Officials push for tax system revamp

Senior Government officials are pushing for radical revamp of the tax system, papers show.

Cabinet papers released under the Official Information Act do not include specific details of such changes but suggest a move from income to spending tax, Radio New Zealand reported.

That may include reduced income tax and increased GST, currently 12.5 per cent.

The papers also included a proposal for the replacement of the Research and Development tax credit.

They include a direct grant or giving small businesses vouchers to buy research.

Prime Minister John Key has repeatedly said New Zealand must create a world-class tax system to increase productivity and fight off the recession.

Earlier this month Finance Minister Bill English did not rule out radical reform of the tax system.

A tax expert group has been meeting to consider reform of the tax system and Mr English told journalists that he had an open mind.

Mr English said straight cuts to income tax were just not possible in the current economic climate, with the Government facing years of deficit and ballooning debt.

Asked if he might consider raising GST in order to cut income tax, Mr English said again he would not rule it out.

He also indicated he was more open-minded about implementing a capital gains tax.

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