Prime Minister John Key has rejected criticism of the so-called 'paperboy tax'.

The Government has been accused of penny-pinching from kids to make ends meet after it cut children's tax credits in Budget 2012.

Revenue Minister Peter Dunne announced yesterday that school-aged children would no longer get a tax refund if they earned wages for part-time work.

Labour Party leader David Shearer said of the change: "This is the nickel and diming of this Budget where you don't really take on the big issues but you end up taxing paperboys and papergirls.


"Picking the pockets of paperboys and papergirls is petty. It's not really addressing the big issues," he said.

Under the changes, young people who earned cash-in-hand for babysitting or lawnmowing would not have to file a tax return at the end of the year.

But children earning under $2340 who paid tax to their employers could no longer claim it back.

Treasury officials said the changes would make the Government $14 million a year over the next four years.

Mr Key - a paperboy in his youth - said he found out about the move at Cabinet on Monday and did not regret it despite the publicity.

In a speech at the Langham Hotel in Auckland today, Mr Key said the change was done primarily to try to tidy up the tax code and most people didn't claim the PAYE exemption.

"A lot of people didn't know they were entitled to them so they didn't bother claiming. The amounts were fairly small and overall we have been trying to clean up the tax code."

He rejected criticism the Government was picking on paperboys and said he had never claimed the exemption.