New Zealand Government To Review Company Taxation

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

21 November 2005

New Zealand's government is planning to review its company taxes in an effort to remain competitive with Australia, its largest and closest trading partner, although the country's businesses ought not to hold their breath waiting for a cut in the corporate tax rate.

“The terms for the review are still being drawn up but will reflect the government’s commitment to give better incentives for productivity gains and improved competitiveness with Australia," Finance Minister Michael Cullen explained in a statement last week.

However, referring to a Treasury briefing paper, within which Cullen said there were certain "tensions", he hinted that these incentives are unlikely to come in the form of lower company taxes.

“This (briefing) would seem to imply that I simultaneously loosen and tighten fiscal policy while also broadly maintaining current fiscal settings," Dr Cullen remarked.

He added that:

“As Treasury itself observes, the ageing population will put pressure on the fiscal position and strong fiscal positions can deteriorate quickly. That is why the manifesto Labour took into the election campaign was the most fiscally responsible of any party and why we will continue to run a prudent and consistent fiscal strategy."

"The mission this government has set itself, as spelt out in the Speech from the Throne last week, is to lift the quality of life and standard of living of all New Zealanders."

“To achieve that we need to lift labour productivity, improve the skills base of the workforce, protect environmental values and raise sufficient tax to support quality public health and education services and to provide security in retirement."

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