WELLINGTON, Feb 9 (Reuters) - New Zealand vowed on Tuesday to reform the tax system in 2010 to encourage more investment in production rather than housing and to look at raising valued-added tax, but it ruled out land or capital-gains taxes. Prime Minister John Key ruled out new taxes on property but said the government would close loopholes favouring investment in residential property, with any changes to be announced in the government's May 20 budget.
Financial markets showed little reaction to Key's statement, with the New Zealand dollar around 10 points higher at about $0.6842/48 after the statement.
'It looks like there'll be some tinkering around property which will impact house values, and therefore be negative for interest rates, but we can't say to what degree until we see the detail,' said Westpac senior markets strategist Imre Speizer.
Last month an official report on the tax system concluded New Zealand's tax system was unfair and in need of a major shake-up. See
'In working through reform options we are keeping the equity of tax changes squarely in mind,' Key said in a statement to the first sitting of Parliament for 2010.
He said some recommendations in the report, including a new tax on the value of a property, a comprehensive capital gains tax and other measures involving property had been discounted for reasons including complexity or inequality.
Housing has been a favourite of New Zealand retail investors, partly due to its favourable tax treatment. The sector was valued at around NZ$200 billion ($137 billion) last year, but it received net tax benefits of about NZ$150 million.
Key said the government was considering a rise in the value-added Goods and Services Tax (GST), which is currently imposed at 12.5 percent on nearly all goods and transactions.
The rate would not rise beyond 15 percent and would be accompanied by across-the-board personal tax cuts to lessen the impact on low income earners.
Key said the government would also announce plans next week to promote investment and confidence in capital markets following a report on the issue last December. See
(Reporting by Adrian Bathgate; Editing by Mark Bendeich)
($1=1.460 New Zealand Dollar)
((adrian.bathgate@reuters.com; +64-4-4714233; Reuters Messaging: adrian.bathgate.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/KEY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Financial markets showed little reaction to Key's statement, with the New Zealand dollar around 10 points higher at about $0.6842/48 after the statement.
'It looks like there'll be some tinkering around property which will impact house values, and therefore be negative for interest rates, but we can't say to what degree until we see the detail,' said Westpac senior markets strategist Imre Speizer.
Last month an official report on the tax system concluded New Zealand's tax system was unfair and in need of a major shake-up. See
'In working through reform options we are keeping the equity of tax changes squarely in mind,' Key said in a statement to the first sitting of Parliament for 2010.
He said some recommendations in the report, including a new tax on the value of a property, a comprehensive capital gains tax and other measures involving property had been discounted for reasons including complexity or inequality.
Housing has been a favourite of New Zealand retail investors, partly due to its favourable tax treatment. The sector was valued at around NZ$200 billion ($137 billion) last year, but it received net tax benefits of about NZ$150 million.
Key said the government was considering a rise in the value-added Goods and Services Tax (GST), which is currently imposed at 12.5 percent on nearly all goods and transactions.
The rate would not rise beyond 15 percent and would be accompanied by across-the-board personal tax cuts to lessen the impact on low income earners.
Key said the government would also announce plans next week to promote investment and confidence in capital markets following a report on the issue last December. See
(Reporting by Adrian Bathgate; Editing by Mark Bendeich)
($1=1.460 New Zealand Dollar)
((adrian.bathgate@reuters.com; +64-4-4714233; Reuters Messaging: adrian.bathgate.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/KEY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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