Wednesday 23rd March 2011 1 Comment
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The second round of Budget 2010 tax changes will help make business more competitive and further rebalance the economy towards savings and exports, Finance minister Bill English and Revenue Minister Peter Dunne say.
"Cutting the company tax rate will make New Zealand more competitive and increase incentives for businesses to reinvest earnings back into jobs and growth," English says.
"A number of property and other tax changes will encourage sound investment decisions, make the tax system fairer and ensure the overall tax package is broadly fiscally neutral."
The changes, set to take effect of April 1, or for the 2011/2012 income year, include a cut in the company tax rate from 30% to 28%, a cut in the tax rate faced by unit trusts, life insurance policyholders and some other savings vehicles from 30% to 28% and ending landlords' and businesses' ability to claim depreciation on buildings with an estimated useful life of 50 years or more.
Other changes include the abolishing of loss attributing qualifying companies (LAQCs) and changes to the thin capitalisation tax rules to limit the scope for foreign multinationals to reduce their New Zealand tax liability.
Lowering the company tax rate will cost about $1.1 billion over four years, while changes to some savings vehicle tax rates will cost $170 million.
Dunne said the changes make the tax system fairer by ensuring the treatment of property is consistent with other forms of investment.
"Ending depreciation tax breaks on buildings made sense. On average, New Zealand buildings actually increase, rather than decrease, in value over time. Changes to the LAQC rules and the introduction of the new-look through company tax rules will reduce the opportunities for tax structuring," he said.
"Closing loopholes that allow families to structure their income through the use of trusts or to use investment losses to increase their eligibility for Working for families payments will also make the tax system fairer."
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