Tax Review Seeks Submissions
The Tax Review 2001 is seeking its first round of public submissions on tax policy issues. This first round of consultation concentrates on what is the best framework within which to build tax policy. For example, NZ relies on three main types of taxes: over recent years income tax has brought in 65% of tax revenue, GST 25%, and other indirect taxes - including excise taxes on tobacco, alcohol and petrol - another 10%. Is this the right tax mix? Should NZ introduce other types of taxes (for example, many European countries also use wealth taxes and eco-taxes for revenue-raising)? These are the sort of questions that people are encouraged to look at.
The Review is also keen to identify any deficiencies of the present tax system, and encourage people to submit their ideas for improvements, either by making changes to the present system, abolishing existing forms of tax, or introducing new forms of tax.
Other aspects of the Review include:
- Balance. There is the issue of the balance among the key tax types. Is the present tax structure appropriate in terms of fairness and efficiency in gaining revenue?
- 'Progressivity'. The income tax levied on individuals is mildly progressive in that it has rates increasing with income. That is not the case with other tax bases. Does this degree of progressivity reflect current views of society? What are the costs and benefits of more or less progressivity? Alternatively, should other taxes be used to redistribute income?
- Tax and Social Benefits. The tax system is used to provide social benefits such as Family Support. But, the interaction of the tax and benefit systems can mean people have to, effectively, pay high marginal tax rates. Comment is sought on the degree to which this creates problems that should be considered. Related to this is the question of whether rates of tax should be based on the individual (as income tax is) or the household (on which social benefits are currently based).
- Tax on Individual and Company Investments. Currently, there are different tax rules for investments, depending on whether the investments are carried out directly by an individual through a company, trust, or other entity. The objectives of past tax reform suggest that investments should be taxed the same irrespective of the entity through which they are made. To what extent is this desirable and practical?
- Taxation of off-shore investment by NZers. Although our rules attempt to tax all NZers on their world-wide income (even when that income is earned through off-shore companies), this is not applied consistently. For example, income earned through a company in the UK is not taxed as it accrues, but income earned through a company in the Netherlands is taxable on an accrual basis. Is consistency important? And, if so, what benchmark would provide good consistent rules?
Contact for Enquiries
The Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 00 83 33
Fax: +64 4 894 0720
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