NZ’s PM Jacinda Ardern does a volte face against capital gains tax

It is not clear what events and knowledge has prompted her change of stance vis-a-vis CGT.

On Wednesday, New Zealand’s Prime Minister Jacinda Ardern stated, her coalition government will not go ahead with a proposal for a capital gains tax (CGT) due to a lack of consensus and has ruled out implementing such a tax under her leadership.

The decision to go against bringing in a capital gains tax goes against the position of Ardern’s Labour Party which had taken this stand for decades. The Labour Party had campaigned to bring in a capital gains tax in order to ensure economic fairness and a sense of balance.

A working group on tax that was appointed by Ardern in February had also recommended a capital gains tax.

“All parties in the government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus,” said Ardern in a statement. “While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future”.

The capital gains tax was to cover assets including land and buildings, residential rental properties, business assets, shares and intangible property.

In 2017, Ardern’s Labour Party formed the government based on the promise of investing funds into social services and rein in economic inequality. Although her government has boosted minimum wages and benefits for poor families, business confidence has however shrunk.

Debate over the pros and cons of bringing in a capital gains tax has been raging for months, with critics and experts warning that it would hurt the housing market and push investors towards selling them in order to avoid the tax.

New Zealand does not generally tax income in the form of capital gains.

With the news reaching the market, shares in retirement village operators, which own property assets and benefit from capital gains in asset sales, have risen. Shares of Ryman Healthcare rose by 3.6% following the announcement.

“The CGT debate wasted millions of taxpayer dollars and over 18 months weakened our economy by scaring businesses owners, investors and mums & dads out of getting ahead,” tweeted Simon Bridges, leader of the opposition National Party.

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