It was crucial New Zealand remained competitive with Australia in tax rates as this country looked to attract both labour and capital, Deloitte associate tax director Peter Truman said yesterday.
"The Australian Government's focus is to remain internationally competitive.
Therefore, while New Zealand tax changes may allow us to make some advances, the finishing line is likely to get further away as Australia makes similar changes to enhance the competitive-ness of their tax system," he said.
Both governments were undertaking comprehensive reviews of their tax systems, looking to identify opportunities to increase economic activity by reducing some of the disincentives that tax systems produced.
Both reviews were considering lowering the higher personal income tax rates, thereby seeking to attract migrants and provide a greater incentive for people to earn higher income through allowing them to retain a higher proportion of each additional dollar earned, Mr Truman said.
Finance Minister Bill English and Australian Federal Treasurer Wayne Swan have both indicated that sweeping changes to tax systems would be included in their respective Budgets next month.
Mr Truman said both governments were focusing on the relative efficiency of collecting and administering GST.
Compared with income tax, GST had fewer arguable boundary issues and the overall compliance and administrative costs per dollar of tax revenue collected were lower.
There was a move towards increasing tax collected through GST and reducing income taxes, he said.
