Deloitte Dunedin tax partner Peter Truman said yesterday that arguably, all New Zealanders were paying higher interest rates on their mortgages than would be the case if the Auckland property market was not so heated.
''The proposals announced by the Government may provide the Reserve Bank with the comfort it needs to reduce the official cash rate.''
However, the high-level proposals released on Sunday were short on detail, he said.
Deloitte assumed there would be consultation as the proposals were developed further ahead of being released into the normal tax policy consultative process in July.
Among the issues Mr Truman expected consultation on included:
• whether the rules applied to gain only or losses could be claimed;
• look-through provisions where companies own residential property and rather than selling the property, shares in the company were sold;
• how the ''seller's main home'' test applied in practice and whether it applied at the time or sale or had to have been the principal residence throughout the ownership period;
• what holding costs were deductible against the taxable gain on sale if the property had not been used to generate income, such as a holiday home.
The additional funding for Inland Revenue compliance projects on property transactions was welcomed.
Current legislation taxed gains on the sale of property where it was purchased for the purpose or with the intention of resale.
Anecdotal evidence suggested voluntary compliance was low and it was appropriate more pressure was placed on property speculators to enforce the legislation.
The Government might consider a withholding tax on New Zealand residents who sold residential property within two years, as proposed for non-resident sellers, Mr Truman said.
Deducting tax from the sale proceeds was sensible as the seller would have cash flow available.
Among the issues to consider for withholding tax were how the gain to which the tax applied was calculated; who was responsible for deducting the tax and what exemptions were sensible.
ASB chief economist Nick Tuffley's expectation was for the new policy to not have a significant impact on the Auckland housing market and, in the short term, the policy could create distortions.
The new rules would only apply to houses bought on or after October 1.
As a result of the consultation period, there might be unintended consequences, which could boost demand in the Auckland property market in the short term, he said.
''It's possible that property investors - particularly the speculators - could rush in ahead of October 1 to avoid being subjected to the new rules.''
However, the Reserve Bank's new loan-to-value lending limits on investment property, which were expected to be honoured by banks immediately, could potentially dampen that impact, Mr Tuffley said.
