United Future leader, Hon Peter Dunne, says the Government has flunked a critical test of its commitment to cutting business red tape by failing to make changes to the Fringe Benefit Tax regime.

He says the Fringe Benefit Tax is an outmoded of mid 1980s tax policy which has long outlived its usefulness.

"FBT was introduced by the Labour Government in 1985 to deal with distortions in income packages arising out of the Muldoon Government's prolonged 1982-84 wage and price freeze."

"It was seen simply as a way of dealing with a particular problem of the time, and not as a specific revenue source."

"It was always acknowledged that FBT imposed additional compliance costs on business, and this was promoted as a reason why employers should seek to structure remuneration packages so that the FBT did not apply," he says.

Mr Dunne, a former Minister of Revenue, says the situation has changed significantly since the imposition of FBT and it was now time to abolish it altogether.

"It is has served its original purpose, and is now just an impediment to doing business."

"A signal that it is to be abolished would be a powerful indication of the Government's commitment to further tax simplification."

"However, by ruling it out with the same firmness the Prime Minister showed at Knowledge Wave Conference when she ruled business tax cuts to promote competitiveness showed that when the crunch comes, this Government's commitment to promoting a better business environment is worse than luke-warm," Mr Dunne says.

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