The business sector is urging the Government to cut the company tax rate after Finance Minister Bill English indicated it was under consideration.The Tax Working Group recommended aligning the top personal, trust and company rates and National wanted to s
The business sector is urging the Government to cut the company tax rate after Finance Minister Bill English indicated it was under consideration.
The Tax Working Group recommended aligning the top personal, trust and company rates and National wanted to set them all at 30 percent, but Mr English said yesterday the need to match any company tax rate cut in Australia meant this might not be possible.
The top personal rate is 38 percent, the trust rate is 33 percent and the company rate is 30 percent.
He told a business audience in Auckland a key issue was working out whether the company rate should drop below 30 percent.
"We're still considering this issue, mindful that our company tax rate needs to be competitive internationally," he said.
Business NZ chief executive Phil O'Reilly said aligning the three top rates was a worthwhile goal but it had to be balanced against the company tax situation.
"The crucial point is that New Zealand's company tax rate needs to be lower than the company rate in other countries," he said.
"If it is higher than company rates overseas it reduces the competitiveness of New Zealand companies.
"It also acts as a disincentive for overseas investment into New Zealand businesses."
Employers and Manufacturers Association chief executive Alasdair Thompson said the company rate needed to be brought down to make New Zealand internationally competitive, and it would be ideal if the other two rates could come down to the same level.
"But the Government's deficit will make dropping the top personal and trust rates that low very difficult to achieve," he said.
"It is reassuring to hear the finance minister acknowledge that the New Zealand company tax rate has to be competitive internationally, and especially so with Australia."
Mr English's comments were taken as a clear indication that the top personal rate will come down to 33 percent in the May 20 budget.
"Our early advice is that aligning the trust and top personal tax rates is the most important issue, because they are both final taxes," he said.
"By contrast, the company tax is an interim payment until a taxpayer's own personal tax rate applies."
Mr English said company tax rates were falling around the world, and at 30 percent New Zealand's rate was "on the high side".
It was important that New Zealand's company rate did not move too far out of line with Australia.
"Currently they are both at 30 percent, but Australia is reviewing its own tax system and may consider dropping its company rate," he said.
"We will watch events across the Tasman with a great deal of interest."
