Critical Tax Changes In Government’s Hands

MEDIA RELEASE

20 January 2010

Critical Tax Changes In Government’s Hands

“The Tax Working Group’s report does not go far enough in recommending what it believes are the best options for New Zealand’s tax system. There are now some critical decisions for the Government to consider, in what is a relatively short timeframe,” Craig Macalister from the New Zealand Institute of Accountants (NZICA) said today.

“We congratulate the Tax Working Group on its well-considered findings but we are disappointed that it was unable to reach a consensus on the best way forward for New Zealand’s tax system and how that may be reached”.

Mr Macalister, the Institute’s tax director, said that people who were looking for something bolder will be disappointed by the recommendations.

“That aside,” he said, “This is a very coherent and comprehensible report that discusses the pros and cons of the various options. While there is a lot of information to distil, the group clearly believes the preferred approach is a lower flatter tax structure and broadening the tax base through the taxation of capital assets. However, given the diversity of views within the group, it has left the critical decisions to how this is achieved, such as what type of new capital taxes to adopt or whether there should be an increase in GST, over to the Government.

The group’s recommendations are consistent with NZICA’s long-held view that the best tax system, in practice, is one that levies the lowest possible rates of tax across the broadest base. For this reason NZICA supports further work by the Government on the taxation of capital assets as a means of removing distortions in investment decisions and funding tax rate reductions.

Mr Macalister sounded a word of caution regarding the proposals to tax rental properties differently from other assets. Those proposals signal a departure from the way in which other income-generating assets are taxed.

“We need to be careful not to fall into the trap of selected taxes for different assets or investments for all the reasons why these were a failure in the past,” he said.

ENDS

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