A capital gains tax would raise less in five years than GST does in one

Deloitte tax partner Robyn Walker has a blunt view of New Zealand’s longest-running tax argument. Speaking at a Tax Traders election panel, she said “the best reason to produce a capital gains tax is so that we can stop talking about it. It’s so tedious.”

It sounds flippant, but the point is serious. Walker argues the political debate is stuck in “culture wars around existing and proposed taxes and not enough on their purpose and how much they would actually generate”. Run the numbers and it is hard to disagree. As a revenue tool, a capital gains tax is small, slow and wildly sensitive to design. The tax that actually funds the country barely gets a mention.

Same tax, five times the difference

Treasury modelling released under the Official Information Act in 2025 showed a capital gains tax could raise $9.3 billion over its first five years under a Canadian-style transition, or roughly 20% of that under an Australian-style one. That is about $1.9 billion. Same country, same tax, a near fivefold swing based purely on how existing assets are treated on day one.

That is not a fiscal plan. It is a lottery ticket whose odds are set by whoever drafts the transitional rules.

The history is instructive. In 2019, the Tax Working Group estimated a broad-based regime could raise about $8.3 billion over five years, rising to a long-run 1.2% of GDP a year. Three of its eleven members dissented at the time, warning that land and buildings are so entangled with business activity that the costs of extending the base outweighed the benefits. That was the maximalist version. Nobody is proposing it now.

As far back as 2024, Walker was already arguing New Zealand doesn’t need a capital gains tax, pointing to the lumpy, market-dependent revenue it produces. Gains get realised when assets sell, and assets sell when markets are buoyant. That is exactly when the Crown needs the money least.

GST already does the heavy lifting

For scale, Inland Revenue collected $116.6 billion in tax in 2024-25. Individuals’ tax made up $60.4 billion, GST $29.3 billion and corporate tax $19.7 billion. A capital gains tax’s best-case five-year haul would not match a single year of GST.

The existing base is not immune to volatility either. Total revenue growth slowed to just 1% after 10% the year before. Bolting on a tax that swings with property cycles adds noise, not ballast.

Asked whether GST is close to a perfect tax, Walker said New Zealand “ranks first in the world for the purity of its system”. That is the product of a broad, low-exemption design that has held since its introduction in 1986, and grown into a stable pillar of revenue over four decades. It is the kind of asset politicians should protect, not ignore.

Labour’s version is smaller and slower

Labour’s current proposal is far narrower than the 2019 model, covering only commercial and residential property gains from July 2027. Deloitte’s analysis says even that brings real complexity, including a likely need for roll-over relief on commercial property, plus compliance costs and inconsistencies. It also notes the revenue will take time to accumulate meaningfully. Since the money is earmarked for health, the obvious question is why other settings could not do the job faster.

The Greens’ wealth tax is the bigger number, estimated at around $5 billion a year before behavioural responses. Deloitte warns such taxes “can result in capital flight and mobile wealth would be likely to relocate out of New Zealand”, with valuation of illiquid assets a practical headache.

Business has softened, not surrendered

The mood has shifted. The Deloitte, Chapman Tripp and BusinessNZ election survey shows support for a capital gains tax surging from 27.5% in 2023 to 46% in 2026. Businesses are now almost evenly split, with 46% in favour and 45.7% opposed, though this year’s sample was smaller and skewed towards larger firms.

Read that as fatigue rather than enthusiasm. BusinessNZ chief executive Katherine Rich summed up the real demand: business wants “certainty that tax settings won’t be pulled out from under them”. A tax whose yield depends on unwritten transition rules is the opposite of certainty.

What to plan around

For business owners, landlords and investors, the practical lesson is to stop treating the capital gains debate as the main fiscal event. If Labour’s version passes, property investors need to watch the transition and roll-over detail closely, because that is where the real cost sits. But the settings that genuinely move the Crown’s books are GST, income tax thresholds and corporate rates.

Whoever wins in October will face the same arithmetic. A capital gains tax may end a tedious argument. It will not fix the budget. The parties that admit that are the ones worth listening to.

Sources

• Newsroom: Capital gains tax a ‘complete waste of time’ as revenue tool – Deloitte tax partner (2026-09-27)
• Treasury: Official Information Act Response 20240917 – Increase in taxation of capital gains (2025-01-30)
• Treasury: Official Information Act Response 20200346 – Tax Working Group Final Report (2021-06-22)
• Inland Revenue: Tax and payments this year – Annual Report 2025 (2025)
• Deloitte: Election Tax Policies, part two (2026-08-17)
• Deloitte: Election tax policies, part one (2026-07-01)
• Deloitte: Business backs stability over reform, Election Survey 2026 (2026-09-15)
• RNZ: Business split on capital gains tax idea, survey shows (2026-09-15)