KEY POINTS:
An international report on the New Zealand economy has called for a major overhaul of the taxation system, including cutting income tax but raising GST.
The Government quickly dismissed the OECD proposals, saying they read like a "National Party manifesto".
The report, released publicly this morning, said New Zealand's economy faced an uncertain future, with low household savings and strong inflationary pressure.
It said living standards were lagging behind other developed countries and an improved tax scheme was needed, to guard against an increasingly mobile workforce and international flow of money.
Options included lowering the top tax rates and increasing GST to compensate.
The report, the latest of an annual survey of the NZ economy by the OECD, also said instituting a capital gains tax would reduce the country's reliance on property as a savings vehicle.
But acting Finance Minister Trevor Mallard today said the report read at times like a "National Party manifesto" and the Government would not be implementing the suggested tax changes.
He said the Government's tax revenue was far from insecure, with large surpluses over recent years.
The report also suggests raising the age of eligibility for universal superannuation and reducing its value in real terms over time.
But Mr Mallard said that also would not be happening.
"They've raised a number of things which are just not acceptable," he said on Radio New Zealand.
He said the Government had already moved to address projected future superannuation problems, caused by a bulge in the ageing population, by setting up the Government Superannuation Fund.
The upcoming Kiwisaver scheme -- due to start in July -- would also boost the country's savings levels, he said.
Mr Mallard said the poor workforce productivity levels identified in the report were largely due to New Zealand's low unemployment rate, which had brought large numbers of unskilled workers into the system.
National Party spokesman Bill English told Radio New Zealand raising GST and instituting a capital gains tax were not on the party's agenda.
However he said the Government needed to do more to boost productivity growth which was only about half the level it was at 10 years ago.
The Government also needed to control its "spending surge" in areas like health and its Working for Families package.
Key quotes
- New Zealand living standards "have remained some 16 per cent below the OECD median for some years".
- "Faster productivity growth is one important element in generating higher incomes and will become increasingly important."
"Creating a more favourable environment for savings and investment will also require a well-designed tax system consistent with the objective of raising living standards."
- NZPA, NZHERALD STAFF
