New Zealand rejects OECD capital gains tax recommendation

The New Zealand government on Wednesday rejected a recommendation on capital gains taxby the Organization for Economic Cooperation and Development (OECD).

OECD's recommendation aims to rebanlance the country's widening wealth gap and curb speculation on the housing market.

In its Economic Survey of New Zealand 2013, the Paris-based organization of developed nations said the government's macro- economic policies were striking the right balance between supporting recovery and ensuring medium-term sustainability.

However, it also highlighted major challenges facing the country and suggested "the main structural challenge will be to create the conditions that encourage resources to shift towards more sustainable sources of prosperity."

"Incomes per head are well below the OECD average, and productivity growth has been sluggish for a long time," said the survey.

The survey raised other challenges to boosting the country's productivity, including the persistent overvaluation of the exchange rate, inefficiencies in the information and communications technology infrastructure, regulatory uncertainties, and low levels of research and development.

Finance Minister Bill English said Wednesday the government did "not agree with the OECD about the need for a comprehensive capital gains tax applying to all assets, including the family home."

"Two comprehensive, expert reviews of New Zealand's tax systemthe 2001 Tax Review and the 2009 Tax Working Groupdid not recommend a widespread capital gains tax of the sort the OECD recommends," English said in a statement.

"The government significantly tightened the tax rules around property investment in Budget 2010, which is expected to raise an additional 3 billion NZ dollars (2.41 billion U.S. dollars) in tax revenue over four years."

English welcomed the report's general "endorsement" of the government's economic program and agreed with the OECD's assessment that New Zealand's high private debt levels, large external imbalances and an over-valued exchange rate were among the main risks to growth.