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The sounds of silence on tax rates

9 February 2010

MEDIA RELEASE

Statement made by Paul Dunne, Senior tax Partner, KPMG

The silence by the Prime Minister today on tax rates requires reading between the lines to see where the Government is heading. From his statements, the Government has accepted the TWG's integrity and coherence concerns. This indicates the most likely policy is to align tax rates across entities and types of income.

The lack of an explicit announcement on company tax rates indicates that our Government is keeping its powder dry while its works through the ramifications of this and keeps an eye on the Australian Government's decisions in relation to its own tax system review.

The Government has been clear in its ambitions to remain competitive with Australia so we would expect the corporate tax rate to move in line with what is announced there.

Which country will move rates first remains to be seen.

What will be of more immediate interest to business is the expected increase in GST which will affect some businesses more than others.

Corporate businesses may also be affected by the possible treatment of depreciation on property. However a drop in corporate tax rates could offset any changes to depreciation. The important factor will be in businesses working out what level of corporate tax rate cut would be required to offset any changes in treatment to depreciation if changes to depreciation are implemented.

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

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