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A proposal for a land tax has worried farmers and business while a property tax may hit renters in the pocket.
The Tax Working Group on Wednesday released its recommendations to revamp the tax system which it says is broken and needs comprehensive reform.
Finance Minister Bill English wants to offer personal tax cuts in May's budget but with no extra money needs to find a way to pay for them.
The group proposed increasing GST from 12.5% to 15%, a method of taxing capital gains on residential rental properties and a low-rate land tax. It 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.
So far the only option ruled out by the government has been a capital gains tax on the family home.
Ideas the group suggested that are likely to find favour are the new taxes on rental properties, increased GST but also a land tax, though there are plenty of opponents.
Federated Farmers spokesman Philip York said a land tax could cost farmers $525 million.
"I know tax reform supporters will argue reform will encourage enterprise, but can anyone tell me how taking $525m off farm businesses will grow exports? That's the effect of a 0.5% land tax on an agricultural taxable land base of $105 billion."
Farmers are asset rich but income poor and farming profits are shared across the economy, he said, and argued that local council rates were having a big enough impact.
Business NZ chief executive Phil O'Reilly said a land tax would be an anti-competitive cost on land-based businesses.
The government says it will carefully consider the report before putting together a tax package.
English and Prime Minister John Key have highlighted issues with property investment where over $200 billion is invested but made a $500m loss last year hitting the tax take by $200m.
The report raised concerns about the welfare system and said it needed to be reviewed. English said that was possible down the track. He said problems with wealthy people obtaining Working for Families tax credits was an issue with the tax system rather than the policy.
The tax system needed to be broad-based and fair, he said.
"Some of the information they provided around who pays what is quite startling - for instance a survey of 100 of New Zealand's wealthiest people shows that only half of them pay the top tax rate. It's astounding to a layman, I'd have to say."
Labour Party finance spokesman David Cunliffe said the party would consider the report and urged caution that any changes did not disadvantage workers.
Green Party co-leader Russel Norman said the recommendation to align the top personal tax rate with the corporate rate should be rejected because those earning less would end up having to pay more. He said tax loop holes should be shut down.
The Greens supported a capital gains tax and would also like to see environmental taxes introduced.
The Council of Trade Unions hoped for tax cuts but said there did not need to be a reduction in the top rate. It opposed increasing GST as did the Tourism Industry Association which said the move could hurt its industry.
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.