10 Jul 2010

Revenue lost because of tax decision - IRD

3:48 pm on 10 July 2010

The Inland Revenue Commissioner says $1 billion a year in tax may be being lost because of the Government's failure to align tax rates.

In the May Budget, the Government set the trust and top personal tax rates at 33% but cut the company rate to 28%.

Inland Revenue Commissioner Robin Oliver is uncertain how much the move could cost, but says it could be $1 billion annually.

Papers released by Treasury show it wanted the company tax cut below the other rates while the IRD thought they should be aligned.

IRD, Treasury at loggerheads

A year ago, both Government departments believed company, personal and trust tax should be aligned.

But the papers show Treasury became convinced the company tax rate should be cut below the others.

It believed aligning the tax rates would not last, because of expected cuts to the company tax rate in Australia.

Inland Revenue held to its position because of concerns that foreigners would be the major beneficiaries of cuts to the company tax rate.