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Tax Cuts Back On Agenda

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Jan 21 NZPA - A proposal for a land tax has worried farmers and business while a property tax may hit renters in the pocket.

The Tax Working Group yesterday released its recommendations to revamp the tax system which it says is broken and needs comprehensive reform.

Finance Minister Bill English wants to offer personal tax cuts in May's budget but with no extra money needs to find a way to pay for them.

The group proposed increasing GST from 12.5 percent to 15 percent, a method of taxing capital gains on residential rental properties and a low-rate land tax. It said the company, top personal and trust tax rates should be aligned to improve the integrity of the tax system.

Also, it wanted depreciation rules tightened up.

So far the only option ruled out by the Government has been a capital gains tax on the family home.

Ideas the group suggested that are likely to find favour are the new taxes on rental properties, increased GST but also a land tax, though there are plenty of opponents.

Federated Farmers spokesman Philip York said a land tax could cost farmers $525 million.

"I know tax reform supporters will argue reform will encourage enterprise, but can anyone tell me how taking $525m off farm businesses will grow exports? That's the effect of a 0.5 percent land tax on an agricultural taxable land base of $105 billion."

Farmers were asset rich but income poor and farming profits were shared across the economy, he said, and argued that local council rates were having a big enough impact.

Business NZ chief executive Phil O'Reilly said a land tax would be an anti-competitive cost on land-based businesses.

The Government says it will carefully consider the report before putting together a tax package.

Mr English and Prime Minister John Key have highlighted issues with property investment where over $200 billion is invested but made a $500m loss last year hitting the tax take by $200m.

The report raised concerns about the welfare system and said it needed to be reviewed. Mr English said that was possible down the track. He said problems with wealthy people obtaining Working for Families tax credits was an issue with the tax system rather than the policy.

The tax system needed to be broad-based and fair, he said.

"Some of the information they provided around who pays what is quite startling -- for instance a survey of 100 of New Zealand's wealthiest people shows that only half of them pay the top tax rate. It's astounding to a layman, I'd have to say."

Labour Party finance spokesman David Cunliffe said the party would consider the report and urged caution that any changes did not disadvantage workers.

Green Party co-leader Russel Norman said the recommendation to align the top personal tax rate with the corporate rate should be rejected because those earning less would end up having to pay more. He said tax loop holes should be shut down. The Greens supported a capital gains tax and would also like to see environmental taxes introduced.

The Council of Trade Unions hoped for tax cuts but said there did not need to be a reduction in the top rate. It opposed increasing GST as did the Tourism Industry Association which said the move could hurt its industry.

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