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Source: ONE News -
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Business groups are calling on the government to be clear about tax policy in this year's Budget after the Tax Working Group set out options for an overhaul of the tax system on Wednesday.
Business New Zealand and others came out against a proposal for a land tax, while welcoming other aspects of the group's report.
The working group is suggesting that the goods and services tax (GST) be raised to 15% and capital gains taxes applied to property so that income and company taxes can be lowered and aligned with each other and with Australia.
The group's thinking is that the consumption taxes have less impact on economic growth and that GST is an efficient tax. Also, in order to drop income taxes the tax net has to be widened to include taxes on assets.
Business NZ chief executive Phil O'Reilly said many recommendations would find support among the business sector, including the alignment of company, top personal and trust tax rates and lower personal rates, which sit at 30%, 33% and 38% respectively.
Business also supported the idea of the company tax rate being competitive with other countries.
While acknowledging work was required on the tax treatment of residential rental properties, O'Reilly said he could be problems with the recommendation for a land tax.
"This would be an anti-competitive cost on New Zealand's many land-based enterprises," he said.
"Enterprises already face a fairly stiff land tax through local body rates and this recommendation if accepted would impose a second tier of land taxation."
O'Reilly said the group's call for a review of welfare policy and the use of relevant tax treatment for low income families in place of the poorly-targeted working for families system had much merit.
"We know from feedback from our members that working for families can act as a disincentive for workers to improve their income from employment."
Timely proposal
EMA chief executive Alasdair Thompson said the recommendations of the Tax Working Group were in general extremely timely and welcome but said his group also did not want a land tax.
"We're not keen on a land tax as this would likely fall most heavily on urban land. If more tax is needed we support using the efficient GST," he said.
"It's refreshing to see the report say our tax system relies too heavily on taxing income because everyone agrees more income is a good thing," Thompson said.
"So we're pleased to see the recommendation to raise GST to 15% or more to fund cuts to personal and company income tax rates," he said.
The report gave the government plenty of options while setting a direction for tax reform in time for this year's Budget.
Be fair
The New Zealand Manufacturers and Exporters Association chief executive John Walley said the report was a move in the right direction.
"Tax advantages for rental properties have already cost the country billions in lost tax revenue and the poor investment incentives created by the tax free status of property has been even more damaging and inflationary. The sooner these loopholes are closed the better," he said.
But his group was against a proposal to take away the 20% depreciation on new plant and equipment.
A comprehensive capital gains tax was the fairest way to level the investment playing field.
"New Zealand relies heavily on personal and corporate tax for its income so reductions in this area are necessary.
" The reductions in the corporate tax rate would enhance New Zealand's international competitiveness. The need for international competitiveness extends beyond fiscal policy, and the impacts of monetary policy on exchange rates must be part of the rebalancing equation."
What do you think about the proposed tax changes? Have your say on our messageboard below.
Add a Comment:
Post new commentmolynz said on 2010-02-27 @ 04:17 NZDT: Report abusive post
Any rise in GST will hurt lower income earners simply because most things will now cost more. I think there is a case for exempting lower income earners and retired people from paying any GST period.
Andrew Mackenna said on 2010-02-16 @ 23:21 NZDT: Report abusive post
Abolish GST. It remains as a significant politico-economic scandal from the Roger Douglas regime (1986); a consumption tax imposed by the founder of a consumption advocacy Party - ACT. Backed by the Business Roundtable, the Douglas project may have been to supplant PAYE with a rich-soft GST. His other 'reforms' transfered the tax 'surplus' to Treasury, cordoning revenue off from public spending. NZ has been caught between two ideologically converse tax systems ever since. - Andrew Mackenna, ChCh
Maureenl said on 2010-02-14 @ 18:36 NZDT: Report abusive post
so where are all the jobs coming from? I presume out of fresh air.I agree about the DPB been there done that.Don't agree on the job front. Not enough now world wide so what makes John Keys think he can pull jobs out of a hat.Teaching respect and Law enforcement would work better
sagekiwi said on 2010-02-14 @ 13:02 NZDT: Report abusive post
Increasing GST is going to adversely affect those on lower in comes, and benefit the better off, full stop. National has always had a policy of punishing the poor, and helping the wealthy.
Tayler said on 2010-01-22 @ 12:56 NZDT: Report abusive post
Imputed rental value of owner occupied housing (net of mortgage interest and some expenses) should be taxed as income. This was the case in the UK until the 1960's. It's explained on the internet - just Google it. No great mystery. The policymakers are undoubtedly quite aware of it but they choose to overlook it because it is politically very contentious. Clearly, failure to tax it amounts to a subsidy to owner occupiers effectively capitalised into higher house prices. Also it is inequitable that rent payers effectively do pay tax at income tax rates on the rental value of the property they occupy (they have to find a gross amount of income and pay tax on that before having a net amount of income with which to pay rent). Introduction, would broaden the tax base, remove a subsidy capitalised into higher house prices and remove a gross inequity.