22 Oct 2014

Commissioner keen on wealth tax

3:00 pm on 22 October 2014

New Zealand needs have a look at the possibility of taxing wealth, as the gap in wealth has increased faster than the disparity in income, Children's Commissioner Russell Wills says.

Children's Commissioner Russell Wills.

Children's Commissioner Russell Wills. Photo: OFFICE OF THE CHILDREN'S COMMISSIONER

Mr Wills said it was wrong he did not have to pay tax on the increase in value of a share portfolio or rental property.

"I should pay tax on that increase in my wealth, just the same as I would on income," he said.

"I think it's important that we have a proper look at this."

Dr Wills said taxing wealth would not be easy, as it could open the door to tax avoidance.

The wealth inequality debate was boosted by the release of Thomas Piketty's best-selling book Capital in the 21st Century earlier this year.

Dr Piketty, a French economist, argues capital returns are persistently greater than the rate of economic growth and that a tax is needed.

Fifteen economists have looked at Piketty's thesis from a New Zealand perspective and will be releasing a book, The Piketty Phenomenon, tomorrow.

Victoria University research associate Geoff Bertram contributed to the New Zealand book and today told Nine to Noon New Zealand sat alongside other Anglo-Saxon economies where wealth was increasingly going to the top 1 percent.

But he said Scandinavian countries, for example, were not going down the same track, showing policy could make a difference.

According to a Ministry of Social Development report, which looks at data from 1982 to 2013, the richest 10 percent of people in New Zealand account for about 50 percent of the total wealth.

The top 10 percent of earners, on the other hand, accounted for 25 percent of total income.

Susan Guthrie, co-author of the 2011 book The Big Kahuna, has argued for tax and wealth reform to redistribute wealth.

She said a lot can be done in New Zealand, including a comprehensive capital tax that would sit alongside income tax.

"If you have another type of asset that doesn't generate a cash return, it will nevertheless estimate the minimum return that it would have earned had it been invested in something really safe," Ms Guthrie said.

"It's not the full value but the equity in it."

She said the tax would apply to the family home.

The Labour Party campaigned on a 15 percent capital gains tax, excluding the family home, during the past two elections.

Prime Minister John Key has said the tax is too problematic.

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