OPINION: What will 2013 bring from a tax perspective, asks Murray McClennan in Taxing Times.
I expect there will be no new taxes, but there will be some legislative changes and increased Inland Revenue audit activity and debt recovery.
The Government reduced personal income tax rates and increased GST in the 2010/11 income year. Subsequently gift duty was abolished. Given this, I think it unlikely that tax rates will be increased before the 2014 election.
By comparison many other countries are increasing tax rates to help reduce deficits. Admittedly, in France the proposed top personal income tax of 75 per cent was held to be unconstitutional.
Our Government would like to reduce its deficit. This can only be achieved by either reducing expenditure, increasing the tax take, or both. If the Government does not wish to increase tax rates, it can only increase the tax take by enforcing the current rules more stringently and collecting some of the outstanding tax already owed from earlier years.
I am sure Inland Revenue will be instructed to: Apply the current rules more stringently; Conduct more tax audits, especially into criminal activities, possible tax avoidance and evasion, and international tax issues; and Collect as much of the substantial tax debt as is possible.
Consequently, I believe that any new tax legislation will be limited to amendments that make: It easier for Inland Revenue to achieve the above goals; Minor changes to legislation, particularly on GST.
In short, more of the same! Ultimately, however, the Government after the 2014 election will need to give serious consideration to expanding the tax base, such as reintroducing stamp duty or extending income tax to more capital gains. One major problem with this is that a policy of increasing taxes usually is not recommended as a winning election strategy.
» Murray McClennan is director of Tax Central Ltd, a specialist tax consulting firm.
- The Southland Times