Call for top tax rates to reduce to 30 pc

A coalition of business groups has called on the Government to align the top personal tax rate with the company rate at 30 per cent.

The Business Roundtable, Chambers of Commerce, Federated Farmers and the Institute of Chartered Accountant said the cuts planned for the 2008 budget in May should be targeted at creating wealth no at wealth redistribution.

The group said the cut to the company rate to 30 per cent announced in the last budget was welcome, but a lower, flatter and simpler rate of taxation was needed now.

The current top rate of personal tax is 39 per cent for earnings above $60,000 with those earning above $38,000 bracket pay 33 per cent.

Finance Minister Michael Cullen has said he will outline a programme of cuts to personal tax in the upcoming budget, but has said they have to be fair and not increase inequality.

The proposal by the business groups is unlikely to find favour with Dr Cullen as it would cost billions of dollars and put nothing in the pockets of low earners and little for those in the middle income bracket.

Dr Cullen has refused to say what shape his tax cut package would take with speculation centring around a lift in the thresholds at which rates kick, paying out a flat dividend to taxpayers or creating a tax-free threshold.

The business group said rate cuts were preferable to other options and they were affordable.

It estimated the Government could afford $2.5 billion in tax cuts spread over a few years by lowering increases in Government spending and borrowing for infrastructure spending.

- NZPA