1. A TAX SYSTEM FOR NEW ZEALAND'S FUTURE 1 December 2009 Afternoon Session 2 Scenarios Geof Nightingale, Partner, PricewaterhouseCoopers New Zealand

3. Principles of an effective tax system Coherence Fiscal revenue Compliance & admin Fiscal integrity Efficiency & growth Equity

4. Scenarios modelled: Scenario Fiscal Cost ($m) Equity measures EMTRs Gini coeff. 80/20 ratio % with rise % with <10% fall % with >10% fall Status quo 0 0.34 2.84 - - - 1A – align at 30% 1,610 0.34 2.87 - 26% - 1B – align at 30% GST increase to 15% (with compensation) 1,410 0.34 2.83 <1% 99% - 1C – align at 30% semi-universalisation of WfF ($2000 p.a. per child) 2,250 0.35 2.89 - 24% 4%

5. Scenarios modelled: Scenario Fiscal Cost ($m) Equity measures EMTRs Gini coeff. 80/20 ratio % with rise % with <10% fall % with >10% fall Status quo 0 0.34 2.84 - - - 2A – align at 27% 3,090 0.35 2.89 - 15% 11% 2B – align at 27% GST increase to 15% (with compensation) 2,890 0.34 2.85 <1% 89% 11% 3A – align at 25% 4,060 0.35 2.91 - 15% 11% 3B – align at 25% GST increase to 15% (with compensation) 3,860 0.35 2.87 <1% 89% 11%

6. Scenarios modelled: Scenario Fiscal Cost ($m) Equity measures EMTRs Gini coeff. 80/20 ratio % with rise % with <10% fall % with >10% fall Status quo 0 0.34 2.84 - - - 4 – top personal and trust rates at 30% company rate to 25% 2,340 0.34 2.87 - 26% - 5 - top personal and trust rates to 30% company rate to 20%, remove imputation 3,210 0.34 2.87 - 26% -

9. Status Quo TAX RATES

10. Status Quo – av. tax rate

12. Status Quo – EMTR’s

13. Status Quo – distrib. of households

14. ‘ Property’ excludes owner-occupied housing ‘ Other’ includes other categories that would be liable to CGT Status Quo – asset holdings

17. 2B: Disposal Income Change *Total income and disposable incomes exclude WFF tax credits and capital income not currently taxed

18. 2B: Equality measures Change from status quo shown in parentheses; n/c = no change Numbers may not add due to rounding errors

19. 2B: EMTR impact

20. 2B: Capital Gains Tax +$3,880m Capital taxation excludes owner-occupied housing Assumes 4.2% nominal gain on property, 2.6% on financial assets and 5.4% on net business assets Revenue figures are for steady state after full implementation

21. 2B: RFRM on rental property +$700m Immediate impacts on households:

22. 2B: Land tax 0.5% +$2,130m

23. Scenario 2B – impact? Fiscal revenue Compliance & admin Fiscal integrity Efficiency & growth Equity Coherence Excluding Base Broadening

26. 5: Disposable income change Total income excludes WfF tax credits and capital income not currently taxed, disposable income excludes untaxed capital income

27. 5: Equality measures Change from status quo shown in parentheses; n/c = no change Numbers may not add due to rounding errors

28. 5: EMTR impact

30. Scenario 5 – impact? Fiscal Compliance & admin Fiscal integrity Efficiency & growth Equity Coherence revenue Befor Base Broadening