The new laws could curb property development in Otago at a time when all economic activity should be encouraged, he said in an interview from Wellington yesterday.
The long-awaited Tax Bill, dealing with the associated persons tests, was reported back to Parliament yesterday.
The proposed strengthening of the associated persons tests first went before Parliament in May last year and was reintroduced by the new National-led Government earlier this year.
Mr Mason said the way had been cleared for the proposals to become law possibly as soon as this month.
The proposals were discriminatory because they forced one group of property developers to pay tax while others would escape.
"This is capital gains tax by stealth and the Government should just own up to that," he said.
What particularly irked Mr Mason, the taxation principal of WHK Taylors, was that property developers, such as those developing subdivisions, who also owned commercial buildings, would be forced to pay capital gains tax on the buildings when they were eventually sold.
However, long-term owners of commercial buildings, who did not do any other development, could sell the buildings and not attract tax.
In the past, land developers had used one company for that activity and had paid the due tax.
Another company or trust had been used to own the commercial buildings which did not require tax to be paid on the sale.
The IRD's Wellington-based policy division had been pushing for the "associated persons test" in relation to land to be strengthened.
The provisions introduced in 1973 were relatively narrow, compared with other associated persons tests that were contained in both the income tax and GST legislation, Mr Mason said.
The strengthening of tests had been "sold" by the IRD policy division and the Government as being a rewrite of the original 1973 rules to give effect to the original intention of Parliament.
"The tax system has moved on a lot from then and we have had four new Income Tax Acts since and numerous new taxing regimes.
If this had been the intention of Parliament all those years ago, why take 36 years to clarify such?
"Parliament can make any law it sees fit and it is not bound on decisions made more than 30 years ago."
Ultimately, the reason for not simply saying that Parliament was widening the tax base to ensure that dealers, developers and builders could not hold long-term investment properties was political, as there was a strong aversion to formal capital gains taxes in New Zealand, he said.
"It is my view that these provisions actually change what has been the status quo for 36 years. We, along with many other firms, made many submissions against the Bill. It is my view that these submissions have been substantially either ignored or subtly misinterpreted."
Mr Mason said the effects of the legislation would be more pronounced in Otago than most other regions.
In his experience, property developers in the region usually held commercial buildings for long-term gain while at the same time doing other development.
"When they invest in commercial property, the ultimate exit strategy is an important component. Seeing the upside reduced by a third might see them changing their minds."
