Business tax review a big win for United Future, says Dunne

United Future leader Peter Dunne is claiming a sizeable portion of the credit for the Government's business tax review, which is at an "advanced" stage.

Mr Dunne yesterday said that the review, which could have flow-on effects for personal tax rates, was a big win for United Future because Labour hadn't committed to such a move ahead of the last election.

The review arose as part of the confidence and supply agreements Labour made with United Future and New Zealand First after the election in order to win government.

Mr Dunne, as Revenue Minister, is leading the review with Finance Minister Michael Cullen and said the pair's working relationship was good and "close". The stage of internal debate is over and numbers are being "crunched" to find out what options are viable.

It is likely that a tax discussion document which will be released in mid-July and offer a range of options for changes to the business regime.

Speculation has mounted since last week's Budget that there could also be changes to personal tax rates as a consequence of the business tax review.

The talk has been fuelled by Dr Cullen, who has hinted a number of times that there may be flow-on effects for personal income tax.

Yesterday Mr Dunne shared that view, saying that it is difficult to look at business tax in isolation. "One of the issues we have got to have a look at is the relationship between personal and company tax rates," he said.

"We don't want to be in a position where what [looks] like a good idea over here creates avoidance opportunities over there."

He refused to be drawn on further detail, but said it didn't necessarily follow that rates needed to be the same.

One of the stated aims of the review is to make New Zealand's business tax regime more competitive with Australia's. In New Zealand the corporate tax rate is 33c, compared with Australia's 30c.

Mr Dunne appeared to suggest that becoming more competitive with Australia would not be achieved by just cutting the headline rate.

It was important to consider that a move like that could be "gazumped" quickly by Australia if it suddenly cut its own business tax rate to undercut New Zealand again, he said.