Wairarapa Property Investors' Association

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Tax Working Group got it wrong


The Government has said the Tax Working Group's (TWG) predictions on how much revenue could potentially be collected from tax on the property investment sector was too radical.

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 TWG.

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

"As (the Treasury) has done more work, their estimates of revenue have tended to come down," English said today.

Although English did not put an exact figure on the amount of tax Treasury predicted could be gathered, he said it was "significantly less than the TWG suggested".

"The trade-offs are a bit tighter," he said 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.

Vice president of the New Zealand Property Investors Federation (NZPIF) Andrew King says property investors should be pleased the government is doing its own research into the TWG claims.

"It's great the government has actually started to look critically at the information the Tax Working Group put out," he says.

"Although we never saw the exact workings, we couldn't see how they could get $1.3 billion and assumed they had taken into account commercial as well as residential."

He says the $1.3 billion could also have been calculated on getting rid of chattel depreciation, as well as the depreciation on the building itself.

King says the NZPIF never had a problem with the government, but rather the TWG and its obvious use of mis-information.

"If the government is given wrong information they will make the wrong decisions.

"The truth is starting to get out."

Source: Landlords.co.nz