Business groups want flatter taxes

A group of business organisations have banded together to lobby for a flatter tax structure to come out of the Government's proposed tax review.

The Government plans to release its Business Tax Review proposals for consultations by the middle of the year.

But the Business Roundtable, New Zealand Chamber of Commerce and Federated Farmers have decided to table their preferences early.

The group today sent the Government a copy of their proposed tax package, which would more closely align company and personal tax rates.

The proposals would see the company tax rate fall from 33 per cent to 30 per cent in the 2007/2008 tax year, and to 25 per cent by the 2009/2010 tax year.

The top personal tax rate would fall from 39 per cent, to 35 per cent then 28 per cent, while the middle personal tax rate would fall from 33 per cent, to 30 per cent, then 28 per cent.

The ballpark cost of the proposal would be $4.4 billion a year, or 2.7 per cent of gross domestic product, when fully implemented. The group proposed funding it by lowering government spending, lowering the operating surplus and taking on higher debt, and allocating from provisions already made in the 2006 budget policy statement.

Chamber of Commerce chief executive Charles Finny said the review needed to incorporate personal taxes as well as company taxes.

"Around 40 per cent of New Zealand businesses are unincorporated -- for example as sole traders or partnerships -- and would not benefit directly from reductions in company tax," he said.

Business Roundtable's executive director Roger Kerr said the group's suggestions were in line with advice the Government received from the McLeod Tax Review in 2001, which also favoured a lower, flatter tax structure with alignment of taxes.

Finance Minister Michael Cullen said last month the scope of the promised review, which was part of post-election support deals with United Future and New Zealand First, was still being considered.

But he said it would not be a matter of just "tinkering with the tax rules".

"We envisage some very bold measures emerging."

Potential changes were aimed at giving better incentives for businesses to improve productivity and improving New Zealand's competitiveness with Australia.

- NZPA