Tax revamp likely following report
The Government is likely to implement some changes suggested in a tax working group report out today with Prime Minister John Key indicating he wanted to address tax on rental properties, while he didn't rule out increasing GST to pay for personal rate cuts.
The issues canvassed by the working group since it was set up in May last year include broadening the tax base, aligning personal and corporate tax rates, the balance between income and consumption taxes like GST, the taxation of property compared to other investments, alignment with Australian tax policy and tackling foreign companies that load subsidiaries with debt to avoid tax.
Speaking before the recommendations are announced today Mr Key told reporters the Government would carefully consider the group's findings and decisions would feed into the May budget.
"Not all of them will be acceptable to the Government but nor will all of them be rejected," he said.
"It's no secret that we would like to lower personal taxes and if we can do that by closing up what might be loopholes or unfairness in the current tax system and redistribute that through personal tax cuts that seems to us both a most robust, fairer and better incentivised system."
There was a wide range of possibilities to consider from land taxes to closing loopholes around depreciation. Mr Key has previously rejected a capital gains.
Yesterday he indicated property investments could be a target with $200 billion invested in rental properties in New Zealand. The Crown lost $500m on those investments in tax last year.
"That doesn't seem to demonstrate fairness to either the New Zealand tax payer or necessarily the right incentives of where we want New Zealanders to invest."
The Government has ruled out recommendations last year from the separate 2025 Productivity Taskforce to cut income tax to 20 percent and slash government spending by $9 billion as too radical.
Finance Minister Bill English previously said any changes would have to be cost neutral, meaning revenue gained in any one area would be offset by reductions elsewhere.