The rural sector has given an unequivocal thumbs down to the Tax Working Group's recommendation to bring in an comprehensive capital gains tax.

The group has recommended the Government implement a capital gains tax - and use the money gained to lower the personal tax rate and to target polluters.

The suggested capital gains tax (CGT) would cover assets such as land, shares, investment properties, business assets and intellectual property.

NZX says CGT would stunt market and economy
Proposed capital gains tax 'a mangy dog'


Marise James, agribusiness specialist at accounting firm Staples Rodway, said a new tax as regime outlined by the group would limit farmers.

"It's going to be quite limiting for them, and quite restrictive in terms of how they plan their futures and how they grow their businesses," James said.

"CGT is really going to significantly impact on cash flow for farms as they grow their business, and I think that that is a real concern," James told the Herald.

She said there was potentially wide implications in terms of the inter-generational transfer of farmland between families from the group's recommendations.

There was no mention in the group's report of "rollover relief" - which allows tax arising from one sale to be deferred from one property to another.

Likewise James said there was no mention of succession planning - a big issue for the farming sector.

She said the lack of rollover relief would compromise farmers' ability to grow their businesses by trading up because they would need to find the cash to pay CGT.

James added environment taxes outlined in the report would be restrictive, particularly if those tax were not directed at finding solutions to environmental problems.


Matt Goodson, managing director of Salt Funds Management, said group's recommendation that agriculture be included in the emissions trading scheme could have a significant impact the rural sector if it came to pass.

"The relatively low returns from parts of the agriculture sector could disappear altogether," Goodson said.

Federated Farmers said a proposed capital gains tax was a "mangy dog", that would add unacceptably high costs and complexity to the rural sector.

"There is nothing in the Tax Working Group's final report that persuades us otherwise," Federated farmers vice-president and Commerce spokesperson Andrew Hoggard said in a statement.

"A CGT would make our well-regarded tax system more complex, it will impose hefty costs, both in compliance for taxpayers and in administration for Inland Revenue, and it will do little or nothing to ease the housing crisis," Hoggard said.

Peter Newbold, general manager of PGG Wrightson Real Estate, said a capital gains tax would have a minimal impact at the moment because the rural property market was largely static.


He said in general rural property values for most sectors are holding steady, although there was some downward pressure in dairy in some regions.

"If that remains the case, a capital gains tax would have minimal impact on the market," he said.