John Key.
Prime Minister John Key says any increase to GST would
have to be compensated for, including by immediate increases to
pensions, benefits and Working for Families payments.
A GST rise to at least 15% was among the recommendations of
the Government's Tax Working Group, which looked at ways to
reform the tax system.
Mr Key said no decisions had yet been made on the
recommendations.
The proposal to raise GST to allow lower business and
personal tax rates has caused concern it would leave families
on low incomes struggling to buy basic goods.
Mr Key said if any changes had implications for lower income
earners, they would have to be compensated.
"Obviously for pensioners, you would have to have an
immediate increase in the pension; for those on Working for
Families or benefits, there would have to be an immediate
increase."
The Tax Working Group had estimated that the costs of
compensating those on low incomes would mean increased
revenue of just $200 million from a GST rise to 15%.
However, the Government had to look at wider considerations.
"There's no way we can allow those that are least well off to
be put into a worse position. We are not looking to make
money on changes we might make, but we are looking to make
sure we have a better and fairer system."
Yesterday, Maori Party co-leader Pita Sharples said he was
interested in a tax on financial transactions rather than an
increase to GST a call also made by Progressive leader Jim
Anderton.
Mr Anderton said imposing a small tax for every transaction
was a fairer way to broaden the tax base and lower income tax
without boosting GST.
Dr Sharples said any changes to income tax should be at the
lower level for those earning less than $25,000 rather than
the top rate.
However, Mr Key said lowering the top tax rate to 33c so it
aligned with the trust rate would help stop people
"sheltering" their income in trusts to try to avoid higher
personal taxes.
"If you are a higher income earner, rightfully you should pay
your share.
"One way to make sure people do that is to make sure the tax
rates reflect what people think is fair."
Mr Key has also indicated some changes are likely for
investment property owners, although he has ruled out a
capital gains tax.
He said there were some issues the Government needed to
consider before deciding on a land tax.
"Whether we would go to a land tax I wouldn't jump to that
conclusion."
However, there was clearly a "hole" in the system if there
was $220 billion invested in rental properties but the Crown
was losing money.
"That hole probably needs to be plugged," he said.
Nobody should draw conclusions about what the Government
would do and any decisions were not likely until the Budget.
Federated Farmers has objected strongly to the idea of a land
tax and Dr Sharples said on Wednesday while he was generally
supportive of taxing wealth and assets, he was concerned
about such a tax on Maori lands, especially the large
non-commercial holdings held under Treaty settlements.
- Claire Trevett of The NZ Herald
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