No word on company tax, say accountants

KPMG chief executive Jan Dawson. Photo / Martin Sykes.

The Government is looking at tax reforms as a broad package, rather than choosing the highest revenue generating options, says a senior KPMG executive.

Jan Dawson, chief executive of KPMG, said the Tax Working Group's recommendations had generated much 'interest, concern and speculation'.

"We welcome the clarity provided by John Key in his opening speech today on the Governments approach to tax reforms," said Dawson.

But while she said the Government's broad approach was positive, questions still remained over other aspects of tax reform.

"Notably, no comment was made about corporate tax rates," she said.

Senior tax partner at KPMG, Paul Dunne, said the silence by the Prime Minister on tax rates required "reading between the lines to see where the Government is heading".

"The lack of explicit announcement on company tax rates indicates that our Government is keeping its powder dry while it works through the ramifications of this and keeps an eye on the Australian Government's decisions in relation to its own tax system review," he said.

Dunne said he expected New Zealand's corporate tax rate to move in line with what was announced in Australia.

Corporate businesses could also be affected by the scrapping of depreciation write offs on commercial property, he said.

"However, a drop in corporate tax rates could offset any changes to depreciation. The important factor will be businesses working out what level of corporate tax rate cut would be required to offset any changes in treatment to depreciation if changes to depreciation are implemented," he said.

Another KPMG senior tax partner, John Cantin, said all businesses would be impacted by an increase in GST, though tourism and financial institutions would be affected more than others.

"Financial institutions cannot recover full GST so that a GST increase will either increase their costs or reduce returns to savers," he said.

"This means the Government does need to properly model the effects of a GST rise on the incentive to save to make sure the effects it intends are realised."

He said if New Zealand raised its GST rate further, the tourism sector would find it hard to compete with Australia's relatively low GST rate of 10 per cent.