No flat tax: PM

The Government will not introduce a flat tax system despite Treasury advice in support of one, Prime Minister John Key says.

A working group, appointed by the Government, was reviewing all aspects of the tax system and was due to report by the end of the year.

Some of its working papers have been released and there has been speculation about the introduction of a capital gains tax, a GST increase and changes to the Working for Families threshold.

Today, Treasury papers obtained by Radio New Zealand under the Official Information Act suggested a flat tax rate or cuts to taxes on dividends, interest and profit were ways of closing the income gap with Australia.

A capital gains tax and increases to GST and land tax would be increased to fund the changes.

Mr Key told reporters there would not be a flat tax.

The working group and Treasury were working on similar ides and the Government would consider a wide range of issues, he said.

Cabinet will discuss all those issues but "there's not going to be a flat tax system".

"We need to close the gap with Australia, we're committed to doing that by 2025, no one's under-estimating how difficult that challenge is and tax will unquestionably play some role in that.

"We also need to make sure we put together a system that isn't regressive and that is fair," he said.

Finance Minister Bill English said the tax working group and Treasury were looking at "all sorts of models" but the Government was "certainly not considering a flat tax".

Those looking at the tax system were told to "rule nothing out" and "by the looks of it they're doing a pretty thorough job", Mr English said.

Labour deputy leader Annette King said her party was opposed to a flat tax because it raised questions about what other taxes would have to be raised to cover expenses.

"But I have to ask every time Treasury puts out a suggestion they are working on, it is knocked back either by Mr English or by Mr Key.

"Why are they wasting taxpayers' money with Treasury officers working away on policies they don't intend to implement and they rule out every time they are announced?"

NZPA