16 November 2005

Review of corporate tax regime on the agenda

“The concerns raised by the Treasury and Inland Revenue regarding company tax will inform the government’s planned review of the business tax regime,” Finance Minister Michael Cullen said today.

He was commenting on the IRD’s and the Treasury’s briefings to the incoming government.

“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.”

Dr Cullen said that there were tensions within the Treasury paper which seemed to be inviting the government to make large reductions to the top personal tax rates while also reducing the size of future budgets and maintaining a stable debt to GDP ratio.

“This would seem to imply that I simultaneously loosen and tighten fiscal policy while also broadly maintaining current fiscal settings.

“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 government will not be undermining the platform of fiscal stability and strength that we have built up over the past six years. 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,” Dr Cullen said.

The Treasury briefing paper is available at:

ENDS

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