Prime Minister John Key has promised to cut all personal income tax rates, not just the top rates, as part of the reform of the tax system.
Mr Key says the Government is considering raising the tax on goods and services to 15% to help pay for those tax cuts.
In his statement to Parliament on Tuesday, Mr Key did not spell out the details of proposed tax changes, but he says the package could be worth $3 billion to $4 billion in tax cuts.
As well as raising the rate of GST, property will also be taxed more heavily, although Mr Key ruled out the more significant taxes on property proposed by the tax working group.
Mr Key acknowledges not everyone will support the changes and concedes his popularity may take a knock.
Mr Key briefed National Party MPs and provided opposition MPs with details of his speech shortly beforehand. He says the Government has been working for about four months on the reforms.
The Government's tax working group has recommended that personal tax rates be cut across the board.
The head of the group, Bob Buckle, says part of the unfairness of the current tax system is that there are so many opportunities to avoid the top personal tax rate that it is not very effective.
Professor Buckle says the main message in the report is that the reliance of New Zealand on taxes that do not encourage growth.
He says any rise of GST would be a one-off jump in price levels and beneficiary and superannuitant payments would have to be adjusted to reflect them.
Labour, Greens to oppose GST rise
The Labour and the Green parties say they will oppose any increase in GST.
Labour leader Phil Goff says there is no way an increase in GST would be fair to all New Zealanders, and the only winners would be those on high incomes.
Mr Goff says Mr Key's statement lacks substance and still leaves New Zealanders in the dark about potential tax changes - though a land tax and a capital gains tax have both been ruled out.
Mr Goff says it will be cold comfort to many New Zealanders if benefits, superannuation and Working for Families payments go up to compensate for a GST rise.
The Green Party says raising GST would hurt low and middle-income earners.
Co-leader Russel Norman says there was no hint of an increase in GST in National's manifesto before the 2008 election.
Dr Norman also expressed alarm at National's intention to open up more Crown land to mining, saying it would be an assault on New Zealand's clean-green image.
He told Parliament National was willing to sacrifice New Zealand's conservation land for economic gain.
The Maori Party says it will leave no stone unturned to ensure Maori families are not worse off under the tax changes.
In her speech to Parliament, co-leader Tariana Turia made no specific response to the proposed tax changes, but touched on the effect they might have on Maori families.
Honour pledge, says Age Concern
A group representing the elderly has called on Mr Key to keep his promise that superannuitants will be fully compensated for any GST rise.
Anne Martin, chief executive of Age Concern, says GST falls hardest on people who spend most or all of their money on essentials - as was the case with many elderly on fixed incomes.
Ms Martin says the Government must increase superannuation benefits immediately if there is a rise in GST.
She says older people are already having trouble affording electricity, food and rates, all items that would be hit by any increase.