In our submission to the Productivity Commission, CA ANZ cautions Government against rushing to introduce a vacant residential land tax. Government must first clearly develop their problem definition, and who a vacant residential land tax would seek to target. There is a high risk that a vacant residential land tax would have unintended consequences for a wide range of taxpayers. If a proposed tax means to capture developers who may currently hold large parcels of vacant residential land for future development (land banking) then it should be targeted accordingly. In addition, there may be other more appropriate mechanisms available to Government.
Defining ‘vacant land’ for the purposes of a vacant residential land tax would be complex, likely with a number of exclusions and exceptions required. Complexity also brings with it costs of compliance and administration, an erosion of taxpayer certainty, and can affect whether taxpayers perceive the tax as being broadly fair. If a vacant residential land tax is considered by Government, we recommend that a definition is set nationally and should only be applied by local governments where there is an identified shortage of land and a desire for housing. We also recommend that de minimis thresholds are considered to reduce the inappropriate application and overreach of a proposed tax.
Other factors which affect housing supply and affordability in New Zealand, such as the Resource Management Act, unitary and zoning plans, and access to financing and funding must be considered in tandem with a proposed vacant residential land tax.