The New Zealand government have rejected the call for capital gains tax by the Paris based Organisation for Economic Cooperation and Development (OECD). The OECD said such a tax could help correct a distorted housing market, which they feel will favour the wealthy and harm the poor.

In its latest biennial report on New Zealand, the Paris-based OECD notes that house prices remain high despite recent slight falls and that home ownership rates are dropping, unlike in most other member countries. The OECD report notes that many people in rental accommodation have a job but still cannot afford to buy a house under normal banking rules.

It blames this in part on the taxation of rental property, which it calls regressive or favouring the already wealthy. The reports says the National Government has taken some small steps to correct this, but should do more.

A capital gains tax was also proposed by the recent Tax Working Group, which said it could raise between $4.5 billion and $9 billion a year, depending on how wide the net was cast. The Government says it wants to see houses become more affordable but will not introduce a capital gains tax, saying recent changes on property depreciation and the use of rental losses to qualify for state welfare payments are enough.