Income tax cuts ahead

Thursday June 11, 2015 Written by Release/CS Published in Economy

Income tax for low income earners is to be cut – but the reductions will not apply until next year and the year after.

 

From January 1, 2016 the first income tax bracket will fall from 18.5 per cent down to 17.5 per cent, and from January 1, 2017, down to 17 per cent.

The Government was committed to reducing the burden of tax on low income earners, Brown said.

“We have done a significant amount of work on shifting the burden of taxation of low income earners. A young couple with children who may be earning $25,000 a year each or $50,000 combined will by January 1, 2017, have had their combined annual income tax reduced from $7,500 to $4,760 a year.

Every week that household will get an extra $91.”

Brown said that for the first time, some tax expenditures were being costed.

“A tax expenditure is essentially the cost in lost revenue of providing an exemption to a tax or levy. For example there are no levies on fuel consumed in the outer islands, except on Aitutaki where the rate is 15 cents per litre on petrol and 5 cents per litre on diesel. That compares to the rate for Rarotonga of 28 cents per litre on petrol and 22 cents per litre on diesel.”

The Government had also provided concessions to Cook Islanders returning home, he said.

“All levies are waived for returning Cook Islanders who have been away for more than three years and are returning to live in the Cook Islands for the next two years. This concession is estimated to have cost $450,000 in revenue during 2014/15.”

Deductions to charitable organisations were also anticipated to come at a cost to revenue of $250,000 in 2014/15, Brown said. 

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