Tax changes 'bad for growth'

Today's expected tax blow for property owners has drawn fire from the Property Council.

Chris Gudgeon, council president, said changes which could affect big-time real estate investors could be extremely damaging.

The changes expected to be announced by Prime Minister John Key in his opening statement to Parliament today could impose big additional costs on real estate business and reduce the international competitiveness of the productive sector, he said.

"The council would be hugely concerned if the Tax Working Group's recommendations for tax reform to deal with concerns in the residential property sector are extended to include commercial property owned or rented by businesses," he said.

Connal Townsend, council chief executive, said independent reports by NZIER and KPMG found proposals to change depreciation rates and apply land taxes were the equivalent of raising taxes, with potential effects on growth and economic performance.

"While the Property Council supports the Tax Working Group's call to reform the tax system to deliver revenue to government that won't damage growth prospects and is fair and sustainable, we don't think enough work has been carried out on the current proposals for them to fit those criteria," Townsend said.

"Commercial property is the infrastructure of business and is fundamental to productivity, international competitiveness and growth. But more than 80 per cent of commercial property is owned or occupied directly by business owners and the proposals around depreciation would be the equivalent of an effective rise in tax from 30 per cent to 32 per cent."

He said the Government had identified the need for New Zealand to reduce corporate tax rates to remain competitive.

"The equivalent of a tax increase will also have an impact on our capital markets and our ability to attract and retain international capital."