Finance Minister Joyce says more work needed on personal tax rates

Finance Minister Steven Joyce during his Budget 2017 speech. Photo / Mark Mitchell

Finance Minister Steven Joyce still has income tax in his sights where he sees more room to move on marginal rates but hasn't put a priority on company taxation which the Organisation for Economic Cooperation and Development says is an area where potential gains could be made in encouraging business investment.

The OECD's two-year survey of New Zealand's economy and policy settings was released today, with a focus on lifting the country's productivity and preparing for growing use of automation and artificial intelligence in the labour market.

Among its policy prescriptions was encouraging the government to cut the 28 per cent corporate tax rate to reduce the cost of capital and spur business investment.

At a briefing in Wellington, Joyce said the Crown's current forecasts don't give it room to move on tax for the next year or so because major infrastructure spending will mop up any spare fiscal capacity, and any move that is made would be on income tax.

"I'm worried that potentially lower income New Zealanders would be worried about what entitlements and transfers they lose by taking on a new job and by moving to a higher paying job - I think we've got some room to move in the space," he said.

By contrast, company tax was more like a withholding tax for New Zealand shareholders because of imputation credits, and unlike other jurisdictions, the corporate rate was more relevant to international investors, Joyce said. With the work on base erosion and profit sharing going on at the OECD, Joyce said as those changes bed in "I'd like to look overall at our company tax structure, but it certainly hasn't been a priority."

Government data today showed business investment climbed 3.7 per cent in the year ended March 31 and is up 37 per cent since March 2010, just before the government announced plans to cut the then 30 per cent corporate tax rate.