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Institute Welcomes Tax Report Recommendations

MEDIA RELEASE : Wednesday 24 October 2001

INSTITUTE WELCOMES TAX REPORT RECOMMENDATIONS

The Institute of Chartered Accountants has welcomed the Tax Review 2001 Committee's confirmation of many of the recommendations of its interim report.

"The Institute is pleased to see the recommendation that the top personal tax rate should be reduced to match the company rate, with less
progressivity but more targeted assistance at lower income levels", Chris Abbiss, Chair of the Institute's National Tax Committee, said today.

"We support the suggestion of a seven year 'holiday' on foreign source income of new migrants, and also a $1 million cap on personal tax charge - NZ would be better off getting $1 million from a person who would otherwise pay more tax, but to Australia.

"We also agree that the corporate tax rate should be kept close to (and in our view no more than) that of competing jurisdictions, such as Australia's 30%. We do, however, have some reservations about the competitive implications of granting a much lower corporate tax rate to non-resident owned companies.

"We are pleased to see the strong rejection of new taxes, such as taxes on capital gains, wealth, estates and various financial transactions. As noted in the Report, such taxes are not superior substitutes for GST or income taxes, and do not meet the objectives claimed by supporters. Additional problems with taxes on financial transactions include harmful transitional and cascading effects."

Mr Abbiss said the Institute was disappointed that the Review Committee had not made a firm recommendation to defer, until repatriation, NZ tax on active offshore earnings, as this was now the international standard.

"The Institute was disappointed and concerned that when the original report was first released some aspects of the tax debate were stifled because of excessive focus on the housing tax issue. That outcry has been heard by the Review Committee, which explicitly has not recommended that the government take the proposal further at this point.

"We sincerely hope that the release of this report will now be followed by open debate."

..... ends

Contacts:

Chris Abbiss Chair, National Tax Committee Institute of Chartered Accountants of New Zealand Tel: 021 630 528

Jeff Owens Tax Director Institute of Chartered Accountants of New Zealand Tel: (04) 474-7860 Tel: 025 818 635

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