IMF Recommends Land Tax Reform For New Zealand

imf-recommends-land-tax-reform-for-new-zealand

Posted on 09-24-2019

The IMF has recommended that New Zealand should consider reforming the taxation of land, and consider introducing a tax on vacant land.

In its annual review for the country, the Fund focused on the Government’s efforts to improve housing affordability and supply. It noted that, on the demand side, the policy measures so far have included:

  • an increase in the
    accommodation supplement – a cash subsidy linked to low-income recipients’ actual rents
    or home ownership costs;
  • the extension from two to five years of the period during which
    capital gains on residential investment property are taxed (the “bright line test”);
  • a change in the
    tax treatment of residential rental losses, which can only be deducted from future taxable
    income from rental properties rather than taxable income in general; and
  • a ban on the
    purchase of residential property by nonresidents under the Overseas Investment Amendment
    Act.

The IMF said that New Zealand should consider further reforms to the tax system, including a tax on vacant land. The IMF argued that a broad land tax “would support more efficient land use.”

The IMF has recommended that New Zealand should consider reforming the taxation of land, and consider introducing a tax on vacant land.

In its annual review for the country, the Fund focused on the Government’s efforts to improve housing affordability and supply. It noted that, on the demand side, the policy measures so far have included:

  • an increase in the
    accommodation supplement – a cash subsidy linked to low-income recipients’ actual rents
    or home ownership costs;
  • the extension from two to five years of the period during which
    capital gains on residential investment property are taxed (the “bright line test”);
  • a change in the
    tax treatment of residential rental losses, which can only be deducted from future taxable
    income from rental properties rather than taxable income in general; and
  • a ban on the
    purchase of residential property by nonresidents under the Overseas Investment Amendment
    Act.

The IMF said that New Zealand should consider further reforms to the tax system, including a tax on vacant land. The IMF argued that a broad land tax “would support more efficient land use.”