Split over plans for tax reform

There are mixed reactions in Manawatu to tax system changes flagged by Prime Minister John Key yesterday.

Mr Key said it was possible GST could be raised 2.5 per cent to 15 per cent, while personal income tax would be cut.

He said May's Budget would include changes to the way property is taxed, although Mr Key appeared to rule out a capital gains tax, a land tax or a flat equity tax.

However, he did not rule out the possibility of ending tax breaks for claiming depreciation on rental property values.

Grey Power Manawatu president Wendy Gadd labelled the possible GST increase as "terrible".

"It's hitting people on benefits and superannuation – fixed income people. We are the ones that always support the higher paid people."

She said possible changes to income tax would mean those on incomes of $100,000 could be better off by about $5000 a year.

Grey Power Manawatu had written to Senior Citizens Minister John Carter and Mr Key about its concerns, but had not yet received a reply.

"It's not just 2.5 per cent on one or two items. It's on everything. It's disappointing, but that's what I expected from a National government."

Manawatu Chamber of Commerce spokesman Paul O'Brien said the announcements on tax were "music to our ears".

The chamber was pleased the Government was ignoring proposals for a land tax, as raised by a tax working group, while it supported addressing anomalies in property investment taxes.

The chamber supported reductions in personal tax and the increases flagged for working for families and other benefits, which would help offset any GST increase, he said.

"[This] means that the families in the Manawatu that are on lower incomes will still be a viable part of the economy."

Mr Key also announced a plan for stronger investment in the science and innovation sector, which would benefit Manawatu, as the region had the highest concentration of scientists in the southern hemisphere, Mr O'Brien said.

The Manawatu Property Investors Association welcomed the sidelining of land taxes, although president Grant Ogilvie said there was uncertainty about how property depreciation would be dealt with.

At present, if depreciation was claimed on rental properties, but the property was later sold at a higher value than its book value, the difference had to be repaid.

"There's already a system in place there."

Most landlords entered the property investment market as a business, and not allowing expenses to be claimed could affect landlords' profitability.

This could force costs to be passed on to tenants, he said.

Federated Farmers' Rangitikei-Manawatu vice-president Andrew Hoggard said its initial reaction to Key's tax proposals was positive.

"The worst-case scenario would have been land tax similar to council rates."

- © Fairfax NZ News