BusinessNZ has welcomed the Government's decision to not proceed with a capital gains tax.

Chief executive Kirk Hope said the proposed tax would have hit businesses hard, reducing funds available for investment and job growth and increasing their compliance burden.

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"Our members have been very clear that they did not see the justification for an expensive new tax that would have reduced the competitiveness of the New Zealand business sector for no discernible gain," he said in a statement.

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BusinessNZ commended much of what is in the report, but in the end it could not support a capital gains tax.

It was clear that NZ First has played a significant role in a capital gains tax not proceeding.

"We feel the process of working group proposals followed by widespread consultation has been successful in delivering a result that the majority of New Zealanders can support.

"With the Government's decision not to proceed with a capital gains tax decision, the benefits of our relatively broad-based, simple and fair tax system have been retained, and New Zealanders' confidence in the tax system strengthened," he said.

The Employers and Manufacturers Association (EMA) said it was relived that the government has decided not to proceed.

"It wasn't something that was going to meet the objectives of reducing over-investment in housing and increasing tax fairness, and it would have been at a significant cost for SMEs," chief executive Brett O'Riley said.

"Dropping the CGT is one less issue for SMEs to deal with, especially with the volume of change this government is trying to introduce in the workplace."