Media release

19 May 2005

Budget – a great lost opportunity

Today’s Budget has provided some useful benefits for business, but no major shift to improve the competitiveness of NZ enterprise, says Business NZ Chief Executive Phil O’Reilly.

“The opportunity existed to provide a fundamental shift in the policy environment to put NZ businesses on a better footing compared with other nations – unfortunately, that opportunity has been lost,” Mr O’Reilly said

“Changes to the depreciation regime will be helpful, mostly to enterprises with large capital expenditures like export manufacturers, and the simplification of FBT and alignment of GST and provisional tax are also welcome – the Finance Minister has listened to our concerns and acted appropriately.

“But the claim that businesses will benefit from $1.4 billion worth of tax relief rather overstates the net benefit to business. Nearly half of that amount is a one-off, so the ongoing business benefit is more like $700 million a year, most of it in the depreciation area.

“The depreciation moves will benefit some businesses more than others. Those with less frequent or smaller depreciation events won’t gain much benefit – but they’ll still be hit with the carbon tax.

“And the depreciation move is only what the Government should have been doing already. As the Finance Minister said, it’s a change to ‘better reflect how assets decline in value’ – a catch-up measure rather than one that puts us in a fundamentally improved situation for the future.

“What’s more, the benefits from changes to personal income tax thresholds are set so far in the future – beginning in April 2008 – that they don’t address the current problem of bracket creep that’s resulting in the overtaxing of many New Zealanders.

“The Government is clearly seeking to reduce the compliance impact of the Kiwi saver initiative, in response to concerns expressed by business. That is welcome. We will be working through the detail with an open mind, but have some concerns that the Government $1,000 sweetener will impact adversely on existing personal and work schemes.

“Today’s Budget is only marginally good for business, and for some enterprises the net impact will be negative – sadly the opportunity to make fundamental improvements to the environment for business has not been taken.”

ENDS

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