WELLINGTON -(Dow Jones)- New Zealand Prime Minister John Key said Tuesday that his government is focused on tax reform to boost economic growth but ruled out several recommendations made by a Tax Working Group although a higher Goods and Services Tax and reductions in top personal tax rates are being considered.

"We have a tax system that taxes labor and investment income at relatively high rates, taxes consumption at a relatively low rate and generally gives money back to people when they invest in residential property," the prime minister said in prepared text of a statement to parliament outlining the government's plan for the current year.

He said the government is still looking at possible reductions to the top personal tax rate and "carefully considering" a modest increase in the rate of the Goods and Services Tax to no more than 15%. The GST is currently 12.5%.

However, he said the government is "acutely aware" of the impact any increase in the GST will have on lower income families.

"Therefore, if an increase were to occur it would have to be accompanied by across-the-board reductions in personal taxes, as well as upfront increases in benefits," he said.

Key said "tinkering" in recent years has made the tax system more complicated and "created a raft of different ways for people to minimize their tax payments."

The prime minister said while the government agrees with the Tax Working Group that New Zealand relies heavily on the taxes most harmful to growth it has ruled out some of the options proposed by the group.

In January the independent tax working group said New Zealand needs to overhaul its tax system to make it fairer and more effective as well as improve the country's economic performance. The government is currently reviewing those recommendations.

Key said the government will not be developing any proposal for a land tax, a comprehensive capital gains tax or a risk-free return method for taxing residential investment properties.

Key said a land tax could create cash flow problems for many landowners as would the proposed risk-free return method. "A property owner could have a very sizable tax bill each year under an RFRM, but little or no ability to pay it except by putting up rents."

While the prime minister recognized a capital gains tax would extend the tax net he said it would make the tax system more complex to administer and comply with.

"These new taxes are therefore off the table," he said.

Key said, however, there would be changes to the way property is taxed and any changes will be announced in the budget, which will be presented May 20.

The prime minister said the government would remain closely focused on trade and would continue working toward a free-trade agreement with the U.S. through the Trans-Pacific Partnership.

He also said his government will continue to "push hard" for progress on a Single Economic Market with Australia.

"The Single Economic Market is about aligning the regulatory environment in New Zealand and Australia, so that a New Zealand company can do business in Palmerston, Northern Territory as easily as it can in Palmerston North."

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