Key’s silence on depreciation indicates it’s a focus

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KPMG believes the silence on depreciation today in the Prime Minister's speech on tax indicates that this remains very much a focus for the government in its tax reforms.

Tuesday, February 9th 2010, 6:00PM 3 Comments

by Jenha White

Prime Minister John Key today ruled out land tax, risk free rate of return (RFRM) and a capital gains tax on property.

KPMG chief executive Jan Dawson says the ruling out of land tax and RFRM is a triumph of pragmatism over theory.

"Although economists like property taxes for their efficiency, the real world impacts of these two measures make them difficult to implement in a politically sustainable way."

KPMG tax partner Paul Dunne says property investors will be looking for clarity around parameters and definitions.

"Until detailed announcements are made, property investments decisions will be shrouded in uncertainty," he says.

"We expect a lot of pressure will be applied by the property sector on the Government between now and the Budget in order to gain further clarity."

He says a range of options are available to Government to address the perceived "problem" with the total amount of tax paid by the property sector.

"Although ruling out land tax and risk free rate of return (RFRM), the government's silence indicates removing building depreciation remains on the table."

Dunne believes property investors need to ask - if depreciation is denied, then what level of tax rate cut would compensate?

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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