Land tax favoured by working group rather than CGT

But for the fact that any land covered by such a tax would suffer a one-off fall in value to reflect the impact of the tax, and that this would be most unfair to the elderly, a land tax would beneficial side-effects for the wider economy, according to a paper for the working group by economists Arthur Grimes and Andrew Coleman, from the Motu Economic and Public Policy Research g

"A land tax would be likely to cause home ownership rates to rise slightly, and gross debt to GDP and net foreign assets to GDP ratios to fall due to lower foreign borrowing," the Grimes-Coleman paper argues. It would also bring foreign landowners into the New Zealand tax base in an inescapable way, land being a highly tempting to tax since it cannot be moved.

The working group has no government mandate, but involves collaboration between non-government tax experts and officials from the Treasury and Inland Revenue Department, on the premise that New Zealand must widen its tax base or face much higher rates of income tax and GST. 

Excluding government-owned and conservation land, the value of the taxable land base is around $460 billion, so could raise $460 million a year at a 0.1% rate of tax, before the one-off fall in land values caused by the tax.