With focus on a "zero" Budget, there was little room for movement on fundamental policy changes. It was no different with taxation.

The headline change was an increase in tax excise on tobacco products. 

Others included reinforcement of prior announced loophole closures on livestock valuation elections, and a denial of deductions on certain mixed-use assets, principally holiday homes, yachts and aircraft.

The increase in funding for Inland Revenue to provide a focus on greater revenue collection was no surprise. The key areas of focus: the hidden economy, debt collection and unfiled tax returns.

There was a missed opportunity to make further changes to the tax system to facilitate the structural policy adjustments started in the 2010 Budget.

The reason may be simply one of pragmatism rather than any deliberate policy decision, given the problems with the Inland Revenue computer systems.

Finance Minister Bill English, in the pre-Budget briefing for journalists, confirmed that with those problems it was unlikely there would be tax changes in any event.

In fact, some of the changes made, namely the removal of certain tax credits, were for simplification of Inland Revenue systems more than any real revenue gain or policy shift.

So what could the government have done?

There has been much speculation over the last 12 months on the merits of capital gains tax and the anomaly that its absence presents from a tax policy perspective.

New Zealand is unique among OECD countries in this regard.

Everyone accepts it is not a revenue earner in the short term, given most CGT regimes move to a realised basis to avoid the difficulty of funding tax payments when funds are locked up in the assets.

However, if there was ever a time to introduce a CGT it was now.

Public understanding of it, with its scope limited to certain assets and value, means their acceptance of such a regime was more likely to be acceptable, rather than encountering the political death knell its mention used to be.

There is also a greater political acceptance across the spectrum, albeit differences in opinion on the detail.

And in an environment of getting the structural integrity of policy landscape in place, a CGT had a logical niche.

Recent examples of significant capital gains on IPO floats reinforced the need for a CGT, particularly when the government intends to float significant state assets in the near future.

Another opportunity missed related to remedying the ambiguity around the Penny and Hooper decision. That decision related to the use of company structures to divert what was essentially personal services income through family trusts.

The Inland Revenue is in audit mode of a significant number of taxpayers following its Supreme Court win.

While the reduction in personal tax to match the trustee rate means the incentive for such arrangements has been seriously diminished, the uncertainty about when and how the new principles should apply could have been alleviated through a bright line test on the extent of income to be attributed in such situations.

For example, an 80% rule exists for income attribution in certain circumstances.

That rule could have been extended to all personal services income situations, with some ability to modify the rule for specific circumstances.

While there would be winners and losers from such an approach, certainty and a reduction in audit requirements would have outweighed this.

Earthquake strengthening of buildings is also a growing area of concern, brought about by the changing landscape following the Christchurch quakes. Current rules mean such expenditure is non-deducible. 

However, as a result of recent changes to tax depreciation, the capitalisation of such expenditure will not result in any depreciation deduction.

With an increased focus by insurers and city councils, the necessity for strengthening is becoming paramount, and would add much needed stimulus to the economy at the same time.

However, the cost for most landlords is prohibitive, and could be eased through targeted deductibility of strengthening expenditure for tax purposes.

Finally, the recent tax simplification paper for SMEs presented by NZICA has gained recognition by the government, but the timing of its release earlier mean its merits could not be considered in time for the Budget.

Such changes revolve mainly around tying small businesses income tax liability to their GST returns, as a final tax, removing their need for filing income tax returns.

Of all the changes mentioned here, it stands the greatest change of success, provided policy officials can overcome the quantum shift away from historical tax principals to one of simplicity.

But returning to the fundamental problem that any tax policy change represents, until the Inland Revenue systems are modified, it is unlikely that any real policy change can be made.

This seriously limits the government’s ability to react and make necessary policy shifts as the economy rebounds, as it must inevitably do.