Positioning NZ's tax system for challenges ahead

Positioning NZ's tax system for challenges ahead

Jan Dawson, CEO KPMG comments along with a range of KPMG tax, infrastructure and advisory experts prior to Thursday's Budget announcement. For more: http://www.kpmg.co.nz/pages/104000.html

Focus on growth, jobs and productivity with a surgical approach to cost controls, Jan Dawson, CEO KPMG

Positioning NZ's tax system for challenges ahead, Paul Dune and John Cantin, Tax Partners KPMG

Don't let our infrastructure languish on "to do lists", Troy Newton, Financial Advisory Partner KPMG

Creating value for money in the public sector, Troy Newton, Financial Advisory Partner KPMG

Increase funding and reduce compliance for SMEs, Angela Abernathy, Partner in Charge, Business Advisory, KPMG

Jan Dawson, CEO KPMG says:
"Clearly there needs to be a close watch on costs and spending, and debt needs to be aggressively managed, but the government needs to be surgical about its approach. This is not time for a slash and burn exercise where budgets are arbitrarily decimated across the board, a sentiment echoed by the New Zealand Institute.
"We believe the Government should be asking some important questions as it evaluates options for Government spending.
Will it enhance New Zealand's growth prospects?
Will it retain jobs or result in more jobs?
Will it improve productivity?

"A focus around growth, jobs and productivity, will in our view inspire confidence in what is a very gloomy marketplace right now.
"This includes importantly the serious consideration of partnering with the private sector to provide funding for many infrastructural needs. KPMG has seen many examples of the successful implementation of this in other countries - for example the UK has seen increased academic performance and decreased absenteeism from secondary schools that have adopted the Private Finance Initiative (PFI).

"Our clients continue to tell us and we see the corrosive accumulative impact of compliance obligations borne by small and medium sized businesses, so any concessions in this area would be welcomed across the board.
"What we are seeking is an innovative approach to solutions for funding, if tax revenue is low then there is a clear need to look at other options in order to address the jobs, growth and productivity challenge."

Positioning NZ's tax system for challenges ahead

Paul Dunne and John Cantin, KPMG Tax Partners say:
"As a medium-term aspiration, the tax system should remove disincentives for New Zealanders to invest in and participate in the economy:
Alignment of the company, trust and top marginal tax rates, over time, and a flatter personal tax structure (when fiscal conditions permit) would significantly improve the efficiency and equity of the tax system - this medium to long-term strategy for the structure of the income tax system is important as other tax policies will need to be compatible with this overall vision.
Personal and company tax cuts, even in the medium to long term, may need to be accompanied by tax base broadening or further reductions on the expenditure side, to be affordable - this debate needs to be objective and identify what is in New Zealand's national interest.

"Don't fix what isn't broken". Commentators have advocated changes to the GST regime, such as removing GST on certain items (such as food and fuel). While based on good intentions, such proposals run the risk of complicating what is arguably New Zealand's best example of a low-rate broad based tax system. The reduction in revenue from exempting certain items from GST would also need to be made up elsewhere or by raising the GST rate generally.
Tax simplification needs to be meaningful - as a first step there needs to be acknowledgement that significant tax compliance cost reduction will only come at the cost of Government revenues. Again, these trade-offs need to be more explicit so as to determine the best "bang for buck" and whether Government or taxpayers are best placed to spend it."

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