However, it will increase a planned duty hike for foreign investors buying Tasmanian housing.

" ... following feedback received through the consultation process from the TFGA and industry representatives, the government has decided not to proceed with the introduction of a foreign investor land tax surchange as was proposed," Treasurer Peter Gutwein said on Wednesday.

"As the 2019-20 budget did not include an estimate of potential revenue from the introduction of a foreign investor land tax, there will be no revenue shortfall in budget estimates."

Labor said the government had "finally listened to farmers and abandoned its attack on regional jobs".

"The big new farm tax was always a bad idea that would cost jobs and investment in regional Tasmania," Shadow Primary Industries Minister Shane Broad said.

"It has taken consistent advocacy from Labor and the farming community to convince the government to abandon its plans.

"Just a few weeks ago in parliament the Premier, Will Hodgman, backed the tax to the hilt.

"He appeared completely unaware of the impact this big new tax would have on confidence in the agricultural industry.

"The fact it took this long to acknowledge the disastrous effects of this policy shows the Liberals are out of touch with regional Tasmania."

Mr Gutwein said legislation would be introduced in the current session of parliament to ensure the definition of a foreign person remained consistent with the Government's original policy intent.

"In addition, as a result of feedback from stakeholders, the rate of the foreign investor duty surcharge on the purchase of residential property will now be increased from the 7 per cent announced in the budget to 8 per cent, bringing Tasmania into line with Victoria and New South Wales," he said.

"The increase in the FIDS on the purchase of primary production land will remain at the same level (1.5 per cent) as announced in the 2019-20 state budget."