In a speech given on the 14th of September it was made adamantly clear by the comments of John Key, New Zealand Prime Minister, that he does not support the idea of introducing Capital Gains Tax into the New Zealand taxation system.

Capital Gains Tax and the feasibility and benefits of their possible introduction is being investigated be the Tax Working Group. Previously, John Key had been hesitant to give full comment on the idea of Capital Gains Tax so as not to affect the Tax Working Groups opinions prior to the investigation.
Having started their investigation, John Key has revealed his opinions. He claimed that it would take much convincing to see him side with the introduction of the tax, and “meteoric evidence” would be required.

The Labour Party has announced that they would be willing to work with the current National party led Government to see the introduction of Capital Gains Tax. Although, a proviso was demanded to mandate that the introduced tax would be levied solely on second homes, and not the owner’s primary house.

As of the first of April, 2009, a number of changes are taking place in the New Zealand taxation system both in regards to business and personal taxation.

To the everyday individual, most noticeable amongst these will be the introduction of the Independent Earners Tax Credit, which will deliver a net $520 ($10 per week) to those earning between $24,000 and $44,000. This decrease at 13 cents per dollar above the $44,000 bracket. Also, the 33% marginal taxation bracket begins from $48,000. The above $70,000 earnings bracket tax is decreased from 39% to 38%.

Changes also come into effect for small and medium enterprises. Provisional tax estimation uplifts are now removed. The GST payment threshold is now at $2 million. GST registration is now set at $60,000. The provisional tax “use of money” threshold is $50,000 and the use of money interest rate has been reduced also.

The full list of changes and breakdown of tax brackets can be seen at the Beehive website, here.

The national-led Government is set to bring forward for discussion a new tax which will be levied on anyone coming to court and being charged with a crime. The new tax will be charged regardless of seriousness of offence, extending from murder to traffic offences.

The collected $50 is aimed at repaying victims of crimes. It will be collected alongside other court fees and is reputed to hold very little extra administrative cost with it. It is expected to garner $5 million per year.

Those opposing the tax claim that in some cases the cost of collecting the fee will surpass the final $50. Deputy Leader of the Opposition, Annette King has said that this move is a “piece of pure political theater’. She further expressed doubt as to how much of the tax victims will actually receive.

The new personal tax plan is set to come into effect on the 1st of April 2009, with changes on the same date of each of the next three subsequent years.

The first year saw will see the earnings brackets change to $0 to $14,000, $14,001 to $48,000, $48,001 to $70,000 and above $70,001. The personal tax rates will become 12.5%, 21%, 33% and 38% respectively.
On the 1st of April 2010, the brackets will become $14,000 and under, $14,001 to $50,000, $50,001 to $70,000 and $70,001 and above. The tax rates for each bracket will be 12.5%, 21%, 33% and 37%.
The 1st of April 2011 will not see a change in the income brackets but a drop will be seen in the tax rate of the $14,001 to $50,000 earners, who will now face a tax rate of 20%.

From the 1st of April 2009, a $10 tax credit will be given to individuals earning between $24,000 and $44,000, called the Individual Earners Tax Credit (IETC). Those earning above $44,0000 will still see a tax credit, but it will be lowered by thirteen cents per dollar earned above the threshold. The tax credit will rise to $15 in 2010. To be eligible for the IETC an individual must not be receiving any form of benefits from the government already other than student allowance.

Finance Minister Bill English said in a press government press release that in the short term the new tax changes will place extra money in the pockets of New Zealanders, and in the long-term will encourage individuals to invest int heir own skills to earn larger sums of money.

The new personal tax plan is set to come into effect on the 1st of April 2009, with changes on the same date of each of the next three subsequent years.

The first year saw will see the earnings brackets change to $0 to $14,000, $14,001 to $48,000, $48,001 to $70,000 and above $70,001. The personal tax rates will become 12.5%, 21%, 33% and 38% respectively.
On the 1st of April 2010, the brackets will become $14,000 and under, $14,001 to $50,000, $50,001 to $70,000 and $70,001 and above. The tax rates for each bracket will be 12.5%, 21%, 33% and 37%.
The 1st of April 2011 will not see a change in the income brackets but a drop will be seen in the tax rate of the $14,001 to $50,000 earners, who will now face a tax rate of 20%.

