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The broad-base low-rate approach to taxation has other benets such as administrative simplicity, and reduced opportunity for tax avoidance and arbitrage. The shift to the broad-base low-rate approach can be seen in the removal of exemptions and lowering of rates in the personal income tax base in the late 1980s; and in the introduction of a low rate and comprehensive GST together with the removal of specialised and high-rate sales taxes.6 From a costof-tax perspective, New Zealands broad-based GST, which has very few exemptions and a relatively low rate, is highly efcient. International studies have concluded that increasing rates of GST or property taxes are likely to be more efcient than increasing company tax rates or personal taxes.7 But in New Zealand, there is an additional reason that increasing GST is likely to have lower economic costs than a rise in income tax. This is because of our relatively broad and efcient GST base.
There are areas in which New Zealands tax base is not as broad as in other countries. An example is the absence of a comprehensive capital gains tax (CGT) across all types of income. This means that New Zealand has a lower tax on capital gains, including gains on property, than most other OECD countries. By not comprehensively taxing capital gains, New Zealand is unusual amongst OECD countries.8 One of the questions the TWG has addressed is whether or not the absence of a comprehensive CGT is a disadvantage. The Group also examined whether or not other forms of base
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