New Zealand's PM Looks To Tax Reform

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

15 January 2010

While New Zealand’s Prime Minister, John Key, touched on the topic of tax reforms in a press conference, he put it in the context of encouraging economic growth, which he considered would be the main theme for the country in 2010.

New Zealand’s government has previously expressed a desire to close the country’s income gap with Australia by 2025, which was the vision of the 2025 Taskforce which issued its first report late last year. The key elements of the Taskforce’s proposed approach are significant cuts to both government spending and tax rates.

The Taskforce calculated that New Zealand presently has many middle income working families with children facing effective marginal tax rates of 53% or 58%. Key reiterated in the press conference that the Taskforce’s recommendations and, therefore, personal tax cuts remained within the government’s sights.

He also said that, within wider tax reforms to shore up the country’s tax base, New Zealand had to be careful that its company tax rates remained competitive. That recalled a report by the Treasury in November last year, which said that the less ambitious the increases in other rates (goods and services tax, land tax, capital gains tax), the more difficult expansionary income tax reductions would be.

Key said that more of the government’s thinking would be given after the re-opening of parliament next month. The final report of the Tax Working Group, which the government set up to investigate the country’s future taxation, and which will therefore influence its thinking, will be delivered in the next few weeks.

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