Date posted: 6/08/2019

Should NZ have a Vacant Land Tax?

The Productivity Commission has been directed to explore the possibility of vacant land taxes for New Zealand. CA ANZ would like to hear from Members to inform our submission.

In brief

  • We want to hear your thoughts on vacant land taxes and the implications for NZ
  • The Productivity Commission is seeking further feedback to inform their report to Ministers in November 2019
  • CA ANZ will be making a submission to the Productivity Commission on the vacant land tax issue

Vacant land taxes – Productivity Commission draft report

For a while there, hopes of increasing our tax base and, for some, adjusting our housing market, hung on the Government extending capital gains taxes. But when Government announced in April that it wasn't accepting the Tax Working Group recommendations for a broad extension to the taxation of capital gains, or a targeted version of a CGT (as many expected), the favoured approach was a surprise. 

Government directed the Productivity Commission to explore options for taxing vacant land as part of its inquiry into local government funding and financing, and to seek a review of the current rules of taxing land speculators as a high priority for the work programme.

The Productivity Commission's draft report is now available for consultation. The report explores the principles of good local government funding and financing in great detail, but the Commission is calling for further vacant land tax feedback addressing the below questions before reporting to the Minister of Finance in November.

"How desirable and useful would a tax on vacant residential land be as a mechanism to improve the supply of housing for New Zealanders?"
"How would such a tax measure up against the principles of a good system of local government a funding and financing?"

We're being asked whether a vacant land tax would free up unused land for housing developments to improve housing supply.

The Productivity Commission makes the following observations:

  • A tax on vacant land would discourage land banking,
  • It is difficult to define vacant land and could therefore create opportunities for avoidance, and,
  • A vacant land tax would provide limited revenue.

Questions for Members

CA ANZ will be making a submission to the Productivity Commission on the vacant land tax question. Members can contribute by sharing their thoughts on the following questions:

  • Do you think a tax on vacant land tax would improve the supply land for housing for New Zealanders?
  • What challenges to you see with implementing a tax on vacant land?
  • What benefits do you think a tax on vacant land would have?

Submissions to the Productivity Commission must be received no later than 29 August 2019.

The other side of the coin

To complement the investigation into vacant land taxed being undertaken by the Productivity Commission, Inland Revenue have been directed to undertake a review of the current rules of taxing land speculators as part of the tax policy work programme. While the work programme is yet to be released, more work continues in the land & property space, with a further amendment to the bright-line test included in the latest Tax bill.

We would also like to hear any thoughts members have regarding land speculation and how this should be taxed.

Contact the tax team

As an advocacy team, we endeavour to comment on a "what's best for New Zealand" basis. Our public policy perspective means we provide comment on tax policy and its implementation free from self-interest or sectorial bias. Our submissions are guided by the following principle: the tax system must not impede New Zealand's international competitiveness, the growth of our economy; or our innovation and entrepreneurship.

We engage with Inland Revenue, Treasury and other stakeholders early and regularly on tax policy matters. In formulating our submissions, we consult with our Tax Advisory Group, member tax liaison groups and other stakeholders.

Throughout the year we ask for member's thoughts and feedback on Inland Revenue consultation items, if an item is of interest to you or your clients, we'd love to hear from you.

If you'd like to discuss current or upcoming advocacy work, get in touch with our Member Knowledge Specialist.

Please note that as an advocacy unit, and in order to focus on our tax advocacy priorities, our NZ Tax Team cannot provide advice.

Read the productivity commission interim report

Property Taxes and a proposed vacant land tax are discussed in chapter 6 of the report.

Click here

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