Fairness and efficiency, not political rhetoric, must be the focus as the government works to create a better taxation system, Peter Malcolm, the spokesperson for the income equality group Closing the Gap, said today.

A capital gains tax simply must be part of any new legislation, Mr. Malcolm said, because without one, the unfairness of taxing some forms of income and not others will continue to fuel inequality.

“The arguments against a CGT are familiar, but they don’t hold water,” he said. “Of course, some who are better off now will pay more, but it’s only fair that tax-free profits should being included in the same tax net as for wage and salary earners.”

New Zealand is the only western democracy to not tax capital income, Mr. Malcolm said, and that’s not an efficient way to run an economy.

“Without a CGT there is an incentive to invest in assets where the capital profit is not taxed,” he said. “Our productivity as a country is relatively low, and one reason is that too much capital is invested in assets for tax-free capital gain and not enough in better technology and mechanisation to boost productivity.”

“Fairness also dictates the family home should not be exempt, since that would skew investment toward pricey homes,” he said. “There are better ways to protect and promote home ownership, including graduated taxation — for example, exempting the first $20,000 of capital gain on the family home for each year of ownership.”

Kiwis have been pressing to close the inequality gap for years now, he said. We sincerely hope the government continues to show the kind of strong compassionate leadership it has displayed in recent months to introduce a tax system we can all be proud of.

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