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Labour touts capital gains tax, SOE dividends in detailing fiscal strategy

Friday 4th November 2011

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The Labour Party would make up the Budget shortfall from not selling down state-owned assets by the introduction of a capital gains tax and from the dividends it could reap by avoiding asset sales, according to its pre-election fiscal policy.

The main opposition party has been goaded into the release of the detailed fiscal strategy after leader Phil Goff’s online debate with Prime Minister John Key this week, where Key repeatedly interjected ‘”show me the money.”

Labour’s strategy would return the Budget to surplus by 2014/2015, the same target National has, while reducing net debt to zero by 2022, a year earlier than the government’s projections. The capital gains tax would generate $26 billion in revenue over 16 years, Labour says. That’s an extra $19 billion to the current forecast for the Crown accounts, as a Labour-led government would keep full ownership of the energy State-owned enterprises flagged for partial sale.

By keeping the SOEs under full ownership, Labour claims its forecast deficit would be smaller than the Treasury’s projection in the pre-election fiscal and economic update, due to the companies’ bigger dividend returns.

Still, the extra revenue from a capital gains tax wouldn’t generate much revenue in the short-term, meaning Labour’s alternative budget would require an additional $2.6 billion over the next three years to the National-led government’s existing programme. That difference in the net debt of the alternative budgets would peak at $4 billion in the 2016/17, Labour said.

(BusinessDesk)

BusinessDesk.co.nz



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