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A new capital gains tax will hit a majority of Australians

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The Opposition Leader, Mr Andrew Peacock, today criticised the Labor Government's obvious intention of introducing a new capital gains tax as part of its tax "reform" proposals.

He warned that the introduction of a new and harsher capital gains tax would have severe financial consequences for a wide range of Australians - not just those involved in selling properties or businesses.

"The Opposition is not merely opposed to the introduction of a new capital gains tax because it is being promoted by some sections of the Labor Government and the Trade Union movement," he said.

"We are opposed to it because it is misguided in a country which needs new capital formation and investment, and because it will become another burden for a broad cross-section of Australians."

He said the Opposition was opposed to a new capital gains because it would:

- Be a further disincentive to investment when Australia needs every investment dollar it can get.

- Adversely affect small businesses, both in the incentive for people to go into business and the . return they would get on resale.

- Adversely affect the farming community, in particular, where the farm is the main, and perhaps only, asset.

- Eventually push up rents and other charges in the community as investors seek to make up in income the potential loss from capital gains tax.

- Be unlikely to raise much revenue, in any case.

- And would be costly to administer.

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Mr Peacock said the introduction of a new capital gains tax by the Government would mean a significant re-assessment of investors' expectations of financial return from any new investment.

"The introduction of a new capital gains tax will simply mean that investors will expect a greater income return during the working life of their investment, rather than awaiting the capital gain," he said.

"This means that there will be a tendency to lift rents and other returns to enable investors to help make up for the tax on the capital profit made on the eventual sale of the property or business." ■

Mr Peacock said that in this way the introduction of a new capital gains would affect a far wider group of Australians than those involved in the buying and selling property and future investment.

"The direct effects of the introduction of a new capital gains tax - on incentive and investment - are bad enough to contemplate in the present economic climate," he said

"But the indirect effects of increased rental and other charges to many Australians who perhaps cannot afford yet another financial burden, are even worse."

• . Mr Peacock said these indirect effects of the introduction of a new capital gains tax would be compounded if it were introduced at the same time as a broadening of the indirect tax base.

"While we favour a gradual broadening of the indirect tax base and a compensating reduction in income tax, we are also well aware of its potential impact on the price structure in the community," he said.

"If a new broadly-based consumption tax was pushing up prices, on the one hand, and a new all-embracing capital gains tax was pushing up rents and the like, on the other, it could be disastrous for the economy. -

"The Government must be made well aware on this and should take it into account when considering its proposals for overall tax reform," the Opposition Leader said.

Mr Peacock said it was becoming increasingly apparent that the Government's agenda for tax "reform" was being influenced by factionalism within the ALP, rather than looking to genuine reform.

"But if the Left Wing gets its way and forces through a new capital gains tax as part of the tax 'trade-off', it will be striking a blow against many ordinary Australians," he said.

31 MARCH 1985