Paul Keating says the Howard-Costello capital gains tax discount distorted the tax system, inflated housing prices and entrenched inequality between wage earners and wealth holders.

Before I began the major reform of the tax system, as Treasurer in 1985, capital profits in this country were completely untaxed.

The takeover merchants were taking-over industrial companies, closing down the businesses, selling off the assets, taking the profits free of any taxation.

Meanwhile, on the income side of the tax system, employees were fully taxed and at the time, under John Howard’s Treasury, at a top marginal rate of 60%.

The issue was simply that income was taxed and at exceptionally high rates while capital profits were completely tax exempt.

In 1985 I addressed this distortion by introducing the Capital Gains Tax, but at the same tax rates that employees paid on ordinary incomes though importantly, washing the inflation from the calculation........

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