Home Mortgage Centre Reaction: E & Y: Lack of tax certainty could be detrimental to the economy

Reaction: E & Y: Lack of tax certainty could be detrimental to the economy

Jenha White,  Tuesday, 09 February 2010 18:31

While clarity around property tax was welcomed in Prime Minister John Key’s speech today, the rest of the tax announcements are hardly likely to incite riots or dancing in the streets according to Ernst & Young.

Ernst & Young tax partner Jo Doolan says we still do not know how and when personal tax rates will change, what form of tax will be adopted to deal with the perceived unfairness around residential property and when and if GST will increase.

"Given we have to wait until the budget for further details this lack of certainty could have a detrimental impact on our economy which is only just coming out of the recession," she says.

Aaron Quintal, tax partner, adds that although the Prime Minister is careful in his language, there is a reasonably strong indication that we will see some change on the GST front but this will be accompanied by across the board reductions in personal income taxes and compensating increases in benefits, New Zealand Superannuation and Working for Families.

"Meanwhile businesses and taxpayers are left to speculate what the potential impact of any future tax changes may have on their business.

"With one of the pillars of a good tax system being certainty, this is not helpful."

He says for now it is a waiting game until the Budget is released on 20 May 2010 with the result being investors, particularly those with residential properties, likely to remain cautious.