Key components of the proposed legislation were a change to the residential withholding tax rates for interest, while the Government's failure to alter the resident withholding tax rate on dividends imposed more compliance on companies because of a change to what imputation credits could be attached to dividend payments, he told the Otago Daily Times.
Revenue Minister Peter Dunne introduced the Taxation (Consequential Rate Alignment and Remedial Matters) Bill to Parliament on Tuesday.
Mr Dunne said the Bill also had a good deal of catch-up legislation in it that would make downstream changes to tax law that followed on from earlier tax changes.
When it is enacted, the changes will apply from April 1 next year.
Mr Truman said many individuals would be paying 21% rather than 19.5% tax on investment income from April 1, which would affect those people with taxable income between $14,000 and $48,000.
The matter arose because before the October 1, 2008 tax rate changes, the lowest marginal tax rate of 19.5% applied on income up to $38,000.
Now, there was a 12.5% rate up to $14,000 and a 21% rate between $14,000 and $48,000.
If individuals who at present used the 19.5% residential withholding tax rate did not confirm they were eligible for the new 21% rate before March 31, 2011, the financial institution they dealt with was required to increase the deduction rate to 38%.
"Therefore, we have the Government increasing its tax take from those who are not motivated or organised enough to advise financial institutions of their correct tax rate."
In his experience, many New Zealanders did not get around to notifying their financial institutions of their correct tax rate, he said.
Often, they had ticked the box claiming eligibility for the 19.5% rate and left it at that.
To get the money back, they would have to file an annual income tax return, something many taxpayers did not do any more.
"Many individuals will now be paying more tax on their investment income."
One of the other catches in the proposed legislation was the failure to alter the resident withholding tax rate on dividends which placed an administrative burden on companies, Mr Truman said.
From April 1, next year, the maximum level of imputation credits that could be attached to dividends would be 30%.
But the residential withholding tax rate for dividends paid by all companies remained at a flat rate of 33%.
That applied regardless of the marginal tax rate the shareholder was on.
That meant that individual shareholders earning less than $48,000 were overtaxed.
To correct the situation, they again needed to file a tax return.
Companies would be required to deduct a 3% tax on fully-imputed dividends paid.
