Wellington, May 21 NZPA - New loopholes will be exposed in the Government's plan to generate more tax income by clamping down on people's ability to arrange their affairs to avoid paying tax, the Green Party says.
Budget announcements yesterday included dropping the top tax rate from 38 percent and aligning it with the 33 percent trust tax rate, which was likely to discourage a growing tendency from high earners to use trusts to manage their financial affairs.
Property developers also face a clampdown on their ability to claim depreciation on their holdings.
Green Party co-leader Metiria Turei said today the Government should concentrate on closing loopholes rather than reduce the top tax rate.
It was good that there was going to be more emphasis on compliance to tax rules, but the horse had "already bolted", she said.
Reducing the top rate to the trust rate would help reduce the incentive around using trusts, but the lowering of the corporate tax rate from 30 percent to 28 percent left the door open for people to instead use businesses to funnel income, Ms Turei said.
The Inland Revenue Department (IRD) was given $120 million in the budget to strengthen its ability to tackle the problem of tax avoidance, but Ms Turei said the return from that would be negligible.
Her comments were similar to those of New Zealand Institute of Chartered Accountants Institute tax director Craig Macalister, who said the Government had placed confidence in IRD being able to collect an additional $745 million over four years.
While it had received funding to help, Mr Macalister doubted IRD would collect as much as budgeted, as it was possible those it chased down would have no money.
When it came to landlords facing extra costs from budget initiatives, it meant renters were likely to suffer the consequences, Ms Turei said.
Revenue Minister Peter Dunne quoted Treasury figures saying the moves could prompt a "modest" rent increase of 1.5 percent over three or four years, but Ms Turei said that was significant when low income families were already struggling to find affordable housing.
"It won't be modest for those on the lowest incomes, it won't be modest for those who are already living two families in a house, or those who are living in garages because they can't afford any decent housing. For them, any increase in rent is a massive reduction in their ability to get adequate housing," Ms Turei said.
The New Zealand Property Investors' Federation doubted the treasury figures today, saying rents could increase by 4.5 percent to 6.5 percent.