Tax package shrinking, rental property sector smaller than first thought: English

Thursday 18th March 2010

Finance Minister Bill English is talking down the size of the tax package for the May 20 Budget, saying Treasury analysis was finding a smaller contribution available from rental property tax changes than was estimated by the Tax Working Group.

The Victoria University-led TWG reported in January that up to $1.3 billion in tax could be raised.

"As (the Treasury) have done more work, their estimates of revenue have tended to come down," said English during questions at a Beehive press conference to launch the creation of a new Productivity Commission.

There was "significantly less than the TWG suggested", said English, who remained determined to change tax system anomalies that encourage a disproportionate amount of New Zealand's private investment into housing.

"The trade-offs are a bit tighter," said English of the capacity to use money raised from ending depreciation allowances on rental property to help fund personal tax cuts and offset an increase in the rate of GST to as much as 15%.

"It doesn't make any significant difference to the tax policy issues", which boiled down to lower than desirable effective tax rates for many rental property owners.

The TWG found that residential housing assets were worth some $200 billion, but rather than contributing to the tax base, the sector as a whole was receiving around $150 million in tax refunds annually because of the way the tax system currently works.

Businesswire.co.nz

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