Officials luke warm on tax incentives

Inland Revenue Department officials appear less than keen on tax incentives for savings, according to briefing papers presented to the incoming government.

"On the one hand, our tax impost on savings is relatively high by international standards, because of the lack of concessions," officials have advised Minister for Revenue Michael Cullen.

"On the other hand, it is the very lack of savings tax concessions that allows us to retain moderate tax rates. There is no easy way to reduce our tax on savings without a substantial increase in tax rates applying elsewhere."

In other parts of the briefing papers, officials note that there has been a general rise in sector groups demanding tax concessions for their particular area.

The demands "add to the strain on tax policy resources and could undermine the broad tax bases our tax system and moderate rates rely upon…Sector-specific concessions will increase the impediments faced by other sectors and therefore need a high level of justification."

Last parliamentary term the government allowed a tax "salary sacrifice" package for savings of those earing more than $60,000, and Cullen has indicated he is considering extending that concession for other income earners.

The Green Party has pushed particularly hard for this.

Also under consideration is aligning employer-based superannuation schemes with the tax rate of individual employees, instead of the current flat rate of 33%. Consultations have already begun on this.

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