Central NZ businesses oppose capital gains tax
Businesses in central New Zealand are opposed to the introduction of a capital gains tax, according to a survey by Wellington Regional Chambers of Commerce and Business Central.
Businesses from New Plymouth and Gisborne in the north to Nelson in the south were asked if they supported the Tax Working Group’s capital gains tax (CGT) as proposed, if it would improve or worsen the business environment for their organisation, and if they would support the proposed tax more if it applied to residential property investments only.
The questions were part of the March quarterly business confidence survey sent to Wellington Regional Chambers of Commerce and Business Central members across central New Zealand in March. The survey received 675 responses.
An overwhelming net negative 42 per cent of respondents opposed the proposed CGT, with 60.7 per cent opposed and just 18.6 per cent in favour. The remainder were neutral or did not know.
A net negative 40 per cent also believed a CGT would worsen the environment for their business, with 46 per cent saying it would and just 5.6 per cent saying it wouldn’t. A net 38.5 per cent said they would not support a CGT more if it applied only to residential property investments, with 53.3 per cent opposed and just 14.8 per cent in favour.
Chamber and Business Central Chief Executive John Milford said the results demonstrate the strong view from business against a new tax.
"Business in our region are clearly against the introduction of a CGT.
"The key word they used in the survey was ‘dis-incentivise’ - our members believe a GCT would dis-incentivise owners from growing their businesses, or even from starting new ventures.
"All the evidence is that a capital gains tax would be counter-productive on many fronts.
"New Zealand businesses are already among the highest taxed in the OECD, and the proposed CGT and its compliance costs would be a double tax on business that will ultimately affect the economy and everyone in it.
"The Tax Working Group didn’t calculate the costs associated with a CGT. Business has estimated indicative compliance costs over five years would be $1.8 billion and tax administration $210m, with a deadweight loss of $1.5b-$4.2b
"Double taxing businesses in this way will divert billions of dollars of capital away from investment in growth and productivity by reducing net returns and driving investors away.
"High-growth and vital sectors such as technology and primary industries will be particularly hard hit, with a CGT being a major disincentive to attracting both intellectual and financial capital in the tech sector, and stripping billions of dollars from the primary sector.
"We need a growing and prosperous productive economy for the benefit of all New Zealanders, and investment in growth, productivity, diversification and innovation is essential to that. Any increase in the comparatively high tax burden faced by the productive economy will be counterproductive on multiple fronts.
"As world innovators on many fronts, the last thing we want is to stifle ideas, but a CGT would have a dampening effect in that regard. Callaghan Innovation has identified how company founders’ willingness to sell to a new owner or welcome new shareholders has been vital to businesses that have created around $34 billion of value in the past 15 years. A CGT would put a big question mark over that.
"This is an unsettled time for business. The new year started out positively, but new laws and regulations are already increasing both financial and time costs on businesses. Add the rise in insurance costs, concern around earthquake resilience in the region, and the continuing struggle to find the right staff and skills, and there is a serious burden that business is having to carry.
"Extra tax on capital gains may be the straw that breaks the camel’s back."
The Wellington Regional Chambers of Commerce & Business Central Business Confidence Survey was conducted over a 21-day period between 13th March and 2nd April (The survey was extended due to the tragedy in Christchurch on March 15th). The next survey will take place in June.