Treasury Secretary John Whitehead yesterday suggested that New Zealand address the long standing issue of taxing capital gains from property investment, reports news website stuff.co.nz

In a speech to the Institute of Directors, Whitehead has called for a debate about "significant adjustment and change'' so that the economy can emerge strongly from the current recession.

He focused on taxation, regulation, the role of the public sector and making New Zealand an attractive investment destination, which he said should "include consideration of moving the boundaries to tax more capital gains - for example on investment property - and shifting more of the tax base towards consumption,'' he said.

Capital gains, or property taxes, would encourage investment into productive activity.

Also, New Zealand's company tax rates were at the upper end of the scale by the standards of the OECD and other small open economies and would be placed under further pressure if Australia decided to further cut company tax.

The call for more fundamental policy changes comes at a time when the Government has been seeking advice outside Treasury and after a budget that was seen as tackling immediate fiscal and economic pressures.

An era of cheap credit was over and investors were more risk averse. New Zealand needed to work much harder to attract foreign investment, Mr Whitehead said.

The Government is reviewing the Overseas Investment Act, the Building Act and the Resource Management Act, with the aim of removing barriers and improving productivity.

Mr Whitehead also suggested creating independent entities to assess the costs and benefits of policies and regulation, along the lines of Australia's Productivity Commission.