Capital Gains Tax

The Productive Economy Council (PEC) has today come out in support of the New Zealand Manufacturers and Exporters Association (NZMEA) comments on Capital Gains Tax.

Revenue Minister Peter Dunne recently attempted to pour cold water on the idea of a Capital Gains Tax, saying “it would be political suicide for any government to implement, and it was time that the theorists and ideologues understood that.”

In criticising Peter Dunne’s comments PEC spokesman Selwyn Pellett says, “It is hardly remarkable that Peter Dunne should find the concept of Capital Gains Tax unpopular. Can anyone name a tax that is popular?”

“Peter Dunne labels discussions about implementing a Capital Gains tax ‘a waste of time’ and says that as Revenue Minister he will not be a part of ‘promoting backward-looking, draconian measures’”, says Pellett.

“What is actually ‘backward and draconian’ is that without a capital gains tax low and medium income earners are forced to subsidize the capital investments of a few tax payers – investments that do nothing to grow our economy and deliver jobs to those same low and medium income earners.”

“Peter Dunne also says that ‘the idea of a general capital gains tax has been around since the 1980s but has never gained any real support’. That lack of support has been political, not economical, and Dunne would do well to consider the difference,” says Pellett.

“What this country needs now is bold political decisions that seek to solve the very real economic problems we face, not doggedly holding on to a political posture that seeks to keep a party in power at the expense of doing what is necessary for the good of the country.”

It is The Productive Economy Council’s view that while property investment has a role within the economy, the current tax legislation is biased in favour of such unproductive investments at the expense of those that are productive. This bias is ultimately to the detriment of the economy in general.

“To grow the economy we need to protect the productive sector that creates the jobs we need”, says Pellett. “The priority in our economy must be to support the people and companies who design, build, and sell the goods and services that earn foreign currency.”

It is the PEC’s view that as a country our obsession with property speculation has cost us dearly over the last three decades by depleting investment dollars for productive businesses and fuelling inflation. That in turn has lead to high interest rates and the inflated value of the Kiwi dollar. These factors have helped drive many exporters out of business. Collectively these policies also allow money to be sucked out of the New Zealand economy via the repatriated profits of our banking sector.

The PEC does not advocate taxing the family home but does see a need for secondary and commercial properties to enter into a gradually increasing Capital Gains Tax over the next 10 years. Now is the time to introduce these policies and prevent another round of inflationary pressure when we come out of recession.

The PEC’s position is that unproductive investments – those that that don’t benefit the economy by creating sustainable jobs and earning foreign currency – should not benefit from a tax regime biased in their favour. There should be a level playing field that sees both productive and unproductive investments taxed fairly.

About the PEC

The Productive Economy Council represents a growing community of people that wish to see New Zealand return to the upper end of the OECD in terms of GDP per capita. It was founded by four of the former Trustees of the Hi Growth Project including current President of the Hi Tech Association Wayne Norrie, former executive of the Hi Growth Project, Garth Biggs, Former Chairman of the Hi Tech Association and entrepreneur Selwyn Pellett and APEC Business Advisory Council, Co-chair Technology & Information Working Group, John Blackham.

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