From the 1st of April 2009, a $10 tax credit will be given to individuals earning between $24,000 and $44,000, called the Individual Earners Tax Credit (IETC). Those earning above $44,0000 will still see a tax credit, but it will be lowered by thirteen cents per dollar earned above the threshold. The tax credit will rise to $15 in 2010. To be eligible for the IETC an individual must not be receiving any form of benefits from the government already other than student allowance.

Finance Minister Bill English said in a press government press release that in the short term the new tax changes will place extra money in the pockets of New Zealanders, and in the long-term will encourage individuals to invest int heir own skills to earn larger sums of money.

To help finance its tax cut policy, the National party planned to implement changes to Kiwisaver contribution rules. Specifically, the required contribution one would have to make would be cut from 4% to 2%, while the Government matched amount would still be capped at $20.

Amongst low income earners this led to criticism as those earning below $52,000 would not be able be eligible to receive the government’s full $1,040 contribution. Subsequently the end result for low income earners would be a much lower total savings amount in their KiwiSaver account.

Solutions to this inequality are being debated in Parliament this week. New Zealand Prime Minister John Key stated in a press conference on the 8th of December that to top up each earners government contribution to $1040 would cost roughly $700 million over the next five years. In pre-election projections, the National Party said that their tax cut policy would yield savings of $580 million, significantly lower than the cost of the scheme.

Other National proposed ways of financing these changes is to abolish the $40 annual contribution to each savers accounts made by the government, which would result in an estimated saving to the government of $30 million. The other proposed change would be to make alterations to National’s tax cut policy, in an effort to reduce its costs. These would most likely come in the form of a lowering in proposed cuts to taxes.

More detail and decision on the situation is expected to be revealed before the end of the week, on Friday the 12th of December.

To cover shortfall in the Accident Compensation Corporation (ACC) accounts, which according to the new Government are a product of the previous government’s manipulations. Finance Minister Bill English is said to have until Christmas to decide the exact nature and amount of the increase in ACC levies that would be imposed on workers.

The current problem arises from the “non-earners account” in the ACC system. This account is used to cover accident claims by students, children, beneficiaries and elderly. The nature of the non-earners account means that it is not covered by levies, as no levies can be imposed when there is no income for them to be imposed upon, and as such, taxes are used for the payment. It is claimed by the outgoing Minister for Accident Compensation Maryan Street that there was a growth in the number and nature of claims in the non-earners account, and also that she was not made aware of the growing discrepancy in the account. The source of contention comes from the fact that the 1$1 billion amount which is to be paid in through the non-earners account over the next three years was not previously disclosed, which would have been mandated by the he Fiscal Responsibility Act, passed in 1994. As this amount is not paid by levies, but by government funding, it is up to the new National Government to decide how it will be covered.

At the current moment the two main options in from of Bill English in regards to this issue are either raising ACC levies or funding the gap from government funds. Analysts say that a governmental funding would require further borrowing.

The other option is the raising of levies. An official recommendation laid forward by the Labour Department o Bill English has proposed a raise in levies to 2 cents per dollar earned next year, and rising to a level of 2.2 cents, while the current rate is 1.4 cents. Many critics are already coming forward, mostly using the fact that these raises will make a significant impact on the National tax cuts as justification.

Speaking at a Federated Farmers conference on the 18th of November, John key admitted that his National Party would be willing to consider a carbon tax in place of t Emissions Trading Scheme ( ETS). While he did not openly support the idea of a carbon tax, John key said that a committee would be set up to evaluate the benefits and drawbacks of the Emissions trading Scheme, carbon tax or a possible hybrid of the two.

No more details of a new carbon tax were given and none are expected until the review process begins. Similar no pre-standing views on the ETS were disclosed, nor an outline of a possible hybrid of the two. But it was conceded that the carbon tax can be more predictable than the ETS and in many cases significantly easier to use. John Key mentioned to press after the Federated Farmers conference that the carbon tax could be used as an interim measure before a revised ETS was implemented.

Federated Farmers spokesmen did not make any immediate comment on John Key’s thoughts. Green party leader Jeanette Fitzsimons supported the idea, but also commented on the fact that the National Party had strongly opposed the carbon tax while it was a Green part or Labour Party initiative.