Budget 2012: 'No growth behind tax agenda'

This year's Budget is surprisingly reliant on squeezing more tax from an economy that may not grow as fast as the Treasury forecasts it will, say accounting firms PricewaterhouseCoopers and Ernst & Young.

"Budget 2012 is premised on New Zealanders stumping up with a lot more tax without any clear growth agenda," said Jo Doolan, a senior partner at E&Y.

Doolan has been a leading critic of Inland Revenue's aggressive interpretation of existing tax law, which has redefined tax avoidance.

PwC's New Zealand chairman, John Shewan, said his firm was "surprised at the 29 per cent increase in tax and GST forecast over the next four years".

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"It's [very] dependent on growth projections averaging 3 per cent in this period."

Doolan said the message for high-income earners was that the Government would target them for tax avoidance and tax them harder than was B the case now.

People earning over $70,000 a year were already paying 51 per cent of all the income tax, and this was now forecast to rise to 54 per cent in the year ahead.

"We are so over excuses of the global financial crisis, the Canterbury earthquakes, ongoing financial insecurity," she said. "These are realities we live with.

"The burning question is what sort of growth platform the Government is creating beyond a hope-and-see strategy."

But both said the Budget's moves against tax loopholes were less significant than expected, Doolan noting the IRD's IT couldn't cope with major tax system changes in the foreseeable future.

"This isn't necessarily good news. It may mean the IRD will continue its heavy-handed app-roach of using anti-avoidance rules to override any ... use of existing tax legislation."