KEY POINTS:
Q. As trusts are used to avoid tax, why did you not lift trust tax rates from 33c to 39c?
M. Hunter, Ellerslie
A. Our first priority has been the business tax review and the need to ensure the tax system helps drive greater productivity and competitiveness. Any measures to maintain the tax base and the integrity of the tax system will be considered for next year's Budget.
Q. More people are being bumped up into the highest tax bracket of 39 per cent. Isn't it about time that $60,000 benchmark was bumped up too?
K. Wong, Wellington
A. More people are paying the higher tax rate thanks to strong economic growth over the past seven years. Our personal tax-rate structure will be reviewed in the context of next year's Budget.
This Government has provided considerable tax relief for those who need it most through the Working for Families policy.
Q. Employers will soon have to pay employees an extra week's holiday, or 2 per cent of their salary. Then they will have to contribute to the KiwiSaver scheme. Where is the relief for employers and companies?
B. Stark, Auckland
A. The holiday changes bring New Zealand in line with many developed countries. Australians have enjoyed four weeks' leave for more than 30 years. Budget 2007 provides significant help for businesses through the lower company tax rate (the same as Australia) and help for research and development. KiwiSaver will also help build a stronger economy by increasing the pool of domestic savings, allowing New Zealand businesses greater access to capital to drive expansion. Greater savings will take pressure off inflation and the dollar over time. The tax credit limits overall cost to employers to about 1 per cent of the national wage bill.
Q. What can be done to address the fundamental problem of our low wage and low profit (particularly for small businesses) economy?
L. Callagh, Whangarei
A. Wage growth has been strong in recent years. The latest Quarterly Employment Survey shows average hourly earnings growing by 4.6 per cent in the year to March. Company tax returns show profits grew at an average of 20 per cent a year between 2003 and 2005 - up from around 5 per cent a year in the 90s. Raising productivity, though, is the key to sustaining higher wages and profits. We need to be smarter at what we do and what we produce. We need more skilled workers to do that. That's why this Government has invested heavily in expanding skills training through the industry training programme and Modern Apprenticeships.
Q. When will working parents get tax relief for childcare fees?
S. Hunter, Auckland
A. The Government does provide targeted assistance to families. Examples include the working for families tax credits, the childcare subsidy and the out-of-school care subsidy.
Q. When will the Government wake up to the "non-NZ citizen" demand for our land where they are not subject to a capital gains tax? Our exchange rate will not ease back to a more realistic level until our interest rates reduce and the demand from world money market/hedge dealers investing/speculating in our high interest rates diminishes.
Derek Cossey, Financial Consultant-Mortgage/Insurance Broker House of Mortgages
A. A capital gains tax in Australia did not stop the housing market there booming. Finding other ways to help the Reserve Bank better do its job is now the subject of a select committee inquiry.
NEXT WEEK: 'Water warrior' Penny Bright, from the Water Pressure Group
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