Watered down capital gains tax would prove New Zealand First is in charge - Tova O'Brien

If the Government announces a "watered down" capital gains tax (CGT) on Wednesday, it clearly shows New Zealand First is running the Government, according to Newshub's Political Editor.

In February, the Michael Cullen chaired Tax Working Group (TWG) recommended the Government introduced a thorough capital gains tax.

The proposed tax would apply to all gains and losses on land and improvements (except on the family home), including shares and business assets. It didn't propose, however, applying the tax to personal items like boats, bikes and art.

But after heavy opposition from the National Party and the business community, some pundits believe the Government will kneel and instead look to enact a less comprehensive CGT - and it could be announced on Wednesday.

"It is imminent, we know that the Capital Gains Tax [announcement] is coming out this month, and certainly we are hearing that will be coming out today," said Political Editor Tova O'Brien.

"All suggestions, public and private, is that this CGT is going to be some kind of watered-down version of the Michael Cullen report, perhaps with exemptions for businesses, for farms, perhaps just on residential rental properties, so on property investors, maybe on KiwiSaver."

Before the 2017 election, New Zealand First leader Winston Peters said a CGT was "off the table" and has said the tax wouldn't work in New Zealand.

After the TWG's report was released, Peters appeared to soften his position but also wouldn't commit to following the full recommendations.

"When you're presented with a new set of circumstances, then it's wise to actually consider it before confirming your former opinion.

"Capital gains tax is just one of the things [recommended in the Tax Working Group's report] - there were a whole lot of other suggestions made," he told Magic Talk in February.

O'Brien said a weaker CGT would contrast with previous efforts from the Labour Party and may reflect Labour giving a major concession to New Zealand First.

"All I would say about that is if the Government comes out with this watered down CGT, who is in power?" she told The AM Show.

"We know that Labour wanted a comprehensive, broad-based CGT. It is increasingly looking like the tail, New Zealand First, is wagging the dog.

"If this CGT comes out today, and it is watered down, there are two words that sum up why: Winston Peters. It will point to who is actually running the show here".