Budget 2010 unveiled

Worth $15 billion over four years, the tax package is a key part of the government's wider strategy to raise the rate and quality of economic growth by rewarding savings and discouraging consumption spending, consistent with widespread changes in personal behaviour caused by the global credit crunch.

The top personal tax rate will drop from 38 percent to 33 percent from 1 October, the same date as the GST rate will rise to 15 percent, while English stole a march on Australia by announcing a cut in the company tax rate from 30 percent to 28 percent from 1 April next year, four years earlier than across the Tasman.

However, property investors have been hammered, losing the ability to claim depreciation costs against their rental income, and to use investment losses to exploit the Working for Families tax rebate system intended to assist low and middle income households.

Fears proved unfounded that ring-fencing of property investment losses would be attempted.

Foreign companies will also be paying around $200 million more a year through changes to 'thin capitalisation' rules that will reduce the tax deductibility of interest payments from 75 percent to 60 percent of the value of local assets.

Other major announcements include changes to simplify the way taxpayers use loss-acquiring qualifying companies to assess their personal tax liability and new funding for the Inland Revenue Department to chase tax avoidance and evasion, to produce around $200 million additional revenue annually.

Much of that increase will come from targeting what Revenue Minister Peter Dunne called ‘property speculators’ and the so-called ‘black’ economy, where hidden activities are not taxed.

"This package is timely," said English. “It's pushing in the direction people are already going. That's why it's a once in a generation opportunity to change the direction of this economy.”

As one of the few developed world economies where tax cuts are even possible, the Budget also allowed New Zealand to steal a march on the rest of the developed world.

“This shows to internal and external investment in that we are open for business and ready to go, and compared to everyone else, we're in great shape.”