But what about foreign investors, who can't use imputation credits, especially given an international trend for company tax rates to be cut, most notably recently in the United States?
Officials are sceptical of the assumption that lowering the company rate would increase the level of foreign direct investment (FDI) into New Zealand. "There are no studies we are aware of on the sensitivity of FDI to the company tax rate in New Zealand," they say, and point out that rate cuts in 2008 and 2011 did not cause a surge in FDI.
The current tax rate of 28 per cent is higher than the OECD average of 24.9 per cent, but it can afford to be, officials argue, because much of it is levied on "economic rents". Economic rents are returns over and above those required for investment in New Zealand to take place. Being a small and remote market tends to mean less competitive pressure on profit margins.
Officials argue that a lower company tax rate would only increase the incentive ... to shelter income in companies to avoid the 33 per cent top personal rate.
If foreign companies can supply the New Zealand market without a physical presence here, the company tax rate is irrelevant to them. If they cannot, the more relevant tax consideration is likely to be the extent, limited only by thin capitalisation rules, to which a foreign company can debt-finance its activities here.
Finally, officials argue that a lower company tax rate would only increase the incentive which already exists to shelter income in companies to avoid the 33 per cent top personal rate.
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They point to a rise in the use, especially among closely held companies, of mechanisms to dodge the extra 5 percentage points between the company rate and the top personal rate.
For example, there has been a steep rise since 2010 (to around $23 billion) in the stock of shareholders' borrowings from their companies, suggesting they are borrowing to access corporate income rather than being paid dividends.
The potential for a wider differential in tax rates to encourage such gaming of the system is also part of officials' case against a lower rate for smaller or younger companies.
A two-tier system would also create the usual anomalies and perverse incentives around boundaries. A threshold could act as a disincentive for business expansion, officials argue, in that a company which crossed the threshold could fund itself with a sizeable tax increase which might be more than the increase in profits.
And if the purpose of a progressive company tax rate is to better reflect the tax rates of the underlying investors in small businesses, there are other ways already available for doing that, like look-through companies which attribute the income, losses and capital gains made by the entity directly to individual owners in accordance with their ownership shares.
The officials' advice is not entirely a plea that "it ain't broke so please don't fix it", however.
If the Tax Working Group ultimately backs other measures, like broadening the taxation of capital income, which would increase the tax take, it would have scope to recommend revenue-negative changes which would improve the efficiency of taxing business income.
The most radical change would be indexing the whole tax base for inflation. It is an idea which economists applaud, but which turns tax administrators pale at the "material" compliance and administrative costs involved. Only a few countries have gone this way, they point out, during times of very high inflation.
A more likely starter would be to reinstate a depreciation deduction on buildings, scrapped in 2011.
This implies that buildings do not depreciate and can be expected to last forever provided repairs and maintenance are undertaken, whereas the previous 2 per cent depreciation rate implied an average life of 50 years. "It seems unlikely buildings do not depreciate at all, particularly industrial buildings," officials say.
They also suggest relaxing the continuity of ownership rules restricting the ability to carry forward tax losses.
Before businesses get too grumpy about all this, a couple of things need to be borne in mind.
One is that these are only the views of Inland Revenue and Treasury officials advising the Tax Working Group. No doubt other submissions will have taken a different view and it remains to be seen what the review will recommend, and then which recommendations the Government will take to the electorate in 2020.
Second, there are other features of the New Zealand tax system which are business-friendly by international standards.
One is that the "tax wedge" on wages is exceptionally low, the OECD reports. This is the difference between what it costs to employ someone and his or her take-home pay.
For a worker on the average wage who is single and has no dependent children, for example, the tax wedge is the lowest in the OECD and at 18 per cent of labour costs, not much more than half the OECD average. It may also be one reason we have the third highest employment rate in the developed world.
What officials have advised the Tax Working Group:
• Company tax rate should stay at 28%
• Don't recommend lower rates for smaller, or younger businesses
If other changes boost tax revenue:
• Think about reinstating depreciation deduction on buildings
• Consider relaxing continuity of ownership rules, so it's easier to carry tax losses forward
• Index the tax base, to adjust for inflation
