Tax changes boost economy, encourage prosperity

Tax changes introduced to parliament today are crucial to boosting New Zealand's economy as financial uncertainty continues worldwide, and lifting New Zealand's long term growth rates Finance Minister Bill English said today.

The Taxation (Urgent Measures and Annual Rates) Bill includes personal income tax cuts and threshold changes, a new independent earner tax credit for low and middle income earners, changes to make KiwiSaver more affordable, and the repeal of the research and development tax credit.

"In the short term tax cuts will put money in New Zealanders' pockets just when it is needed to keep the economy going," Mr English said.

"In the longer term this package will encourage people to invest in their own skills to earn more money, because they'll have to pay less of it back in tax.

"We see this move as a step towards our goal to deliver a personal tax system that rewards effort and provides better incentives to get ahead.

"People know best what to do with their own money. They can choose to spend their tax cuts, pay off the mortgage, or invest the money for the future."

An element of the Tax Bill is the repeal of the research and development tax credit from the 2009-10 income year.

"We firmly believe in the importance of research and development to keep New Zealand internationally competitive, but the tax credits aren't the most effective way to ensure that," Mr English said.

"We will work with business to better target government expenditure on innovation."

Mr English stressed that the tax package was affordable. National's tax cuts do not add to government debt.  The tax cuts are funded by the savings from changes to KiwiSaver, discontinuing the research and development tax credit, and replacing the previous government's proposed tax cuts.

The Bill is being progressed under urgency, and is expected to pass through the House tomorrow.

Information sheets on the changes to tax, KiwiSaver and the research and development tax credit are available from the Beehive website. [See attachments]