Bill aligns various tax rates with changes

The Government intends to introduce legislation to align some tax rates with changes to personal income tax.

Revenue Minister Peter Dunne said a bill, to be introduced this month and passed by the end of the year, would align resident withholding tax (RWT) rates on interest and portfolio investment entities (PIE) tax rates with recent changes to personal income tax rates and the 30 per cent company tax rate. Changes would be effective from April 1 next year.

Resident withholding tax on interest is based on the marginal tax rate of the recipient of the interest income. The idea is the tax is paid at a rate that is close to the recipient's tax rate.

New resident withholding tax rates would be 12.5 per cent, 21 per cent, 33 per cent and 38 per cent, depending upon the personal tax rates of individual recipients, Dunne said. The default rate for people who did not specify their tax rate would rise from 19.5 per cent to 38 per cent.

There would be a new 30 per cent RWT rate on interest for companies that invest in financial institutions. It would be optional for the first year. Tax rates on portfolio investment entities would range from 12.5 per cent to 30 per cent for income over $70,000.

Dunne said the "catch-up" legislation was needed because it could not be enacted at the same time as personal tax cuts for the reason that banks and other financial institutions needed to be consulted.

- NZPA