The tax could hit a swathe of assets, including second homes, baches, shares, businesses, farms and land, with most people likely to pay tax rates of 33 per cent.
While Schroder feared the tax would discourage new start-up businesses, one of Auckland's leading property investors said it would also fail to benefit first-home buyers and create a mountain of costly red tape.
Financial advisers have slammed it for potentially targeting KiwiSaver and retirement funds, while art collectors seem to be among the few left smiling after it was suggested art should be exempt from the tax.
The tax could be introduced in 2021, with any capital gains made after this date liable for taxation and those made earlier being exempt.
But Schroder said this could hit his business, Cleverscope, especially hard.
It has made a tool it hopes will be useful to engineers developing new technologies for products ranging from wind farms to electric cars. The tool has been more than 10 years in the making and is yet to sell in large numbers after Cleverscope suffered setbacks with the global financial crisis and competition from China.
That meant the company would have a low valuation at the moment and a high valuation later if successful, leaving him liable to a big tax bill.
Matthew Gilligan, managing director of accountancy firm Gilligan Rowe and Associates, said a capital gains tax would probably lead property investors to hold on to their rentals over the long term to avoid paying the tax.
Gilligan — who owns more than 30 properties in Auckland, while his firm represents about 9000 clients — said this meant first-home buyers would not benefit from an investor sell-off as some pundits predicted.
The cost to investors of complying with the tax and the cost to the Inland Revenue Department of enforcing it and ensuring home owners don't inflate their house price valuations ahead of the tax's introduction would also be prohibitive, he said.
He suggested an extension to the bright line test, so investors are hit with a tax if they buy and sell a property within a 10- or 15-year period, would be a simpler way to tax property sales.
Gilligan also called the Tax Working Group's suggestion to apply capital gains tax to KiwiSaver and superannuation funds "appalling". He said the superannuation industry was still relatively new in New Zealand and the tax would deter people from putting money into retirement funds.
Art and Object auction house director Ben Plumbly said collectors were also keeping their eye on the working group's recommendations.
His auction house traded $11 million of art sales last year, but Plumbly said capital gains were always a secondary concern for those buying art.
"I don't know of anyone who calls themselves an art investor, they call themselves art collectors," he said.
Tax report's key recommendations
•Capital gains tax to apply after the sale of residential property, businesses, shares, all land and buildings except the family home, and intangibles such as intellectual property and goodwill.
•Tax rate to be set at the income-earner's top tax rate, likely 33 per cent for most.
•Calculation of gains not to be retrospective — tax to be applied to gains made after April 2021.
•Art, boats, cars, bikes, jewellery, personal household items and the family home to be exempt.
•Losses on the sale of assets bought before April 2021 will generally be able to be used to reduce tax on gains from other assets.
•Increase the threshold of the lowest tax rate (10.5 per cent), allowing more income to be taxed at the lower rate.
•Increase social welfare net benefits to allow similar benefits as low-income earners, after tax threshold adjustments.
•House on farms and surrounding land up to 4500 sq metres exempt from CGT, calculated as a percentage of total farm value.
•CGT on small businesses can be deferred (rollover relief) if annual turnover is less than $5 million and sale proceeds are reinvested in similar asset class.
•No support to make company tax progressive, ie smaller companies paying less than 28 per cent.
•Capital gains tax estimated to raise $8.3 billion over five years.
•Expand coverage and rate of Waste Disposal Levy, expand the Emissions Trading Scheme and use congestion charging.
•Better tax benefits for KiwiSavers on low and middle incomes.
