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Capital gains tax would accelerate deficit

Media statement Thursday, June 22, 2006

Capital gains tax would accelerate deficit

With the current account deficit running at 9.3 per cent of gross domestic product, business is urging government to delay and reconsider its proposals to introduce a capital gains tax on certain offshore earnings.

“A capital gains tax on Kiwi’s offshore earnings would see the current account worsen,” said Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern).

“The current account deficit needs no help from government’s taxation proposals; its getting worse every quarter, with the bottom not yet in sight.

“We are selling the family silver to stay afloat, with less and less left to sell or mortgage.

“In fact to stay afloat in the year to March New Zealanders sold $4.5 billion of assets overseas while foreign investors bought $9.2 billion more of our assets in New Zealand.

“But as New Zealand represents leaner pickings the rate of foreign investment here is slowing.

“It’s disturbing that the contribution made to the deficit does not include a lot of productivity boosting, capital investment plant and equipment.

“The extra imports are largely for consumption, and as the currency sinks and we will have to pay more for them.

“In this context the plan to introduce a capital gains tax on kiwi’s earnings from their meagre investments overseas is crazy. We urge government to rethink it.”

ENDS

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