Douglas says assets tax to be studied

Press, 22 December 1987, Page 1

Douglas says assets tax to be studied

By

BRENDON BURNS,

political reporter

The taxation of assets will be examined by the Government as it considers a capital gains tax, the Minister of Finance, Mr Douglas, confirmed yesterday.

Last Thursday’s economic package contains only a threeline reference to plans to “intensively examine the scope for the introduction of capital gains and/or asset taxes to lower tax rates further .. Mr Douglas said in an interview yesterday that he wanted to keep all options open, including an asset tax. This is a far more wideranging tax than any directed at capital gains. In his 1980 book, “There’s Got to be a Better Way,” Mr Douglas advocated wiping company taxes altogether and introducing an asset tax based on the value of a person or company’s assets, not just the money that is made (capital gain). *Td like to keep all the options at least open to look at," Mr Douglas said yesterday. “I think in any tax system you’ve got to give people incentive to earn extra income.” His book suggested including companies, farms, and individuals with more than $lOO,OOO in personal assets in a register of liability for assets tax. Liabilities, such as loans, would be deducted and tax applied at the same rate which companies and farmers now pro-

vide. Individuals would be liable also, but in 1980 dollar terms, $lOO,OOO would be set to cover such items as the family home, car, boat, or caravan. Mr Douglas said at the time that the threshold would affect few New Zealanders to any degree. “Those who were affected would be encouraged to invest in productive assets rather than unproductive luxuries,” the book said. A $200,000 boat would be taxed at the same rate as a farm or business worth $200,000. A farmer who made $lOO,OOO profit from a farm valued at that amount, would pay the same tax as someone who made only $15,000 from a $200,000 farm. The advantages of such a tax system were listed to include the encouragement of production, rewards for working farmers, fixed tax rates on which to budget, and some control of land prices as tax would rise with land value. Mr Douglas said yesterday that consideration of a capital gains tax was the central issue to be examined by the Government, but all taxes affecting capital would be investigated. Death duties and inheritance

tax should be considered, also, at some future point. Mr Douglas said calls by the Opposition for him to guarantee that his latest tax package would not leave some people worse off, were “stupid.” “I don’t know that I can guarantee on day one, no-one will be worse off,” he said. For example, a single person earning $30,000 on October 1 next year, when the flat rate comes into force, could be a couple of dollars a week worse off. Continuing the hypothetical example, Mr Douglas said that if that person got a pay rise of $4OOO, it would mean far more after-tax money under the new tax system. Earnings over $30,000 attract tax at 48c in the dollar, about double the likely new flat rate of The Leader of the Opposition, Mr Bolger, said yesterday that it was time New Zealand workers were told the truth about the economic package. It was impossible to believe that the Government could collect the same amount of tax revenue while every group paid less tax.