English signals top personal tax rate cut

Finance Minister Bill English has hinted the top personal tax rate may fall to 33c and the company rate may drop to below 30c.

In a speech to the Auckland Chamber of Commerce today, English said while the Government was still considering aligning the top personal, company, and trust rates, its advice was that a matching trust and top personal rate was most important.

Currently the trust rate is 33c, while the top personal rate is 38c. The company rate is 30c.

Mr English said that complete tax rate alignment may not be necessary to eliminate many of the integrity problems with the current tax system.

"For example, substantial gains could be made by aligning the top personal rate with the trust rate, and having a company tax rate not too far below this.''

Such a scenario was suggested by the Tax working Group, which proposed a company tax rate of 27c. Those changes would cost the Government around $1.1 billion a year in lost revenue.

Mr English said he was mindful that the company tax rate needed to be competitive internationally, and aligning all three rates remained the medium-term goal. But it was considering whether it was affordable and whether it fitted with other equity considerations.

"Around the world, company tax rates are generally falling and, at 30 per cent, New Zealand's company tax rate is on the high side compared with many other developed countries,'' Mr English said.

"Remaining competitive with other countries may be more important than alignment - if not now, then at some point in the future.

"What we do know is that New Zealand's company rate can't get too far out of line with Australia's," Mr English said. "Currently, they are both at 30 per cent, but Australia is reviewing its own tax system and may consider dropping its company rate.

"We will watch events across the Tasman with a great deal of interest."

Mr English also confirmed that the Government would retain the current system for taxing share dividends, which takes into account the tax already paid by the company. Australia also has the system.

- © Fairfax NZ News