The group’s chairman Sir Michael Cullen said the review looked at the structure, fairness and balance of the tax system, which includes introducing environmental taxes, improving tax compliance and capital income.
Cullen said the group considered extending the tax net to capture gains from assets not already taxed or taxing deemed returns from assets.
That could include interest in land excluding the family home, intangible property including goodwill, other business assets such as plant and equipment and shares and other equity interests.
It ruled out a land tax.
A table in the report forecast a capital gains tax introduced in 2021-22 would raise $30 million from the sale of rural land, increasing to $840m in 2030-31.
Over that same period total income from a capital gains tax would lift from $290m to nearly $6 billion.
Environmental taxes can influence behaviour, mitigation or assist people through change and should be considered alongside regulation, it said.
Of the $4.9b now raised in environmental taxes, most comes from road user charges and energy with less than 3% from taxes on pollution, waste disposal and energy resource levies.
It noted taxing greenhouse gases is challenging because of difficulties measuring emissions, international linkages and pricing.
While acknowledging more work is needed on Overseer, it noted imprecise approaches can provide useful price signals on land use and intensity decisions by farmers.
The report suggested a fertiliser tax as opposed to nitrogen discharge catchment trading schemes such as used around Lake Taupo and proposed for the Rotorua lakes.
“Locally variable pricing tools could involve significant administrative and compliance complexity.
“An alternative approach is nationally uniform charging, for example, a fertiliser tax.”
The report did not calculate how much a fertiliser tax would raise but estimated a $2/kg charge on all leached nitrates could generate $270m a year.
Tradeable water rights are considered risky because a small number of participants will reduce competition and administrative costs could be high.
More accurate pricing of water abstraction would incentivise efficiency and increase investment in water storage and transport infrastructure and any tax should capture all users, it said.
“Over the medium term there could be benefits from greater use of tax instruments to address challenges in both water pollution and water abstraction.”
Federated Farmers vice-president Andrew Hoggard said the report reflects much of the organisation’s submission.
While opposed to a broad tax on unrealised capital gains it acknowledged concerns about tax liability for the intergenerational sale of family farms or farmers trading up to bigger properties.
Hoggard said he was pleased the report noted tax is not suited to all environmental problems.
Irrigation NZ has warned against a nationwide water tax to drive efficiency, saying allowing irrigators to invest in more modern systems will provide better water use efficiency.
