Crown Revenue
The Government supports a broad-base, low-rate tax system that minimises economic distortions, rewards effort, has low compliance and administrative costs, and minimises opportunities for tax avoidance and evasion.
A comprehensive review of New Zealand's tax system was undertaken in 2009 by the Tax Working Group. As a result of this review, major tax reforms were announced in Budget 2010. These reforms were broadly fiscally neutral and involved, amongst other things:
- reducing all personal tax rates, including a new lower top tax rate of 33 per cent, and reducing the company tax rate to 28 per cent
- increasing goods and services tax (GST) to 15 per cent, to encourage savings rather than consumption
- tightening up the tax treatment of investment property, and
- bringing in stricter tax rules for foreign multinationals to reduce their ability to minimise tax payments in New Zealand.
The Government considered, and rejected, other potential tax changes such as a land tax and a capital gains tax. The Government is comfortable with the broad structure of the tax system and has no plans for further major reforms in the near term.
In the wider system of Crown revenue, the Government is now satisfied there is scope for significant and sustainable reductions in ACC levies.
The Government has therefore made an allowance for levy reductions of around $300 million in 2014/15. Final figures will be determined after ACC consults on levies later this year.
ACC's improved performance, and an on-going review of its funding policy, mean the Government has also allowed for a levy reduction of around $1 billion in 2015/16.
When combined with the $630 million reduction in levies in 2012/13, these proposed changes would amount to around 40 per cent lower ACC levy rates for households and businesses, with the impact varying over the different accounts.[3]
Notes
- [3]The fiscal impact of reducing levies will be higher than the actual reduction to levy payers. This is because the consequential impacts on investment revenue and insurance expenses also need to be accounted for. The impact on the operating balance before gains and losses is expected to be approximately $400 million in 2014/15, $1.5 billion in 2015/16 and $1.1 billion in 2016/17. These impacts are built into the Budget forecasts.
