National Releases Proposed Tax Cuts

October 10, 2008 New Zealand FinanceNew Zealand Taxation  No comments

The National Party reveled on the 8th of October, their proposed tax cut policy.

The National Party’s tax cut proposal is underpinned with two main points, one being that it is much more beneficial for some income bands, and the other is that it is somewhat easier on the New Zealand budget than that of the Labour Party.

The savings in the New Zealand budget, while still maintaining tax cuts is possible due to National’s decision to scale back the required Kiwisaver contribution from 4% to 2%. While this enables employees to take more of their pay cheque home, it also frees up the Government’s mandatory contribution. Similarly the mandatory employer contribution is scaled to 2%. The National Party Tax Cut plan is also doing away with the current Government’s 15% tax credit for business doing research and development.

The National Part proposes to have three rounds of tax cuts, each on the 1st of April, in 2009, 2010 and 2011. For $0 to $14,000 earners, the rate will stay at 12.5% throughout. $14,001 – $50,000 earners will see a rate of 21% in 2009, 2010 and a drop to 20% in 2011. The $50,001 – $70,000 band will see 33% throughout the three periods. Lastly, the $70,001 and over earners will be at 38% post the 2009 cuts and at 37% post 2010 and 2011.

Those on a salary of over $24,000 who are not receiving any other benefit will now be eligible for a new tax rebate, entitled the Independent Earners rebate. Between $24,000 and $44,00 will receive a rebate of $10 per week until the 2010 cut date, where it will rise to $15. Each dollar of income above $44,000 will see a decrease of 13 cents from the rebate, effectively cutting it off at $48,000 and later at $50,000 in 2010.