New Zealand could see significant economic benefits if the government opted to cut personal income taxes.
On March 20th the Treasury of New Zealand released the report of the Taxation of Savings and Investment Review, which investigated the potential repercussions of various changes to the tax system, finding that New Zealand would benefit the most from reductions to the rate of personal income taxes.
The conclusions in the report were based on whether changes to the tax system would increase the overall levels of savings and investment in New Zealand, and whether the change would reduce macroeconomic vulnerabilities of New Zealand or boost overall economic efficiency in the country.
The Review suggested that deceases to personal income taxes would provide the most benefits to New Zealand as it would have the greatest positive impact on encouraging New Zealanders to save or invest their money.
Further, drops in the rate of personal income taxes would also increase the labor supply in the country.
The Treasury indicated that decreases to the rate of corporate income taxes could also have a net positive effect on the New Zealand economy, but noted that a significant portion of the benefits from the tax cut might actually be shifted to foreign investors, thereby reducing the difference between boosted economy activity and the arising tax losses.
Another option which was considered was instating a dual income tax system, but this idea was deemed to be implemented on the current systems of the Inland Revenue Department.
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