Taxing matters

We're not economists, accountants or tas experts, but our first impressions of the Tax Working Group's recommendations to the Government are favourable. Insomniacs or those of the afrementioned groups can access the full report here.

It remains to be seen how many of the TWG's recommendations will be adopted by John Key and Bill English, but observers are suggesting that the government is listening intently. Let's hope that there are some significant policy announcements in the Budget.

The move to increase GST makes sense. GST is the fairest of all our taxes, in that everyone is taxed at the same rate on whatever they spend. Those who have more disposable income are taxed as that income is disbursed; those who spend less pay less. And it's hardly surprising that we wholeheartedly support the recommendations for both personal and business tax rates to be cut.

Bernard Hickey has written an excellent piece for the Herald; here's his conclusion:

John Key cannot brush this report aside in the same way as the 2025 Taskforce report was flicked away for being too radical and doctrinaire. The Tax Working Group report is a sober and careful collection of proposals that have the majority backing of technocrats, business leaders and economists. It is essentially apolitical, which makes it impossible to ignore in an MMP environment.

Let's see what John Key and Bill English do now. If they ignore it, they are essentially saying they are not reformers and will not listen to the best advice in the country. The May 2010 budget could be very significant indeed.

It's hard to disagree with that conclusion. John Key, Bill English and co have taken fourteen months to consider the future direction of the New Zealand economy. The time for thinking is over; it's now time for the Government to take decisive action.