Key pushes NZ-Oz tax gap

New tax rates in Australia will mean that the average after-tax income in that country is higher than the average pre-tax income in New Zealand, National claimed yesterday.

In a renewed attack on the Government's tax policy, National's finance spokesman John Key released figures to highlight the growing income gap between New Zealand and Australia.

Mr Key said that when new, lower tax rates come into effect in Australia in a few days, the average after-tax income of Australian workers - the equivalent of $44,700 in New Zealand dollars - will be higher than the pre-tax income of the average New Zealand worker at $42,600.

The gap between the average after-tax income of workers in both countries will also widen to 37 per cent from 33 per cent, Mr Key said.

National's latest move to highlight the income gap with Australia is further evidence that the tax cut arguments that arose during the last election will not go away.

Finance Minister Michael Cullen yesterday batted off Mr Key's latest attacks in Parliament by noting that Australian workers face additional levies that don't apply here.

He also said that it would not be possible to reduce tax rates to the point where the after-tax income gap between the two countries closes.

"It's around growth that the gap will be closed over the long-term, but even on the most optimistic forecast that would take quite a long time," Dr Cullen said.

After Dr Cullen delivered his Budget in May, revenue forecasts from Inland Revenue indicated there may be room for some kind of personal tax changes.