NZ Treasury Mulls Further Tax Reform

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

01 June 2010

New Zealand’s Treasury Secretary, John Whitehead, sees more scope for tax reform following the changes announced in the recent budget, albeit on a gradual basis.

In an interview with TVNZ, he said that, while the extent of the lower personal and corporate tax rates and the increased goods and services tax rate was appropriate in the context of the current fiscally-neutral budget, the Treasury has long argued for even lower rates as a means of stimulating further economic growth.

He has also been a proponent of widening of the tax base in New Zealand, largely by the introduction of a capital gains tax. Although that was not accepted by the government in this budget, he hoped that the changes to tax treatment for investment properties which were introduced may have some impact in switching investment away from the property and residential sector, and into more productive areas of the economy.

During the interview, he also confirmed the treasury’s advice to the government to lower or remove entirely the screening of foreign investment into New Zealand, except for the most sensitive items. He believes that overseas investment is beneficial to the country’s economy, and can be a key driver of economic growth.

He confirmed that there is a process going on at the moment to revise the Overseas Investment Act, but that the government has yet to make up its mind. His thought is that the government will eventually come out with a policy which will probably not go as far as the Treasury’s recommendation, but will certainly look at the benefits received from overseas investment.

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