The Government has dropped its plan to introduce a new tax on carparks that employees in central Auckland and Wellington get as part of their salaries.
Revenue Minister Peter Dunne says it would have raised about $17 million a year but the likely cost of compliance makes it not worth pursuing, and officials have more important tax matters to focus on.
Mr Dunne says the tax was proposed because the Government considered it only fair to treat non-cash benefits in the same way as cash benefits for the purpose of taxation.
He says the Government does not resile from the general principle of fairness, but it also has to be pragmatic. He told Checkpoint $17 million a year is a small amount and not worth the effort of claiming.
Last year Mr Dunne said the Cabinet had agreed to focus the tax on the Auckland and Wellington central business districts, where the benefits of a carpark are the greatest.
A lobby group has since claimed the tax would add $1500 a year to the cost of a carpark provided on an employer's own premises and $2400 for a commercial carpark space.
'Common sense has prevailed'
The chief executive of the Employers and Manufacturers Association, Kim Campbell, says the Government has dealt with the issue in a mature way and common sense has prevailed.
Mr Campbell, whose organisation was part of the lobbying campaign opposed to the tax, says the backdown is proof of a democratic government.
However, Mr Dunne says the tax has been dropped because of the possible challenges of enforcing it, not because of the campaign against it.
Labour Party revenue spokesperson David Cunliffe says the Government has cracked under pressure and the u-turn is excellent news. He says the tax would have cost $2 to implement for every dollar of revenue raised.