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    The document discusses implementing a Comprehensive Capital Tax (CCT) in New Zealand to broaden the tax base. A 1.25% CCT on all capital stock, including land, buildings, plant and equipment, could raise $19 billion annually. This would enable fundamental tax and benefit reforms by integrating a Guaranteed Minimum Income. It would also allow aligning all income tax rates at a single flat rate of 25% for personal, company and trust income. A CCT could encourage greater utilization of capital and more labor-intensive production. Broadening the tax base through a CCT is presented as key to tax reform and improving New Zealand's economic competitiveness.

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    Gareth Morgan TWG - Tweaked

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    bernardchickey
    1K views8 pages
    The document discusses implementing a Comprehensive Capital Tax (CCT) in New Zealand to broaden the tax base. A 1.25% CCT on all capital stock, including land, buildings, plant and equipment, could raise $19 billion annually. This would enable fundamental tax and benefit reforms by integrating a Guaranteed Minimum Income. It would also allow aligning all income tax rates at a single flat rate of 25% for personal, company and trust income. A CCT could encourage greater utilization of capital and more labor-intensive production. Broadening the tax base through a CCT is presented as key to tax reform and improving New Zealand's economic competitiveness.

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    The document discusses implementing a Comprehensive Capital Tax (CCT) in New Zealand to broaden the tax base. A 1.25% CCT on all capital stock, including land, buildings, plant and equipment, could raise $19 billion annually. This would enable fundamental tax and benefit reforms by integrating a Guaranteed Minimum Income. It would also allow aligning all income tax rates at a single flat rate of 25% for personal, company and trust income. A CCT could encourage greater utilization of capital and more labor-intensive production. Broadening the tax base through a CCT is presented as key to tax reform and improving New Zealand's economic competitiveness.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    1K views8 pages

    Gareth Morgan TWG - Tweaked

    Uploaded by

    bernardchickey
    The document discusses implementing a Comprehensive Capital Tax (CCT) in New Zealand to broaden the tax base. A 1.25% CCT on all capital stock, including land, buildings, plant and equipment, could raise $19 billion annually. This would enable fundamental tax and benefit reforms by integrating a Guaranteed Minimum Income. It would also allow aligning all income tax rates at a single flat rate of 25% for personal, company and trust income. A CCT could encourage greater utilization of capital and more labor-intensive production. Broadening the tax base through a CCT is presented as key to tax reform and improving New Zealand's economic competitiveness.

    Copyright:

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    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 8

    A TAX SYSTEM FOR NEW

    ZEALAND'S FUTURE
    1 December 2009

    Afternoon
    Session 1
    Base broadening – taxation of capital
    income
    Discussant: Gareth Morgan, Managing Director, Gareth Morgan
    Investments
    Background
    • Tax theory holds most economically efficient income
    tax is a poll tax – provides incentive to work at least to
    extent to pay tax. Trouble is it’s inequitable

    • A poll tax on capital can be similarly considered – yet


    we seldom do. Yet under-utilisation of capital is
    common.

    • Proposition is to consider tax base broadening via


    impost of Comprehensive Capital Tax (CCT) – on
    land, buildings, plant & equipment

    • CCT would be additional to (a lower) tax on income


    from capital + profits
    • Base broadening enables 3 improvements
    1. fundamental tax & benefit reform, integration
    2. alignment and reduction of income tax rates
    3. raises marginal efficiency of capital by lifting its
    price

    • CCT is most significant base-broadening measure; land


    tax = selective alternative

    • If capital stock is $1,500 bn, a 1.25% tax would raise


    $19bn (personal income tax is $27bn)

    • Concept is that capital does/should generate income in


    some form – cash, imputed rent, or capital gain. CCT
    taxes it comprehensively – dependant on rate
    CCT enables two major reforms

    1. Alignment - single flat income tax rate of 25%


    say, whether personal, companies, trusts –
    efficiency gains.

    2.Integration - of welfare + income tax via


    Guaranteed Minimum Income, delivering efficiency
    & neutrality gains
    Guaranteed Minimum Income
    • All adults receive $10,000 from government

    • At 25% flat tax rate implies first $40,000 of earned


    income is tax-free

    • No need for sickness, NZ Super, unemployment, DPB


    etc benefits

    • Total cost = 3m @ $10,000 less $16bn = $14bn (plus


    cost of alignment of company, trust rate at 25% of $3bn
    = $19bn)

    • Can dismantle machinery that decides & monitors


    eligibility for benefits
    Rationale for CCT

    1.encourages utilisation of capital


    2.captures non-cash forms of capital remuneration

    Effects of rise in price of Capital

    1.encourage greater utilisation of capital – income effect


    2.encourages labour-intensive production – substitution
    effect
    Miscellania on CCT

    • Accrued basis tax – payers can defer part or all but


    face cost of money – avoids lock-in

    • Valuation – link to value indexes of asset class –


    avoids costly valuation compliance

    • Own home – vital it’s not exempted totally, at most


    average value of house, not one house each – avoids
    mansions as tax shelters

    • No deduction for interest – that deductibility remains for


    generation of taxable cash income only
    Comprehensive Capital Tax

    • Is the most significant base-broadening measure

    • Base broadening holds key to 4 outcomes:


    1. fundamental tax & benefit reform, integration –
    reduces high EMTRs, benefit fraud
    2. alignment and reduction of income tax rates –
    removes use of different legal structures to
    minimise tax
    3. raises marginal efficiency of capital through
    lifting its price – critical to an economy that
    aspires to “pass Australia” but is destined to “fall
    below South Korea” on the OECD scale
    4. progressivity in income rates goes, CCT does it

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