Tax base broadening measures in Budget 2012 will target high income New Zealanders who structure their financial affairs in ways to avoid their obligations, Finance Minister Bill English says.
Speaking to media ahead of tomorrow's Budget, English would not be drawn on what those measures might be, or how much revenue the government expected to raise with those measures. Prime Minister John Key has said there will be one new base-broadening measure in Budget 2012.
English confirmed the new measure would not be anything like a capital gains tax. The government is already tightening up on the use of trusts, and how mixed-use assets such as baches attract tax.
Meanwhile, the theme of Budget 2012 was confidence in uncertain times, English said.
“Things haven’t all gone New Zealand’s way, but the Budget shows the government’s confidence in getting its own books in order, [and] also in being able to support a growing economy that generates more jobs and better incomes," English said on Wednesday morning.
“Just because things are a bit tough hasn’t diminished our confidence, and we think that reflects the resilience of New Zealanders. They adapted pretty well to difficult times, and I think we continue to show that confidence that we are going to see results," English said.
The Budget would be a sensible one, not an austerity budget, which would show steps to stop the government’s debt rising while improving New Zealand’s longer term growth prospects.
English said he expected the credit ratings agencies to respond "pretty positively" to the Budget.
"What's important there is, we're a small, highly indebted nation, and foreign lenders are getting pretty uneasy about who they can lend money to, because they need to know they're going to get it back," he said.
"The Budget will show a credible path to surplus, and that it's achievable and under control. I think that will be pretty well received."
Base broadening
Prime Minister John Key said at the start of May that Budget 2012 would include one base broadening measure which hadn't yet been announced. He said it would come as no surprise.
The no surprises comment led PWC partner Geoff Nightingale to point to the IRD's 2012/13 tax policy work programme, which includes work on a number of small measures to tighten up holes in the tax system.
The government has already announced it is changing live-stock valuation rules, how employee benefits like carparks are taxed, and how mixed-use assets such as baches (which can be used privately and for income-earning purposes) were treated.
Revenue Minister Peter Dunne told media in Parliament on Wednesday afternoon that work was still ongoing on how employee benefits like carparks should be taxed, and would not feature in this year's Budget.
A paper from the New Zealand Transport Association ealier this year estimated there was at least NZ$675 million of annual untaxed benefits from company cars and carparks.
See Bill English talking about the changes and the Budget this morning in the video below:
(Updates with video of Key and Dunne, video of English at Budget printers Wednesday morning)
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