By Alex Tarrant
Thursday's budget will not deal with "complex" ideas raised by the Savings Working Group such as indexation of the tax system for inflation, as it has not had the time this year to look at making any significant moves in that area, Finance Minister Bill English says.
One of the Savings Working Group's recommendations earlier this year was for government to index interest earned on bank deposits for inflation to make real returns higher and create an incentive for investors to save through deposits rather than through other vehicles like property.
English said New Zealand's tax settings had improved with the changes made to the tax mix last year, which was a significant long-term shift - "greater consumption taxes, and lower taxes on income and interest and investment".
"The Savings Working Group was encouraging us to look at capital taxation. Because we’ve made quite a lot of the easier changes up to now, the remaining changes that could be made are fairly complex, and we haven’t been able, in the time this year particularly with the earthquake, to be able to make any significant moves there," English said.
"But look, I don’t think there’s any magic formula out ahead of us. It’s easy to portray a tax break or a grant or incentive as somehow increasing savings, but if you’re just taking out of one pocket and putting it in the other, it doesn’t achieve that. What does achieve more savings is the attitude shift [toward savings] we’re seeing going on in New Zealand and we’re pretty positive about it,” he said.
“We won’t be dealing with some of the complex issues that the Savings Group raised around, for instance, indexation of the system.”
Asked then whether there would be something smaller in the Budget than the indexation idea, English replied: "I wouldn’t want to speculate on that, you’ll just have to wait until Thursday.
"I’d have to say this is one of the more predictable budgets that this government has delivered," English said.