We must follow Australia's tax cuts, says Dunne

Peter Dunne

The Government cannot afford to ignore the Australian government's plan for significant cuts to both business and private tax rates, Revenue Minister Peter Dunne said today.

Because of this, the Government had to make "bolder" moves to get more than just a brief, temporary advantage from tax changes, he said.

Mr Dunne said a thorough review of business taxation was needed to ensure New Zealand remained competitive with its major trading partners such as Australia, encouraged investment and promoted productivity.

But he warned that while the issue was pressing, "simple quick fixes" would not work.

"The lazy 'cut the rate now and worry about the details later' approach some have taken to promoting is, at best, a short-term solution only, whereas the real need is for far more substantive reform," he said.

"Our major trading partner Australia is already looking at significant tax cuts to both business and private income in next year's budget and we simply cannot afford to ignore what Canberra is planning.

"Against that background, we have to do much better than simply gain a brief, temporary advantage -- we have to be far bolder."

Mr Dunne said he and Finance Minister Michael Cullen were working with officials from Treasury and the Inland Revenue Department on a range of options.

A discussion document would be released in the middle of the year setting out options.

Legislation would then be passed through Parliament next year so the new regime could take effect in 2008, Mr Dunne said in a speech to financial planners and insurance advisors in Auckland.

He also spoke about proposals the Government made in mid-2005 over reform of the tax rules for investment income.

He said proposals for the taxation of domestic investment through managed funds had been broadly supported by submissions.

But proposals for the taxation of offshore portfolio investment in shares were not.

Mr Dunne said the Government was consulting on a modified proposal for offshore investment that took into account the concerns of submitters and expected to announce new proposals in March.

A tax bill with the changes would be introduced in May, taking effect from April 1, 2007, he said.

The minister also said the Government planned to introduce at the end of the month legislation to bring in its KiwiSaver scheme.

Announced in last year's budget, KiwiSaver is a voluntary, work-based scheme to help New Zealanders save. It is due to start in April 2007.

- NZPA