NZ has fourth lowest GST rate in OECD: survey

Photo / Kenny Rodger

New Zealand has one of the lowest goods and services tax rates in the OECD, despite households being charged at a higher rate than before.

Tax accountants KPMG said even at 15 per cent New Zealand has the fourth lowest GST rate in the OECD and contrary to global rates, corporate tax rates were trending down.

The KPMG Corporate and Indirect Tax Rate Survey 2010
analyses value added taxes or goods and services taxes in 114 countries, going back six years.

Countries with the same tax rate are given the same rank.

Based on this ranking system, NZ has the fourth lowest rate in the OECD behind: Canada and Japan (5 per cent), Switzerland (7.6 per cent), Australian and Korea (10 per cent).

Since 2009 the average indirect tax rate for all countries with GST systems rose slightly from 15.41 per cent to 15.61 per cent in 2010.

KPMG New Zealand's GST partner Peter Scott said unlike any other country in the world, the recent increase in GST was matched by personal tax rate reductions.

New Zealand has the seventh highest corporate tax rate in the OECD but this was due to fall in 2012 - in contrast to the rest of the world where the downward trend had been halted, Scott said.

KPMG New Zealand's corporate tax partner Paul Dunne said the reduction in corporate tax rate would "make New Zealand comparatively more attractive than Australia on this measure".

However businesses were likely to be paying for the reduction in other ways including the removal of depreciation deductions on many buildings in 2012, he said.

Scott said businesses needed to understand the rules of the tax game were changing.

"We are finding that many businesses are still grappling with the recent GST changes. It is important that businesses think through the implications of the changes now, and upgrade their processes and systems," he said.

Dunne said a number of countries were considering or in the processing of implementing reforms of their tax systems in a bid to recoup lost revenue during the economic downturn.

"In this environment there will be added pressures for New Zealand companies doing business offshore, and hence they need to have efficient tax risk management in place to succeed," he said.