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The market will be looking for some clarity on the government's intentions on changes to the tax system when Prime Minister John Key makes his opening address to parliament on Tuesday.
Craigs Investment Partners analyst Ross Cuthbertson says there has been some uncertainty in the market since the Tax Working Group made its recommendations to the government in January.
Listed property investment companies could be affected if the government, as it has signalled, picks up on the group's recommendations to tax investment properties.
Cuthbert says a sensitivity analysis on one of the larger listed property trusts, AMP Office Trust, shows that if depreciation rules were removed it would have a negative impact on earnings of about 9%.
"However, that gets offset if the corporate tax rate is brought down to say, 27%, so the overall net affect of the proposed changes might be a negative earnings impact for that particular company of 6%," he says.
ONE News political editor Guyon Espiner says other changes the government has signalled it may adopt are lowering personal tax rates, particularly the top tax rate. Business tax rates may also come down over time.
And, the government may follow the Tax Wording Group's recommendation to lift GST from 12.5%.
"It's a very effective revenue gaining tax. If you lift it just one percentage point you get $770 million, so governments like it as a way of raising tax," says Espiner.
Meanwhile, Brian Gaynor from Milford Asset Management says while Key's speech will flag changes, details are unlikely.
"I think we will get some general comments but we will be told that Cabinet has to consider these options in April before the Budget on the 20th of May," he says.
The prime minister is expected to give his speech at 2pm.
What do you think of the tax recommendations? What are
you hoping the government either takes on board or gives the boot?
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.