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Top tax rate cut essential to halting brain drain: Key

Monday 17th May 2010

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Cuts to the top rate of personal income tax will be part of a deliberate effort to encourage high-earning, skilled New Zealanders to stay in the country, Prime Minister John Key said today ahead of Thursday's Budget.

Challenged in his weekly post-Cabinet press conference on the fairness of cutting top personal tax rates, Key said New Zealand could not ignore that it had lost more of its skilled people offshore than any other country in the Organisation for Economic Cooperation and Development - a proxy for the developed world. 

Those people included doctors, scientists, engineers, and entrepreneurs, as well as lawyers, accountants, and other skilled professionals. 

"We need those people in our economy," said Key. "Part of what you are going to see on Thursday is a deliberate attempt to get people to say here and contribute to the economy."

To suggestions that a rise in the rate of GST from 12.5% to 15% would hit low income people hardest, Key said high income people spent more than those on low income and would therefore pay more of any extra GST. 

Speculation is rife on exactly what tax cuts will be announced, although cuts at all current levels are expected, with the largest cut likely to be from 38% to 33% or lower for the top personal tax rate, to end the capacity for tax avoidance using lower-taxed entities such as companies and trusts to avoid the current top rate. 

Key said there would be Budget package announcements relating to KiwiRail tomorrow.

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