As previously reported, the Committee’s key recommendations to improve the bill included changes to the following provisions:
Unfortunately, the second reading debate has been interrupted because of Xmas and the holiday recess and will now be completed sometime in February. It is likely the Bill will be passed by early March.
The 2025 Taskforce report - prepared by former National Party leader Don Brash, who was also a Reserve Bank Governor has proposed a range of measures increase productivity and close the wage gap with Australia.
Of interest to the Federation, the report recommended against a capital tax.
The Federation attended a public conference hosted by the Tax Working Group held in Wellington on 1 December. The TWG recommended various options to the taxation of investment property.
Although leading Government Ministers and other authorities including the 2025 TaskForce (led by Don Brash) have ruled out or rejected a capital gains tax on property the option was recommended by the TWG. It did however concede “administrative and other difficulties make this approach unattractive". Despite this, the Treasury and Opposition politicians (especially Progressive and Green MPs) favour the imposition of a CGT.
Other TWG tax options included a land tax, a tax on the net equity in rental properties at a deemed rate of return of, say, 6 per cent (the Risk Free Return Method), and denial of rental loss offsets (ie ring-fencing losses on rental properties so that taxpayers cannot offset them against their wage or salary income), and changes to limit depreciation allowances.
Elsewhere, the Capital Market Development Taskforce (16 December) similarly recommended in its final report, denial of depreciation deductions on buildings, application of the RFRM, and a targeted capital gains tax.
Any changes to the tax system, as proposed, will have major implications for Federation members.
The Government will now consider the various proposals, along with recommendations of the Australian Henry Tax Review, and announce any changes at Budget 2010. Beyond that, some of the recommendations may be used in the Government’s election manifesto for the 2011 election.
Finally, IRD’s public consultation on depreciation of items on residential rental properties closed 18 December. (see: http://www.ird.govt.nz/public-consultation/).
The Federation is able to confirm that the Minister of Housing, the Hon Phil Heatley has agreed to open the Federation’s 2010 annual conference (to be held in Blenheim 15-17 October 2010) and give the key note address.