3 May 2010

Less pressure to match Australian company tax rate

9:57 pm on 3 May 2010

The pressure is off the New Zealand Government to respond quickly to planned company tax cuts in Australia.

Australia is to cut its company tax rate below New Zealand's 30% to 28% in the next four years. But it has shelved the bulk of the 138 recommendations made as the result of a two-year independent taxation review by Treasury head Ken Henry.

Radio New Zealand's economics correspondent says it had been thought the Government here could have been forced to match any dramatic cut in the Australian company tax rate.

But the Australian government has shied away from cutting the rate to 25%, as recommended - and for that, PriceWaterhouseCoopers tax partner John Shewan says, the Government here will be breathing a sigh of relief.

KPMG's Paul Dunne says New Zealand now has time to cut company and personal tax rates.

Finance Minister English says that it's important the rates remain generally aligned but that he can't see too much to worry about in the current Australian plans.

Restoration of employer contribution urged

Australian Treasurer Wayne Swan has said however that he may revisit cuts if his government's finances continue to improve, and another member of the group set up to review the tax system here, Rob Cameron, says that's a concern.

But Council of Trade Unions secretary Peter Conway says too much attention is given to headline tax rates. He says the effective rate paid by Australian firms is much higher because of bigger supererannuation contributions.

The Australians will use some of the $9 billion expected from a new mining tax on boosting super entitlements. Employer contributions to super funds will also be upped from 9% to 12% of workers' salaries.

National scrapped the 3% Kiwisaver employer contribution soon after it was elected. Mr Conway says the Government should restore this to help stem the numbers of workers leaving for Australia.

Details of changes to New Zealand's tax system will be revealed in the Budget on 20 May.