8^th April 1999

Dear Sir

Capital Gains Tax is payable on any real capital gain made on the disposal of an asset that was acquired on or after 20^th September 1985 and that is otherwise not exempt. Thus, Capital Gains Tax has two components.

• Firstly, Capital Gains Tax is a wealth tax because it becomes payable when a net increase in real wealth is realised by disposing of an asset not exempt from Capital Gains Tax for a real capital gain, after accounting for any applicable realised capital losses on the disposal of other assets.

• Secondly, Capital Gains Tax is a transactions tax because it increases the cost to the seller of disposing of an asset not exempt from Capital Gains Tax for a real capital gain, after accounting for any applicable realised capital losses on the disposal of other assets.

The consequence of Capital Gains Tax being a wealth tax is that it discourages capital accumulation and savings, exacerbating Australia’s Current Account Deficit, whilst the consequence of Capital Gains Tax being a transactions tax is that it reduces capital mobility and increases economic inefficiency. Therefore, in fairness to all Australians, as Capital Gains Tax is both a wealth tax and a transactions tax, it should be abolished.

If Capital Gains Tax is abolished, it would liberate capital from the burden of its wealth tax and transactions tax components, as well as encouraging millions of Australians to save for, invest in, and enjoy Australia’s future.

I very much hope your Committee will recommend that Capital Gains Tax should be abolished.

Yours sincerely