Bill English, has indicated that the government is thinking about the introduction of a tax on investment property.

In an interview with TVNZ, he said that, in order to turn investment in New Zealand towards more productive areas, a tax on properties held for investment would be examined by the government. Such a tax, he stressed, would not include taxation on people’s primary homes. At present, losses on investment property can be offset against an individual’s other taxable income.

Discussion on introducing the tax began in September this year, following the Governor of the Reserve Bank’s comment that, in the situation of a resurgent housing boom, all possible means should be considered to restrain speculative property transactions, including taxation. New Zealand’s Prime Minister, John Key, seemed to be against the idea at that stage.

However, the possibility of introducing a capital gains tax on such properties is being studied by New Zealand’s tax working group, which has looked at options for broadening the tax base and raising revenue.

In addition, in its Long-Term Fiscal Statement, New Zealand’s Treasury recently expressed the belief that, from an economic growth perspective, New Zealand's present tax mix is unhelpful, as there are no central government property taxes or comprehensive capital gains taxes.

Bill English added that, as the report of the tax working group was due by the end of the year, any new taxes in this area would be announced in next year’s budget, and would be likely to be balanced by other tax changes.

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