Retirement tax warning by MP

Press, 6 September 1989, Page 8

Retirement tax warning by MP

By

PATTRICK SMELLIE

in Wellington

The rate of the new retirement income tax could be 10 per cent or higher by the year 2040, the Opposition spokeswoman on finance, Miss Ruth Richardson, said yesterday. She was commenting on Treasury estimates of the rate for the new guaranteed retirement income tax. The rate of the tax will be calculated for each year’s Budget. Budget night tables showed only estimates as far as 2020, the point after which the elderly population was expected to start rising rapidly, Miss Richardson said. The tax will initially be set at a rate of 7.5 per cent. Miss Richardson requested through the finance and expenditure select committee that estimates of the tax level be given up to 2050-51. These showed the GRI tax peaking at 9.1 per

cent through the first eight years of the 20405, compared with 7 per cent of 7.5 per cent levels estimated from next year until 2020. The Treasury’s calculations were conservative, Miss Richardson said. Her own advice was that the rate could go as high as 10 per cent. The Minister of Social Welfare, Dr Cullen, has suggested it could reach 11 per cent. The estimates show the rate fluctuating around 7.5 per cent until 2030, when it would rise to 8 per cent, and then to 9 per cent in 2039-40. It would begin to tail off from 9.1 per cent to 9 per cent in 2048-49. The Treasury said the estimates were subject to a high degree of uncertainty, and became less certain the further into the future the forecast went. “The forecasts must therefore be interpreted cautiously.”