With the countries recent focus on the tax system and possible reforms, John Key initiated his speech by disclosing the Government’s plans for the taxation landscape. He indicated that investigations are currently being held around the feasibility of implementing a raised Goods and Service Tax (GST) rate of up to 15 percent, from the current 12.5 percent. It was revealed that there could be a lowering at all levels of personal tax rates, with particular emphasis on top-earners. The Tax Working Group recommended risk-free return rate method for property investment, land taxes, and capital gains tax have all been rejected by the Government. There is a possibility that Working for Families and superannuation will see a rise in payments, pending decision on the GST rate. The complete tax package, which John Key described as significant, will be detailed in May, alongside the national budget announcement.

Within his speech, John Key revealed the Government’s revised view on education, promising a ‘shake up” for the tertiary system, and a shift in emphasis in secondary schools towards trade and practical skills. He also promised to increase support for early-childhood education. Changes to resource laws were announced that will see mining on conservation land, with funds from mining licenses funneled back into conservation care. Higher degrees of training and regulation were also promised for Sickness and Domestic Purposes Beneficiaries.

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The Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill was first introduced to parliament in March, 2008. It was intended to be a far reaching Bill, encompassing and amending many areas.

Peter Dunne, Revenue Minister, stated in regards to the bill “The reforms are aimed variously at reducing tax costs for businesses, bringing tax law up to date with today’s commercial environment, protecting our revenue base, ensuring the law works as effectively as possible, or supporting a culture of charitable giving in New Zealand.”

Changes include amendments that ensure that insurance providers are taxed on profits in comparable ways to other businesses. Kiwisaver laws have also been altered to allow $15,000 to be paid from a person’s account in the event of their death. Volunteer and community groups will be subject to new tax treatments, aimed at easing their daily business requirements. Charitable donations will also come into new systems of law, with employees of scheme enrolled employers receiving tax benefits from their donations on pay day.

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.

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.

If the proposed recognition were to be adapted, investors and shareholders will be able to choose in which country they pay the tax on their dividends.

The issue of double taxation on dividends has been raised for many years, and if the proposed regulation were to be approved it would help the processes of further integration of the New Zealand and Australian economies