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KPMG welcomes clarity and package approach to NZ tax system but questions remain

9 February 2010

Media Release

Statement made by Jan Dawson, Chief Executive, KPMG

We welcome the clarity provided by John Key in his opening speech today on the Government's approach to New Zealand Tax reforms.

The Tax Working Group generated much interest, concern and speculation and the Prime Minister has taken the opportunity to rule out some things and introduce a direction that will incorporate a broad range of measures. This signal of the direction of reform is welcomed.

The temptation would have been to cherry pick revenue generating tax options. The Prime Minister's statement makes it clear that the Government is looking at the reforms as a broad package. This is the right way to go about tax reform to ensure a fair and coherent tax regime.

While welcome clarity has been provided around some aspects of the tax system including the ruling out of land tax, no capital gains tax and no RFRM, questions still remain on other aspects of tax reform.

Notably, no comment was made about corporate tax rates, the amount of GST increase and its impacts on various sectors or details around tax treatment of property investments. These areas will need clarifying.

The ruling out of land tax and RFRM is a triumph of pragmatism over theory. Although economists like property taxes for their efficiency, the real world impacts of these two measures make them difficult to implement in a politically sustainable way.

One thing is certain, the 2010 Budget is shaping up to be a major milestone in the New Zealand tax system.

KPMG believes it is important that any package of reforms is sustainable politically and economically as New Zealand would not benefit from being lurched one way then another if Government changes tack.

For more information, or for an interview, please contact Sneha Paul on 021 243 8997

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