COVID-19: National proposes two-year tax cuts for workers and small businesses

National is proposing two-year tax cuts for all workers and small businesses struggling after Auckland's months-long lockdown. 

In its new economic plan, National proposes a temporary 17.5 percent tax rate for small businesses down from 28 percent, for companies with fewer than 19 employees and a maximum taxable income of $70,000, for the next two years. 

For a business earning at the top of that income threshold, it would result in a total tax saving of $14,700 over two years, according to the plan. The policy is expected to cost $750 million to $800 million a year.

National would also increase the upper threshold for paying the 10.5 percent income tax rate from $14,000 to $17,000 for the next two years, providing a tax cut for every worker across New Zealand. 

The income tax change would amount to about $4 a week. It's expected to cost $560 million a year, so about $1.2 billion over two years.

The way income tax currently works is, every dollar you earn up to $14,000 is taxed at 10.5 percent and every dollar between $14,000 and $48,000 is taxed at 17.5 percent. 

The next bracket is $48,000 to $70,000 taxed at 30 percent, while every dollar above $70,000 is taxed at 33 percent, and remaining income over $180,000 is taxed at 39 percent. 

"Businesses don't want pity and they don't want handouts. They just want a fair go," says National leader Judith Collins. 

"They want to be trusted to get on with the job of creating value, serving their customers, and employing others."

National also proposed tax cuts in the lead-up to the election in 2020, but Finance Minister Grant Robertson discovered a $4 billion gap in the calculations. 

National leader Judith Collins speaking in Wellington.
National leader Judith Collins speaking in Wellington. Photo credit: Newshub

It comes as National calls on the Government to commit to reopening the economy once 85 to 90 percent of the eligible population is vaccinated. According to health data, 66.6 percent are currently fully vaccinated. 

National released its opening up plan last month, which included a promise to stop using lockdowns when 70-75 percent of the eligible population is vaccinated. 

Once we reached the milestone of 85 to 90 percent of the eligible population, a 'traffic light' system would begin to operate for travel under National, similar to the UK. It would help to reduce the huge demand on managed isolation and quarantine (MIQ). 

The Government will unveil its revamped alert level system on Friday. 

National is also proposing:

  • $50 million insurance scheme for major events
  • $100 'Dine and discover' vouchers for fully vaccinated adults aged 18+
  • Introduce rental support for businesses
  • Reduce the revenue loss criteria to qualify for the wage subsidy from 40 percent to 30 percent once a business has been receiving it for eight weeks
  • Increase wage subsidy payments from $600 to $800 per full-time employee and from $359 to $480 per part-time employee once a business has been receiving it for eight weeks