National leader Simon Bridges claimed credit for the decision, saying it was a result of his party's relentless pressure, while brushing off questions about a potential leadership spill.
But Government MPs say yesterday's bombshell has actually weakened National's position by neutralising what would have been a strong campaigning position.
New Zealand First leader and Deputy Prime Minister Winston Peters said the Government's move would be the final nail in Mr Bridges' leadership coffin.
Prime Minister Jacinda Ardern said there were two main reasons the Government rejected a capital gains tax (CGT): failure to get agreement from New Zealand First, and not having a mandate from New Zealanders.
"In short we have tried to build a mandate, but ultimately have been unsuccessful.''
The Tax Working Group (TWG), chaired by Sir Michael Cullen, recommended the Government adopt a CGT of up to 33% on shares, KiwiSaver and investment properties.
Ms Ardern took it one step further and ruled out ever campaigning on a CGT while she was prime minister.
Ms Ardern saw the CGT rejection as less of a failure of the Government and more of a reflection of the reality of MMP.
The Government is made up of three parties, NZ First and Labour in a coalition government with the Greens providing supply and confidence.
This means any government policy opposed by the Opposition needs to have the support of all three governing parties. In this instance, NZ First exercised its veto.
However, Ms Ardern said the Government was not bullied into ditching the CGT by NZ First.
After her media conference, Mr Peters said coalitions were "difficult to operate'' but it was not a case of winners and losers, but rather what policies had the support of the majority of the public.
The "absolute complexity'' of the CGT was one of its negative aspects and CGTs overseas had not worked, Mr Peters said.
Mr Peters was highly critical of a CGT just weeks before the 2017 election, when he said such a tax would not work in New Zealand.
He has, however, always been open to the TWG and its report.
Speaking to media in Tauranga, Mr Bridges was chalking the Government's rejection of the CGT up as a "win for National under my leadership''.
"We've embarrassed the Government out of a CGT and that is good for New Zealanders.''
Both Ms Ardern and Mr Peters denied this was the case.
"In the Government's so-called year of delivery, they've dropped their flagship tax policy,'' Mr Bridges said.
"The big question remains, what are they doing to encourage the economy to grow?''
But his press conference was dogged by questions about the future of his leadership after a report this week that National MPs were losing confidence in him following a series of a stumbles.
Was he about to get rolled?
"No. National supporters right now will be feeling really good, and that's because of my leadership in the National caucus.
"I'm talking with all my colleagues all the time. I feel confident and comfortable in my leadership.''
The Green Party has always favoured a CGT, and its co-leader James Shaw said he was disappointed by the decision.
Dr Cullen - a former Labour Party finance minister - said it was clear Mr Peters made the call for the Government to veto the CGT.
He suggested Mr Peters made the decision not to support the tax for political reasons and the party may have been worried about going down further in the polls if it had supported a CGT.
Although Ms Ardern ruled out a CGT, many of the other TWG's recommendations were still on the table.
Some areas of the report could help form Labour's 2020 tax policy, she said.
Ms Ardern told media the TWG's report had cost $1.6million to date and was expected to cost $2million in total. - NZME
Related Stories
Comments
Good to see an independent working group leader out there taking political swipes. Shouldn't he just be commenting on the working group findings.
The most interesting part is not that it didn't get across the line here but that they've said they won't campaign on it in future which cynics might suggest hints at political survival over upholding of values.
(1) For Simon to say he takes the credit is bluntly an 'own goal'. His chasing cars down the road on this issue was clearly nought to do with the decision. He was not on the panel or in cabinet.
(2) For anyone to complain about the 2 million cost of the TWG need to look in the mirror of how much the flag debacle cost. Also the TWG has come up with other options as well.
(3) Jacinda's decision simply was a democratic one showing the coalition is working. As Jacinda said "there is insufficient mandate from the people".
Now back to work everyone.
government in damage control.....