Budget 2011 won't deal with "complex" Savings Working Group tax ideas, such as indexation for inflation, English says

Budget 2011 won't deal with "complex" Savings Working Group tax ideas, such as indexation for inflation, English says

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.

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Cheer up, Ivan! I got an email from my dear old Dad in the UK this morning. He was moaning about getting just 0.5% on his money in the bank. But he'd got it from the sale of his house 3 years back, and he reckons his old house ( Southampton) would probably fetch 30% less, today! Good time, yet to come to New Zealand.....

Why am I not surprised....you see if the govt introduced said inflation tax adjustment on interest earned ...it would negate the ongoing programme to debase the currency and rob savers to bailout the gambling banks.

It was an idea that was destined for the rubbish bin on day one.

I agree 100% with you Wolly. The food chain starts and ends with the Banks and God help it if you threaten them in any way. Key has many friends in high banking places! Cheers.

OK, so we have:

  • Your investments still being eroded by inflation with no relief from Govt
  • KiwiSaver being debased by a thousand cuts
  • Property still with its taxation rorts largely intact

..... so just how is this "step change" of National's going to occur?

Cheers to all

And they are wondering why people are moving their money back in to property, especially in Auckland.

Exactly so what have they changed? - nothing.

Our debt problems will just get worse, and the country economically weaker all the time.

Why not simply adopt the Individual Savings Account (ISA) regime from the UK?  Everyone can invest circa £10k into an ISA each year and the returns on that investment are tax free.