New Zealand’s Tax Working Group (TWG) released its final report last month, with the most significant recommendation to introduce a capital gains tax.

The key motivation for the Labour-led government in establishing the TWG was to investigate a fairer tax system. For reasons of simplicity, the TWG proposes broad exclusions from a capital gains tax, including a taxpayer’s primary home and all personal assets such as collectables and artworks.

I argue that this exclusion could nudge taxpayers towards investing in art.

My research explores how the tax system can promote the arts and fair reward for artists. But I am concerned by the lack of principle or clear purpose underpinning the TWG’s collectables recommendation.

Few countries specifically privilege artworks for capital gains tax purposes. But in the United States, artworks have long qualified for roll-over relief, whereby a taxpayer can sell an artwork but not pay tax on any gain if they reinvest in art. This roll-over relief has been eliminated by Donald Trump’s tax reforms, but investments in special economic development areas offer similar deferral opportunities or even elimination of capital gains tax liability.

Read the full article on The Conversation.