Hon Dr Michael Cullen
Minister of Finance
Hon Peter Dunne
Minister of Revenue

8 November 2006 Media Statement

Business Tax Review – issues papers released

Finance Minister Michael Cullen and Revenue Minister Peter Dunne have today released three issues papers dealing with the tax credit options of the Business Tax Review.

"We are pleased with the feedback we have received since the Business Tax Review was released in July," said the Ministers. "The review identified a number of options – lower company tax rate, tax credits and compliance measures.

"We are now trying to determine what combination of options has the best chance of boosting New Zealand’s productivity and competitiveness, particularly in relation to Australia.

"However, before we make decisions on the optimum mix, we need to be confident that whatever options we choose, they can be readily implemented.

"This requires a detailed examination of the design issues – essentially, how the different tax changes would work in practice – so we can make decisions on the most effective package.

"As the review has noted, tax credits may play a role in fostering greater innovation, investment and improved productivity. But their effectiveness depends on how accurately we can define relevant activities and how efficiently they can be administered.

"The three issues papers, which have been prepared by officials, deal with R&D, export market development and skills training. They look at design details of how the tax credits might work, should the government proceed with them.

"We are hopeful that feedback on these technical issues will guide our decision
on whether to include them in the final package that we unveil next year.

”Interested parties have until 1 December to make submissions.

"While the timeframe is tight, we need to move with some speed to ensure any business tax changes can be in place by 1 April 2008 as planned," the Ministers said.

The papers are available at: http://www.taxpolicy.ird.govt.nz./

ENDS

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