New Zealand

Details

  • Service: Tax
  • Type: Business and industry issue
  • Date: 17/07/2011

Tax

Our tax advisory team has the skills and commitment to help you to be competitive and compliant in all areas of business tax.

Taxmail - Labour’s tax policy for the 2011 general election 

Issue 1, July 2011

 

There are strong tax policy arguments in favour of a comprehensive CGT as part of New Zealand’s “broad base low (tax) rate” approach. However, there will inevitably be political and practical compromises which could dilute the ultimate effectiveness of a CGT.

The Labour party yesterday released its key tax policies, to be contested at this year’s general election (available at www.labour.org.nz).

 

  • A capital gains tax (“CGT”), for implementation by 2013.
  • Ring fencing of investment property losses and clamping down on avoidance.
  • A new marginal rate of 39% on incomes above $150,000.
  • A tax-free threshold of $5,000.
  • A 12.5% tax credit for Research & Development (“R&D”) expenditure.
  • Removing GST on fresh fruit and vegetables.

 

The attached taxmail provides some initial views on these proposals.

 

The key change is a reasonably broad based realised CGT, excluding the family home. There are strong tax policy arguments in favour of a comprehensive CGT as part of New Zealand’s “broad base low (tax) rate” approach.

 

However, there will inevitably be political and practical compromises which could dilute the ultimate effectiveness of a CGT.

 

The other proposals are a mixed bag, in our view. Re-introduction of the 39% rate accompanied by a $5,000 tax-free threshold will reduce the effectiveness and increase the costs of the tax system, and removing GST on fresh fruit and vegetables, while well-intentioned, will add complexity to an internationally well-regarded GST system.

 

We do, however, believe there is room for an R&D tax credit regime in New Zealand, if the objective is to grow New Zealand’s innovative businesses.

 

If you have any questions on the above, please speak to your usual KPMG advisor or contact:

 

Paul Dunne
Partner - Tax
KPMG
Phone: +64 9 367 5991
pfdunne@kpmg.co.nz

 

John Cantin
Partner - Tax
KPMG
Phone: +64 4 816 4518
jfcantin@kpmg.co.nz

Taxmail - Comment on topical tax issues from KPMG NZ Tax. 

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