National campaigned on a proposal to adjust the existing tax thresholds, but as part of coalition negotiations with ACT last year, it agreed to consider whether the “concepts” of ACT’s tax policy could be incorporated “subject to no earner being worse off than they would be under National’s plan”.
In simple terms, ACT would immediately axe the lowest tax threshold of 10.5 percent, meaning the government would collect more revenue from all income earners.
Some of that extra revenue would then be returned to low-and-middle income earners through a targeted tax credit to ensure they were not worse off.
The money left over would allow the government to reduce the higher tax rates at the top of the income scale - dropping the 33 percent rate to 30, and the 39 percent rate to 33
This is its one good point: We collect tax from travellers who, if there was no VAT, would pay zero tax while visiting NZ.
Not quite zero, if you count some airport fees etc. But otherwise yeah, it is a gap. Albeit we do end up collecting tax on that money once its counted as income for the companies or individuals providing services to those tourists.
It also gets around off-shoring profit to avoid income tax.
It’s not perfect, is regressive and, imho, is too high. But it does have SOME benefits.
If I were made dictator I would lower gst to 10%, meddle with the income tax rates (including a tax free bottom bracket and higher tax for the top brackets) and add CGT.
But that’s just me.