Capital gains tax favoured?

Press, 15 July 1987, Page 6

Capital gains tax favoured?

By

BRENDON BURNS,

political reporter

The Reserve Bank appears to favour a capital gains tax. In its annual report to Parliament, tabled yesterday, the bank said that even with the Government’s taxation reforms, there remained a need to correct distortions which favoured investment for

capital gains. It said GST was an important step in widening the tax base and reducing dependence on income tax. High personal tax rates tended to discourage productive effort and increase tax avoidance, said the report.

Taxation structures were said to have a significant impact on the distribution of resources and

substantial gains could be made from distortions in the structure. The moves made to tackle tax loopholes and reduce company tax were significant, said the Reserve Bank. But there were still distortions to be corrected. “These distortions include a bias towards investment for capital gains rather than interest income.”

The leaked report of the Labour Party activist, Mr Simon Wallker, suggested the Government would introduce a capital gains tax if re-elected.

An Associate Minister of Finance, Mr Prebble, said last week this was not being considered but might be examined later. “The Press” was unable last evening to gain Reserve Bank comment about its annual report.