New Zealand National Party Unveils Tax Plan

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

23 August 2005

Ahead of the New Zealand general election, set to take place on September 17, National Party Leader Don Brash has unveiled a plan to significantly restructure the tax system, with a package of tax cuts worth about NZ$3.9 billion (US$2.7 billion) by the third year.

"This tax package substantially reduces the tax rate faced by ordinary New Zealanders who work a little harder, or do some extra overtime. It is a package designed to allow people to get ahead from their own efforts," remarked Dr Brash as he unveiled the comprehensive package in Auckland on Monday.

The major features of the National Party's tax plan include:

• The 15% tax rate, which now applies to income below NZ$9,500 will extend to NZ$12,500.
• For income between NZ$12,500 and NZ$50,000, the tax rate will be 19%.
• The withholding tax rate for secondary employment will be 19%.
• Income between NZ$50,000 and NZ$100,000 will be taxed at 33%.
• Income above NZ$100,000 will continue to be taxed at 39%.
• The lower statutory rate of withholding tax applied to interest and other investment income will be reduced from 19.5% to 18%.
• The threshold for abatement of WFF payments will be NZ$30,000 from April 2006, and to keep the effective tax rate on extra income low, the abatement rate will be 20%.
• The company tax rate will be reduced to 30% in April 2008.
• The personal tax reductions will be implemented in two stages in April 2006 and April 2007.

"These changes will give very large reductions in the tax rate on extra work and income faced by around half a million working New Zealanders, and a significant income boost for most working people," explained Dr Nash.

The National Party also intends to save the average household about NZ$200 per year by scrapping the Labour government's plan to introduce a carbon tax.

"Under this tax structure, a person on the average wage can work harder, do some overtime, or take secondary employment, and they will from next year keep more than NZ$4 in every NZ$5 they earn," added Dr Nash.

The proposed tax cuts will mean that a single person earning NZ$38,000 will receive a NZ$630 a year increase from April next year, rising to NZ$690 a year from April 2007. Somebody earning NZ$50,000 a year will get an annual increase of NZ$1,470 from April next year, rising to NZ$2,370 from April 2007.

Dr Brash also said over time National will replace Working For Families with a family tax package.

"Work will start immediately we assume office on replacing WFF with a system of family taxation. Nobody will be worse off from this change - we are comfortable with the level of support. But the method of delivery must change," he noted.

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