Morgan Onboard for Capital Tax Proposal

Press Release by Hon Sir Roger Douglas, ACT New Zealand
Wednesday, December 2 2009

ACT New Zealand Economic Spokesman Sir Roger Douglas today welcomed economist Gareth Morgan's support of the idea of a comprehensive Capital Tax on all land, buildings, plant and equipment - as outlined in Sir Roger's discussion paper 'Catching Australia By 2025: An Alternative Approach'.

"The current system in New Zealand sees economic gain from income and capital gain treated very differently, creating a distortion in the allocation of capital. A lot of capital in New Zealand is tied up in assets that realise little income – a capital tax would create incentives for people to move capital to areas that are most productive," Sir Roger said.

"A capital tax is essentially a tax on wasted opportunity. Anyone under-utilising their capital – if they leave their farm idle or their factory gathering cobwebs – will pay the same amount in capital tax as those who productively use their farm or factory. This encourages productivity.

"The implementation of a very low capital tax in conjunction with a cut in income tax would eradicate the need for a capital gains tax, which is administratively difficult to implement. A capital tax is a good alternative as it is comprehensive, treats people equally, and encourages productivity.

"ACT, the Green Party, and Labour have all indicated they are willing to consider a capital tax - so why won't National?" Sir Roger said.

ENDS