The Government will not go ahead with plans to tax employer-supplied carparks in Auckland and Wellington.
The backdown was announced in a joint statement from Finance Minister Bill English and Revenue Minister Peter Dunne today.
"The proposal was made as a matter of fairness, because in general we consider that cash and non-cash benefits should be taxed the same way,'' said Mr English.
He said they still thought it was fair to tax employer-supplied car parks, but needed to be "pragmatic''.
"This was considered likely to be one of those proposals from IRD where the cost of compliance, compared with the likely return, made it not worth pursuing,'' he said.
Mr Dunne said officials' estimates of the number of carparks which would have been affected were far fewer than the 180,000 talked about.
"Even so, for expected revenue of about $17 million, and the difficulties around ensuring the policy would not have adversely impacted other workers, it seems sensible not to proceed.
"We will continue to focus on fairness in the tax system but we also think that there are bigger and more important tax matters for officials to focus on.
Labour's revenue spokesman David Cunliffe said the backtrack on the tax was excellent news.
"The tax was inefficient, unfair and downright dangerous. It was set to cost twice as much to administer as it would have brought in. It included only two CBDs and would have forced city cleaners to walk the streets at dangerous hours of the night.''