At his first press conference for 2010 John Key summarized the Government’s goals for the new year, and said that “Shoring up the tax base and ultimately lowering personal tax rates are important”. Though he provide no further details, John Key said that further explanations on the Government’s economic position will be provided on February 9th, at the opening of Parliament.

Ultimately, no further decision on personal taxation can be expected before discussion on the findings of the Tax Working Group, a government sponsored collective charged with investigating the country’s taxation future. According to the Prime Minister, the group’s final report can be expected within weeks. He went on to say that it was obvious from preliminary releases that the Tax Working Group had identified numerous shortcomings within New Zealand’s taxation landscape, and would address them in its final report.

John Key also said that he would remain “vigilant” on the issue of corporate income tax. Continuing to explain New Zealand’s fiscal situation, the Prime Minister said “…it is my expectation that the major theme for 2010, for the Government, will be improving New Zealand’s economic growth. The Government remains very committed to strengthening our economy and lifting wages, we will also remain very focused on ensuring that we deliver value for money from the state sector.”

Photo by kelvinhu

On the 12^th of September at a Labour Party conference in Rotorua, Phill Goff, Labour Party leader vowed that if Labour were to be re-elected there would be no rise in personal taxation, GST or introduction of Capital Gains tax.

The concession on the capital gains tax remains that it applies exclusively to first homes and not investment and rental properties. It was also emphasized that any possible tax cuts will be prioritized and aimed towards low-income families. He described the party’s future focus as catering to average New Zealand households.

Further, Phil Goff made statements regarding a reform in the perception of the economy. He is encouraged by New Zealand’s recovery and that of its trading partners, like China. The relatively low level of governmental borrowing warrants some level of optimism for the future. He made reference to previous Labour party leadership and decisions, and apologized to the New Zealand public for mistakes made.

In an interview with Newstalk ZB, New Zealand Prime Minister John Key stated that the idea o cancelling the upcoming promised tax cuts would certainly not be an idea that he would support, although the option of delaying the cuts would be acceptable to him.

It seems from John Key’s comments that much effort was expanded in either keeping the level of funding for entitlements equal or even raised. Combined with the rising budget deficits, lowering trade surpluses and the seeming preferences of New Zealand of not accepting tax cuts if they come at the cost of raised government borrowing, the room to maneuver for tax cuts seems diminishing. Subsequently it seems that the possibility of delayed tax cuts is looking to be more of a reality.

As the Government is facing an ever growing disparity between December predicted Treasury surpluses and the grim reality of the actual situation, New Zealand Prime Minister John Key has begun signalling that planned future income-tax cuts might not go ahead. While this is pending on future tax income and government budgets, if the decreasing tax income and growing debt are any indicator, the scrapping seems more than likely.

According to a survey released by the New Zealand Business Council for Sustainable Development, New Zealanders are not too phased by this. While it seems that the majority of New Zealanders support future cuts, they thoroughly do not do so if it would require further borrowing by the Government. Similarly there seems to be a large consensus that previous cuts should not have gone ahead if they required increased Government borrowing.

The full survey details can be seen at the New Zealand Business Council for Sustainable Development website, here.