Cullen Hints At New Zealand Corporate Tax Cut

by Mary Swire, Tax-News.com, Hong Kong

21 September 2006

New Zealand's Finance Minister Michael Cullen has hinted that the government's review of business taxation could result in a cut in the rate of corporate tax.

In a speech to a Singapore business breakfast, Cullen said that the government wants to foster a business environment that encourages greater investment in innovation and exporting.

"A current review of business tax rules is likely to produce an attractive mix of a lower corporate tax rate and tax credits, particularly helping those businesses focused on tackling overseas markets," he revealed.

The business tax review, announced in March by Revenue Minister Peter Dunne, is aimed at giving better incentives for productivity gains, and improving competitiveness with Australia. The final outcome of the review is expected to be announced in February and March next year.

However, Cullen's speech was criticised by National Finance spokesman, John Key, who accused the Finance Minister of having "no credibility" on tax.

"The public should be sceptical about what talk of a corporate tax cut actually means. This is the Finance Minister who in Budget 2005 delivered a tiny chewing gum-sized indexation adjustment - for 2008," he remarked.

"The public would also be questioning what Dr Cullen intends to take back to replace the revenue lost from any corporate tax cut. For instance, there is talk of lifting the trust tax rate, which would bring in about NZ$160 million (US$105 million) in revenue. That's giving with one hand and taking away with the other," Key argued.

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