Key confident of support for tax change 

Source: NZPAPM John Key

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Prime Minister John Key believes he will get both political and public support for the government's tax reform package which is set to be partially unveiled later on Tuesday.

Key's opening statement to Parliament will outline his government's policy programme for the year with the economy and tax reform as the centrepiece.

Speaking to journalists, Key gave no detail ahead of the speech but once again pointed to property tax as one area in need of an overhaul.

Key said the speech would spell out the areas where work would be done and rule in some changes and rule out others.

The Tax Working Group last month released its recommendations to revamp the tax system which it says is broken and needs comprehensive reform.

It proposed increasing GST from 12.5% to 15%, a method of taxing capital gains on residential rental properties and a low-rate land tax. The group said the company, top personal and trust tax rates should be aligned to improve the integrity of the tax system.

Also, it wanted depreciation rules tightened up and tax loopholes closed including on property.

There has been intense debate about all the recommendations and Key said not everyone would be happy with the government's decisions.

He believed the proposals would meet tests of fairness, equity and sustainability and believed the public would generally agree.

Some MPs have expressed concern that an increase in GST would hurt lower income people even if the government tried to compensate, changes to property tax have also worried others saying it could both increase rents and decrease property values.

Key said preliminary discussions had been held with support parties about the reforms and while their votes had not been "signed in blood", Key did not anticipate problems including final decisions in the May budget and implementing them shortly after.

The 20-minute speech to parliament would outline wider economic strategy and other policy.

Key said 2010 was a crucial year, as the public had given the new Government facing a recession "a fair bit of slack" last year.