By VERNON SMALL
The Government plans to lower the 33c tax rate on business when the country's coffers are healthy enough, says the Minister of Finance, Michael Cullen.
"We would like to reduce it as fiscal conditions permit, although we do not anticipate that will be possible within this parliamentary term," he said in notes for a speech to an Asia Society lunch in Hong Kong.
In the run-up to last November's election Dr Cullen said Labour's budgetary policies did not permit a cut in the rate in the next three years, although it could not afford to be left behind.
Australia's company tax rate will drop to 30c from 36c in July 2001.
National's finance spokesman, Bill English, said Dr Cullen's latest comments were "flim-flam" for international investors.
"There is no substance to it. No New Zealander can imagine this Labour Government cutting company tax," he said.
"The fact is, if he can't afford a reduction in company tax now or within the next year or two, then he won't be able to afford it for a very long time."
He said Dr Cullen knew international investors' view of New Zealand was deteriorating because of his policies.
Talk of cutting the corporate tax rate was merely an attempt to sound investor-friendly, he said.
It appeared to contradict the intention of the promised review of the tax system.
"The idea was ... they would go with an open mind [into the review] and any tax changes would be part of their campaign for the next election.
"This promise seems to have been revived out of the blue, and that tells us Dr Cullen does not take his tax review seriously."
Mr English said the proposal would widen the gap between the top personal rate, lifted to 39c from April 1, and the 33c business rate that now exists.
"It looks as if he has not learned any lessons of his first few months in office," Mr English said.
"The idea that he would open the gap up even further is quite a concern because it is telling the business community he does not understand the complexity he has created already."
Since introducing the new top personal tax step the Government has signalled measures to prevent pension schemes, trusts and companies being used to avoid paying the higher rate.
Govt holds out tax cut hope for businesses
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