BusinessNZ says income under $64,000 could be taxed at 17.5pc

Finance Minister Steven Joyce will be in an enviable position when he delivers his first Budget, ANZ says.
CAMERON BURNELL/FAIRFAX NZ

Finance Minister Steven Joyce will be in an enviable position when he delivers his first Budget, ANZ says.

There is a strong case for adjusting tax brackets and cutting income tax in Thursday's Budget, business lobby group BusinessNZ argues.

Chief executive Kirk Hope listed cutting company tax first in a pre-Budget wish-list published on Friday.

But he said reducing personal tax and loosening tax thresholds would also be positive.

The case for adjusting tax brackets was strong, Hope said.

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"New Zealanders are already taxed steeply on modest incomes and subject to further tax because of 'bracket creep' through inflation."

Higher tax thresholds would "more realistically reflect people's earnings and aspirations", he said.

Consultant KPMG has suggested the levels at which higher rates of tax kick-in could be increased by about 9 per cent, Hope noted.

He said one option was to:

- make the 10.5 per cent rate for incomes up to $14,000 apply to incomes up to $20,000
- raise the top end of the income band for the 17.5 per cent tax rate from $48,000 to $64,000
- apply the 30 per cent rate to income up to $80,000, instead of $70,000

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ANZ bank said the Government would be in the enviable position of being able to offer tax cuts by raising tax brackets, lift infrastructure spending, and pay down debt, while "throwing the normal Budget lollies around".

But it noted Finance Minister Steven Joyce had talked up the need to build more "resilience" into the economy to tackle future crises such as major earthquakes and international economic woes. 

Joyce had mentioned "resilience" 10 times in a pre-Budget speech, "giving a clear impression that the Government's mind-set has not shifted from a prudent approach to spending and a building-up of its rainy-day coffers", the bank said.

Hope said that while cutting income tax would help small businesses, reducing the company tax rate of 28 per cent was a "key need".

"It's important for international competitiveness to keep the New Zealand business tax rate below that of key trading partners. 

"Australia is currently reducing its business rate from 30 to 25 per cent while the US is moving to a 15 per cent federal business rate," Hope said, referring to a one-page tax proposal released last month by President Trump.

The Australian tax cut would only apply to companies with annual revenues of less than A$50 million (NZ$54m) and would be phased in over 10 years.

Hope's wish-list included higher spending on transport and infrastructure, and "restraint" elsewhere.

Retail lobby group Retail NZ also called tax cuts via changes to tax thresholds in an "election wish-list" it published earlier this month, saying they would have a significant positive impact for consumers and retailers. 

 - Stuff

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