Business Tax Review - timid proposals

Media release

25 July 2006

Business Tax Review - timid proposals

The discussion document Business Tax Review proposes fairly timid moves towards improved business taxation, says Business NZ.

Chief Executive Phil O’Reilly welcomed the fact that the Review has picked up on Business NZ’s recommendation to move to a 30% corporate tax rate as a first step.

“But this should be a first step only. Business would like to see evidence of the Government looking beyond simple parity with Australia, to a situation where New Zealand’s rate is well below Australia’s, so New Zealand companies can compete more effectively. The Review lacks a strategy for further reductions, within a dynamic framework. What if Australia now drops its business tax rate below 30%? They could potentially do this even before these proposals are implemented.

“The Review appears to be looking at lower business tax as a cost, not a benefit. This is a fallacy. The evidence shows that lower business tax stimulates business growth, bringing a higher tax revenues as well as increased economic growth.

“It’s pleasing that payroll tax is now off the agenda, but most business will be concerned at the thinking in the Review on targeted tax credits. A targeted tax approach is picking winners by another name, with the potential to harm the robust, broad-based system we currently have. In the long run, this kind of proposed targeted regime could bring a lot of complexity for not a lot of benefit.

“Most New Zealand businesses are small and unincorporated - so the business tax level doesn’t relate to them at all. This Review therefore fails to address the over-taxation of thousands of small businesses that pay tax at the top personal rate of 39%. Reducing the business rate to 30% will not help their situation - a more integrated solution - of both business and personal taxes - is required.

“Business NZ will make submissions on this Review with the interests of all businesses in mind.”

ENDS

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