New Zealand Considered Cutting Corporate Tax

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

10 January 2005

Despite pledging to keep income tax rates on hold, it has emerged that the New Zealand government has been studying ways in which the corporate tax rate could be reduced in order to make the country more competitive.

According to reports, Rodney Hide, leader of the opposition ACT party, has obtained documents through the Official Information Act which purport to show that Finance Minister Michael Cullen had asked the Treasury to explore two possible options for reducing the corporate tax rate.

One of these options would have cut corporate tax to 30%, matching that of Australia, in a move that the government felt would make New Zealand more competitive with its neighbour.

The second option proposed cutting the corporate tax rate lower still, but introducing a payroll tax of between 5.4% and 7.2% to cover contributions to the superannuation pension fund system.

However, despite the existence of a record NZ$7.4 billion (US$5.1 billion) fiscal surplus, Cullen has resisted the temptation to cut taxes, preferring instead to use the spare cash to build up the superannuation fund and bolster spending on health and education.

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