The subsequent reaction from many sectors (particularly property investors) has been interesting.
Two of the recommendations most commented upon are that of ending property depreciation, and a form of land tax on second properties.
It is likely that some of the more simple recommendations will be implemented in this year's Budget, but any major changes are most likely not to be implemented for political reasons, in this Government's first term.
In previous articles in these columns, I have commented on New Zealanders being so besotted with property investment that we lose all interest in anything else - a quote from The NZ Herald business editor Jim Eagles in September 2003.
He commented then that if there was no housing boom, lower interest rates would be possible and it would lead to a lower exchange rate and a wider spread of investment.
So what has changed in recent years? Well the property market is still rampant despite a recession, but changes in legislation and the introduction of KiwiSaver have changed the attitudes of investors.
The up-front incentive of $1,000 and annual tax refunds on KiwiSaver, has seen more than 1.3 million people join up to date. This has been despite the downturn in the economy during the past two years.
From March 2009, market recovery has been spectacular, with some slowing now evident.
All financial products and many financial advisers were reviled during the decline as finance companies collapsed or went into moratorium.
The past year has seen average balanced portfolio returns of around 20%. However, they are still below the most recent peak of October 2007.
The cycles of investment returns are repeating.
With the Portfolio Investment Entity (PIE) tax introduction on October 1, 2007 there have been further advantages to managed funds.
The provision for capital gains tax within the funds has been abolished, and tax is paid to IRD on behalf of investors by the fund managers.
PIE income does not need to be declared in a tax return as it is considered separate from other taxable income.
It is a final tax paid on behalf of the investor by the fund manager.
Investors can elect a Prescribed Investor Rate (PIR) of 19.5% or 30% depending on their income. Most investors PIR are now 30%.
It was initially 33% and this could rise again with the new recommendations.
Personal tax can be reduced by the use of PIE and trusts. Trusts can elect a zero PIR rate if funds are to be passed to beneficiaries such that the trust pays tax on all income earned (including PIE income). A zero rate may not benefit all beneficiaries from a trust.
Media figures suggest that there is $200 billion invested in investment property. Very little or no tax is being collected on the majority of this investment sector.
A land tax could reduce the value of these properties and perhaps reduce rentals in turn. It will cause many investors to rethink their investment strategies.
New Zealand did once have a land tax, introduced in the 1890s. It was a tax on the unearned increment of land value.
Many exemptions were added over time as politics became dominated by rural sector representatives, such that it was finally abolished in 1990, as it was so unwieldy it was costing more to collect than the revenue gained.
Media commentators are speculating that the most likely scenario to be introduced first would be a tax on a risk free rate of return (RFRM) on the equity in investment properties. Such a tax would apparently only bring in $500-$600 million.
It is likely that any introduction of a new tax on property will have exemptions. Exemptions such as the family home, farms and possibly holiday homes used as lifestyle property, that are not rented. Eventually the tax would collect more funds as the exemptions over time were abolished.
A change in investment direction away from property into the markets would be beneficial to New Zealand's infrastructure as greater capital would be more freely available.
• Peter Smith is a certified financial planner and is the principal of Peter Smith Financial Services Ltd Dunedin. A disclosure statement is available on request and free of charge.
