New Zealand Tax Reform Report Released

January 21, 2010 Taxation in New Zealand

Government Building @ WellingtonThe New Zealand Government initiated research group, the Tax Working Group, has released its final report cataloging numerous tax changes it considers essential for the country.

On January 20th The Tax Working Group published its widely anticipate final report, which recommends thirteen primary changes to the New Zealand tax landscape, along with identifying concerns regarding the current tax situation.

The Tax Working Group report claimed that there is a lack of coherence, integrity and fairness within the country’s tax system, saying that a too large tax obligation was placed on wage-earners, with business entities and the wealthy being able to restructure their affairs to minimize their tax burden. The Group claimed that the current tax structure is unsustainable, and that the changing demographics and international competition will result in greater pressure on a decreasing tax base. It also stated that New Zealand currently places a too great reliance on the taxes that are most harmful to growth, especially corporate and personal income.

Among its key recommendations the Tax Working Group’s report stated that the country’s Goods and Services Tax (GST) should be raised from its current 12.5 percent to a level of 15 percent. Further, the Group recommended for the Government to align top personal, corporate and trust tax rates. It also emphasized the importance of ensuring that New Zealand’s corporate rates are competitive on an international scale, though this may pose difficulties in regards to aligning tax rates. Further, all personal tax rates should be lowered, though this will be offset by the introduction of a comprehensive capital gains tax and a low-rate land tax.

The Tax Working Group was established in May, 2009, in partnership with the New Zealand Reserve Bank, Inland Revenue Department and Victoria University of Wellington’s Centre for Accounting Governance and Taxation Research. The thirteen member group was tasked with examining and providing recommendations on New Zealand’s fiscal framework, structure of personal and corporate taxes, GST and the overall integrity of the tax system.

Photo by Remon Rijper