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First $10,000 Should Be Tax Free

Fuseworks Media
Fuseworks Media

Personal income of up to $10,000 should be tax free to offset the impact of a rise in GST on lower income families, said Michael Barnett, chief executive of the Auckland Chamber of Commerce.

An increase in GST is preferable to the imposition of a land tax, which he described as "a tax on the wealthy".

"People with wealth have chosen to invest in land and there is no defensible reason why these individuals should be penalised for exercising personal choice," Mr Barnett said.

He applauded the thrust of the Tax Working Group report, which recommends the company, trust and top personal tax rates be aligned at 30%. Barnett said he recognises that the Government needs a broad-based but fair mechanism to claw back much of the tax revenue it will forego by alignment.

The best and fairest means of achieving this aim was a rise in GST, he said.

"This will have a disproportionately bigger impact on low-income families, who will need to be compensated," he said. "This could be achieved by making the first $5000-to-$10,000 of personal income tax free."

Tax rate alignment was an important goal, which would remove many of the distortions in investment and consumption that the present progressive tax system encourages, he said.

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