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World class tax system Key's goal

Staff Reporter,  Wednesday, 15 July 2009 15:47

Prime Minister John Key has described New Zealand's economic performance as being "disappointing" and made us "a third-division economy".

In a speech hosted by Cullen Law he outlined six main policy drives the government is focussing on to improve New Zealand's economic performance.

The sixth of these is to develop a "world-class tax system."

Key talked about the changes already made, but also says the Tax Working Group being done in conjunction with Victoria University and chaired by Bob Buckle to consider "the medium-term tax policy challenges" will be important in the changes.

He also noted that the government was "watching closely what comes out of Henry Review of taxation in Australia,"

The following is the full text of Key's comments on a world-class tax system.

The final policy driver is the tax system.

The primary function of the tax system, not surprisingly, is to collect revenue.

In the current environment, when we are facing a decade of budget deficits, we need to make sure we can fund the Government's activities in a sustainable way.

But the tax system is also important because it changes the way people behave in the economy. People do things because of the way the tax system is structured, not necessarily because those things represent the most productive use of resources.

So we have to ensure that New Zealand maintains a world-class tax system that doesn't get in the way of people working hard, saving, and investing in productive enterprises.

This Government has already reduced personal tax rates for a great many taxpayers, in a tax cut package worth $1 billion a year.

We have also introduced a $500 million tax assistance package that makes it easier and less expensive for small and medium enterprises to pay their taxes.

Together with Victoria University, we have established a Tax Working Group to consider the medium-term tax policy challenges facing New Zealand.

The Working Group will be chaired by Professor Bob Buckle and will report at the end of the year.

The Government considers that a strategic review of the tax system is very timely at this stage - particularly in light of the challenges posed by the current economic and fiscal environment and by our medium-term goal of a 30% top personal tax rate.

And since our overriding aim is to be competitive with other countries, we can't consider our tax system in isolation.

In particular, the Government will be watching closely what comes out of Henry Review of taxation in Australia, which is due to report back at the end of this year.

 

 

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