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Dunne signals action on Working for Families rorts

Wednesday 20th January 2010

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Revenue Minister Peter Dunne threw out a strong signal today that the government will crack down on people using trusts, companies and heavily indebted residential property investments to qualify for Working for Families tax credits.

The Tax Working Group found growing evidence of the use of all three vehicles to help taxpayers lower their taxable income in order to qualify for WfF, with the strongest evidence being a spike in the number of taxpayers declaring income close to the $60,000 threshold for WfF entitlements.

"Such abuse potentially places an unfair burden on the 60% of families who do not receive WfF tax credits," said Dunne, in a joint statement with Finance Minister following release this afternoon of the TWG's final report, which is expected to have a major influence on tax reform in this year's Budget.

Dunne also noted the TWG's comments on people using trusts and companies to avoid the top personal income tax rate of 38%.

"This is inherently unfair to the wage and salary earner who is then left to bear a disproportionate share of the personal tax burden."

English said the TWG report was one of several reviews being considered as part of Budget decision-making, and stressed that any tax reforms would have to raise as much tax as the current was raising, while meeting tests of "equity and fairness, alongside delivering benefits for households and the economy".

The group's work was praised by the Business New Zealand lobby group, which called for swift action. While it supported action to discourage investment in residential rental property, there was less enthusiasm for a land tax, said its executive director Phil O'Reilly.

“Enterprises already face a fairly stiff land tax through local body rates and this recommendation if accepted would impose a second tier of land taxation.”

NZX chief executive and TWG member Mark Weldon today questioned the fear that a land tax would depress land values, noting that local body rates had not had that impact and that other, larger forces drove land valuation.

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