Inland Revenue has warned the Government may have to consider cutting the company tax rate next year if Australia drops its rate.
In a briefing to Revenue Minister Todd McClay, the tax department said New Zealand’s aging population could result in pressure to raise taxes to pay for health and pensions.
But it said the Government would need to take into account developments in other countries when considering company tax, which was cut from 30 per cent to 28 per cent in 2011, undercutting Australia’s 30 per cent rate.
“Tax changes in Australia should continue to be monitored as they can have important implications for New Zealand,” Inland Revenue said. “A particular focus will be Australia’s White Paper due out at the end of 2015.
“If, for example, there were a substantial reduction in the Australian company tax rate, the question of whether New Zealand should follow suit would arise,” it said.
Many people complain about companies shifting to countries with low tax rates. There is little one can do to stop this, except to ensure our own tax rates are competitive.