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Few Tax Policy Hints From New Zealand's New Gov't

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

24 October 2017


New Zealand's new Labour Party-led Government will increase penalties for corporate fraud and tax evasion, according to its coalition agreement with the NZ First Party.

It was the only announcement on tax policy in the document, despite both parties being very vocal on tax prior to the election.

The absence of tax measures in the coalition agreement could signal that neither party considers it possible to make stark changes to tax policy during the current government term, perhaps owing to the fact that the coalition will need the support also of the Green Party to achieve a majority.

Before the elections Labour said that it would ditch the National Party's plan to hike individual income tax thresholds from April 2018. National had proposed that from April 1, 2018, the lowest tax bracket, under which a 10.5 percent tax rate applies to income up to NZD14,000 (USD9,871), would be increased to NZD22,000. The next tax bracket, which features a 17.5 percent rate, would also be hiked, from NZD48,000 to NZD52,000.

Ahead of the election, Labour had also proposed a tax on the sale of a property within five years of its purchase, to discourage property speculation.

It said it would end secondary taxation, which provides for the taxation of a second source of personal income at a fixed rate. Labour had also proposed changes to make tax payments easier for businesses by allowing them to pay in regular installments at a rate they can adjust. It previously said that the current system of businesses having to estimate their annual income and paying tax in three large installments throughout the year can leave companies "with a big bill at the end of the year which can push a small business to the wall." The party said that it would scrap late penalties for provisional tax and raise the level at which provisional tax kicks in.

Labour said that it would not make any changes to personal income tax, corporate tax rate, or goods and services tax.

Meanwhile NZ First's manifesto included a pledge to remove secondary tax for workers (levied on those with more than one job); tie PAYE income tax thresholds to inflation; and exempt basic food items from goods and services tax. The party has also said that, from April 1, 2019, it would reduce company tax rates over three years to 25 percent, allow immediate 100 percent deductions for spending on capital goods, improve research and development tax relief, and introduce a 20 percent tax on income from exports.

TAGS: tax | small business | business | value added tax (VAT) | speculation | goods and services tax (GST) | tax thresholds | New Zealand | penalties | individual income tax | services | research and development

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