Business groups have pushed back against a Capital Gains Tax with a chorus of concerns ranging from the impact on productivity, the destruction of shareholder value, and flow-on to an already slumping property market.
Matt Goodson, managing director of Salt Funds Management, said CGT would have a negative impact on company valuations.
“It will increase companies’ cost of capital, which should decrease valuations, and that will be particularly skewed to those companies who retain most of their earnings.” “If you retain most of your eanrings, you would expect your share price to go up over time, so you would be taxed on that where you were not taxed previously,” Goodson said.
Shane Solly of Harbour Asset Management said the extension of the bright line test and restrictions on income spreading were already taking the heat out of some of the more speculative elements of residential property investment.
“They have certainly put owner occupiers on a more equal footing to residential property Investors,” Solly said.
The introduction of a CGT while leaving the above measures in place would be “draconian.”
EY Tax leader David Snell said he thought the prospect of implemention by 2021 looked “hasty.”
“The fact the group vote was split three (against) to eight (for) indicates that implementation of a full CGT is going to be incredibly difficult with associated revenue and efficiency gains uncertain.”
Greg Haddon, tax partner at Deloitte, said the report raised the possibility whether the government should look at a staged introduction and consider what assets might be perhaps be simpler to start with.
