Boosting Investment The Top Priority For Tax

The top priority for the Government's taxation review must be to ensure that our tax laws promote investment in high quality productive assets in New Zealand, says Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern). Re-designing the tax system to promote the economy and job growth is a matter of urgency given our per capita income has fallen to 30th in the world and our external deficit is so high, he says.

"Investment and exports are not nearly strong enough, and our Balance of Payments deficit is still growing, so plainly we have to focus first and foremost on growing the size of New Zealand's economic pie, not on how it should be cut up," Mr Thompson said.

"Re-distribution of wealth has to be a secondary consideration to growth.

"The taxation system is the most important instrument Government has available to achieve this.

"Virtually all of the welcome return to business confidence is based on the high world prices for agricultural commodities and the favourable exchange rate.

"This is fortuitous but not sustainable without much stronger rates of new investment.

"Export volumes rose a mere 1.2 per cent for the year ended September, while investment in manufacturing, including dairy and meat processing, was 38 per cent lower in the September quarter compared to the same quarter last year.

"At present our tax system favours investing overseas rather than locally. It favours investment in non-productive assets of variable quality over and above investing in enterprises that can generate goods and services, and jobs.

"These purposes are at odds with our ambition to retain skilled people and grow the New Zealand economy. IRD and Treasury must be able to devise a tax system that promotes the country's revenue growth.

"Next year Australia will also have a lower company tax rate than ours, which will see even more of our earnings go towards creating jobs overseas.

"To attract and retain more business and jobs in New Zealand the taxation review should focus on such issues as: * lowering the corporate tax rate below Australia's, * encouraging technical and export innovation by treating R&D and export development generously, and * removing unnecessary barriers to investment in New Zealand."

Further comments: Alasdair Thompson tel 09 367 0911

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