Monday, March 28, 2011
New Zealandís second round of Budget 2010 tax changes will help make businesses more competitive and further rebalance the economy towards savings and exports, Finance Minister Bill English and Revenue Minister Peter Dunne have said.
"Cutting the company tax rate will make New Zealand more competitive and increase incentives for businesses to reinvest earnings back into jobs and growth," English said.
"A number of property and other tax changes will encourage sound investment decisions, make the tax system fairer and ensure the overall tax package is broadly fiscally neutral."
"Pressing on with policies that encourage faster growth is one of the best ways we can meet the costs associated with the repair of Christchurch. Treasury estimates all the Budget 2010 tax package will add about 1% to economic growth over the next few years," said the Finance Minister.
The changes, which take effect on April 1 for the 2011/12 income year, include:
Lowering the company tax rate will cost about NZD1.1bn (USD826m) over four years, while changes to some savings vehicles tax rates will cost NZD170m. This is offset by the other measures, which are expected to raise about NZD3bn over four years Ė ensuring the government's overall tax package is broadly fiscally neutral.
"These measures help tilt the economy further towards savings, investment and exports and away from the unsustainable borrowing, consumption and over investment in housing of the past decade," English said.
The government believes that the changes will make the tax system fairer by ensuring the treatment of property is consistent with other forms of investment.
"Ending depreciation tax breaks on buildings made sense. On average, New Zealand buildings actually increase, rather than decrease, in value over time."
"Changes to the LAQC rules and the introduction of the new look-through company tax rules will reduce the opportunities for tax structuring."
"Closing loopholes that allow families to structure their income through the use of trusts or to use investment losses to increase their eligibility for Working for Families payments will also make the tax system fairer," Dunne said.