Business groups, farmers, landlords elated at capital gains tax backdown

Business leaders and farmers have been quick to welcome the Government's decision not to adopt a capital gains tax (CGT).

And they're all pointing at New Zealand First as being behind the big call.

BusinessNZ chief executive Kirk Hope said the Government was to be commended for listening as New Zealanders made their views clear that they didn't want a CGT.

Hope said the proposed tax would have hit businesses hard, reducing funds available for investment and job growth and increasing their compliance burden.

"Our members have been very clear that they 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."

BusinessNZ commended much of what is in the report, but in the end could not support a CGT.

And singing from the same songsheet as other business leaders, Hope praised Winston Peters' party for canning the controversial tax.

"It is clear that NZ First has played a significant role in a capital gains tax not proceeding, and the business community will thank them for not compromising their concerns."

Federated Farmers echoed those thoughts, saying it seems New Zealand First has been pivotal in this decision "and we appreciate their pragmatism".

The group's economics spokesperson Andrew Hoggard said the decision not to proceed with a CGT was "heartening evidence that the Coalition Government is willing to put well-reasoned and practical considerations in front of ideology".

Hoggard said there were too many downsides to the proposed tax, including "massive administration costs and the potential to put the handbrake on the progress of small and medium businesses vital to our economy".

He also welcomed new measures to tackle land banking and land speculation, which had a much better chance of tackling housing affordability issues than a CGT.

"We're also pleased with the assurance that there will be no resource rental for water or fertiliser tax - at least in this term of Government," Hoggard said.

Business Central chief executive John Milford said the CGT was "a poorly conceived idea" that would have hit Wellington's high-growth high-tech particularly hard, as an example.

"We hope the parties of government decide to shelve this idea for good."

Likewise the Employers and Manufacturers Association (EMA) said it was relieved because of the detrimental effect a CGT would have had on the productivity and growth of small to medium-sized businesses (SMEs).

"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," EMA chief executive Brett O'Riley said.

Federated Farmers also welcomed the Government's commitment to looking at the compliance cost reduction ideas mentioned in the Tax Working Group's report, which were worth looking at.

These included increasing various thresholds on the likes of provisional tax, and simplifying depreciation and Fringe Benefit Tax.