Call for business tax rate cuts from next year

Media statement Thursday, October 11th, 2006

Call for business tax rate cuts from next year

The $11.5 billion surplus announced today is no measure of how well Government is handling the economy unless a sound strategy is in place to re-invest it for the longer term benefit of all New Zealanders, the Employers & Manufacturers Association says.

"An equitable way for some of the surplus to be re-invested would be to cut the business tax rate earlier than previously planned," said EMA's chief executive Alasdair Thompson.

"If the business tax rate is significantly lower than personal tax rates, the strong incentive will be for businesses to re-invest, not pass extra dividends through to their stakeholders which would incur higher personal tax payments.

"Cuts to business tax rates would greatly boost productivity growth by accelerating skills training and as businesses invested more in new plant and equipment.

"We urge the Government to start cutting business rates from April next year.

"New Zealanders want personal tax cuts too, but there is a reasonable concern that they would be inflationary.

"However, if personal tax cuts were brought in at the same time as KiwiSaver was launched, in July 2007, the inflationary impacts would be minimized as funds were channeled from tax cuts into savings, which is in line with Government's intentions."

ENDS

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