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Professor Robert Wade from the London School of Economics says it is “outrageous” that New Zealand has no capital gains tax.
Speaking on the issue of growing inequality in New Zealand, Professor Wade told TVNZ’s Q+A programme capital gains tax should receive more political attention.
“And, I mean, it is I think quite outrageous that in New Zealand there's no capital gains tax… But of course if you have a situation where economic policy is being made by the top 1% for the top 1%, then the last thing you're going to get is political movement towards a capital gains tax,” he said.
Professor Wade says people who are concerned about rising inequality should be paying relatively less attention to issues of tax and public spending and look to “pre-distribution”.
“That is, examining the way in which government laws, regulations, policies have the effect of making market income – that’s before taxes and transfers – more and more unequal.”
Prof Wade says laws, regulations, and policies need to be examined to see how they’re impacting on income distribution.
“Corporate governance law has a very strong impact on income distribution. Why? Because the law allows senior executives of corporations to appoint the boards of directors, number one, and number two the boards of directors set the salaries of senior management. And so there is a 'scratch my back, I’ll scratch your back' kind of ethic that evolves and the result is a spiralling upwards of the salaries of senior management. So you need to change corporate governance law. You need to change trade union law so as to strengthen the rights of trade unions to bargain over matters of salary and other things. “
Prof Wade says incomes in developed countries like New Zealand over recent decades have become more unequal, especially in terms of concentration of income at the top.
“Concentration of income up at the top means that incomes lower down are stagnant or even falling. So this is a widespread phenomenon. That’s point number one. But point number two is that New Zealand is up towards the top in terms of how fast inequality has increased. There are countries in north-west Europe – Scandinavian countries, for example; Germany, Belgium, Holland – where they are much more prosperous than New Zealand but income concentration at the top has increased much less than it has in New Zealand.”
Watch the full interview here.