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Source: ONE News -
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Wage earners now have a little extra in the pocket with the National government's first round of tax cuts.
The tax cuts, which come into effect April 1, are being seen as a way to retain New Zealand's largest tax payers and stimulate the economy as wage earners spend their extra cash.
The government has repealed the research and development tax credits to pay for the cuts, and together with tax cuts made under the Labour government in October last year, will make them the second round of cuts in six months.
The cuts are proportional to wages. Those earning $100,000 or more a year will get at least an extra $24 dollars a week. Anyone on the average income of $48,000 a year will get an extra $18 a week, and low income earners will get a $10 a week tax credit.
On a monthly basis, both tax cuts together will see those earning $100,000 pocketing an extra $225, and low income earners an extra $95 a month.
"It's spread right across the three main income levels. The tax credit is really there to address an anomaly where Working For Families were available for low income earners but if you were a single person without a family you didn't get much of a break," says Iain Craig, tax partner at BDO Spicers.
He says the key to the cuts is the movement in band rates - an inflationary adjustment that compensates for 10 years of no movement.
The tax cuts may also help offset dampened expectations by wage earners for pay increases in the current economic climate, and ease pressure on employers at annual review time to provide them.
"I think for employers that have maybe been locked in over the last 10 years, at least to CPI type increases, that they may file that at least their employees are a little bit better off, they've got more money in their pockets,"
However, while some say every little bit helps, other say the tax cuts are too small to make any difference.
Labour has criticised the cuts for not helping low income
earners who need to qualify for the independent earners credit to
get an extra $10 a week.
