Finance Minister Nicola Willis promised tax cuts in May's budget, but has yet to provide details on how this will be achieved.
National had been campaigning for proposals to adjust the existing tax base, but as part of coalition negotiations with Act last year, it announced that Act's tax policy would be “provided that earners are no longer disadvantaged”. They agreed to consider whether it is possible to incorporate the concept. It will be under the national plan. ”
In a sit-down interview with RNZ, Mr Seymour said a key concept in his party's plan is a flatter tax system, meaning that some standards are completely removed and targeted support is given to lower income groups through tax credits. He said that.
“If we implement the Act concept, we can make everyone's lives better in the short term,” Seymour said. “In the long run, society as a whole will be better off because we will have a more unified society.”
Treasury officials have been tasked with studying the proposed law and will report back before the budget is drawn up, he said.
“If these concepts can be shown to work and deliver better policy, we hope that our coalition partners will seriously consider implementing them.
“On the other hand…if you have difficulty stacking up on the math, be prepared to propose ideas that are sometimes rejected.
“If you've never had an idea rejected, you're probably not ambitious enough.”
law tax concept
The law promoted flattening the current five-tier tax system to three levels by 2026/27.
Simply put, the law would immediately eliminate the 10.5 percent minimum tax rate, meaning the government would collect more revenue from all earners.
Some of that additional revenue would be returned to low- and moderate-income people through targeted tax credits, ensuring that their lives don't deteriorate.
The remaining funds will allow the government to reduce the top tax rate for income brackets, reducing the 33% tax rate to 30% and the 39% tax rate to 33%.
“Suddenly we're closer to a world where everyone pays the same tax rate,” Seymour said. “It's a world that's a little bit more fair. We're all in the same boat and we're all in this together.”
Mr Seymour told RNZ that lower tax rates and a simplified tax system would reduce incentives for people to try accounting tricks and encourage a culture of success and achievement.
“People look at current rates and think: Should I take out an additional contract, save and invest, take part in a promotion or do some additional study?”
“When people see that they're going to lose 39 cents for every extra dollar, there's always someone who says it's not worth it.”
“There are so many options.”
The KMT's election tax policy proposed simple adjustments to income brackets, alongside extending existing tax credits and new child care benefits.
Under National's proposal, the tax rate would remain the same, but the threshold at which the tax rate would be applied would increase.
In late December, Willis told parliament the government was still providing “detailed design and implementation advice” on the final form of the tax relief package.
Mr Willis said: “We're having detailed discussions. We're taking a lot of advice. There are a lot of options.”
“In principle, our view is that New Zealanders should be able to keep more of their own money wherever possible.”
Mr. Willis did not elaborate on what elements of the Act's income tax policy were being considered, but he ruled out reducing the top tax rate of 39%.
During parliamentary question period, Labor's Grant Robertson asked: “Does the concept of Act's income tax policy as a pathway to tax cuts include a reduction in the top tax rate of 39%?”
Willis simply answered, “No.”
“That's not the worst idea in the world.”
Tax consultant Terry Boucher told RNZ there was merit in the Act's idea of a simpler, flatter tax system alongside credits, similar to New Zealand's tax system from 1989 to 2008.
He pointed out that Labor's tax task force supported tax credits over threshold changes as a way to provide support to low-income households.
“It's not the worst idea in the world, but at the end of the day, the devil is in the details,” Boucher said.
”[Are the tax credits] Will it be available to everyone? Or do you intend to exclude groups such as beneficiaries? What will happen to pensioners? That's the whole point, really. How inclusive will it be?
“If it's completely inclusive across the board and everyone can understand it, then it's certainly worth considering as an alternative.”
But Mr Boucher said neither National nor Act adequately addressed the issue of “fiscal drag” where inflation pushed people into higher tax rates over time.
“You can talk about these tax credits. Conceptually, I see where you're going and I think they're a good idea, but you have to address the issue of inflation.
“If you don't do that, you're going to have the same problem again in two or three years.”
Under the previous leadership of Simon Bridges, National proposed automatically indexing income tax brackets to inflation to end 'bracket creep', but the policy was later replaced by a one-off threshold adjustment. Abandoned in favor.
The coalition agreement between National and Act makes clear there is “no ongoing commitment” to changes to income tax beyond those announced this year.
But a separate agreement between National and New Zealand First commits to assessing the impact of inflation on average tax rates by 2026.
Mr Boucher said that ultimately most New Zealanders were likely to care about how tax relief was delivered, whether it was under the National or Act model, as long as they were entitled to it. said it was low.
