NZ businesses happy with tax at home

NZ businesses happy with tax at home

4 March 2013

While the Organisation of Economic Co-operation and Development urges member countries to crack down on companies that move profits to countries with a lower tax rate, New Zealand as a target would be at the bottom of their list, according to a survey by Grant Thornton.

The survey of more than 3400 businesses in 44 economies found that New Zealand businesses were the most reluctant to relocate their businesses overseas for a lower tax rate with 94% happy to stay.

They are followed by Georgia (92%), Switzerland (90%), France (88%), Germany (87%) and Ireland (86%). The economies in which the most businesses would move for a lower rate are Russia, India, Taiwan, Greece, Botswana, Norway and Malaysia.

Murray Brewer, Auckland partner for Grant Thornton New Zealand Ltd, said that there were a number of reasons why New Zealand stood out in the poll.

“When you couple our isolation and average company size with the fact that businesses seem to begenerally happy with the present tax regime, then you can understand why we are the most reluctant country in this survey.

“Many New Zealand businesses are domestically focused and migration of head office is not commercially viable.

“Also, shifting head office may provide a tax deferral in some cases but the ultimate tax cost for the New Zealand shareholders may in fact increase.

“The bottom line is that New Zealand tax resident shareholders are subject to New Zealand tax on their world-wide income. The comprehensive nature of our international tax rules means that migration of the company head office would have limited tax advantage unless the shareholders go to the extreme and also head offshore to become non-resident for New Zealand tax purposes.

Globally, over two-thirds of business leaders (67%) said they would not consider moving abroad for a lower corporate tax rate.

“Two other very interesting points came out of the survey. Over half of New Zealand businesses thought the Government was doing enough with tax to ease the economic pressure with 22% saying ‘yes definitely’ and 30% ‘yes probably.’ This compared very favourably with the global average of 11% and 22%.

“When it came to the question of lowering the tax rate against eliminating some current tax deductions, businesses were evenly divided at 48%. This was in sharp contrast to the global average where 68% of businesses favoured lowering the tax rate even if it meant eliminating some tax deductions.

“A trade-off between tax breaks and headline rates of tax, leading to a simple low tax rate with no or few deductions, does have the advantage of bringing simplicity. The difficulty is that tax breaks are hard to remove once in place, especially in those economies, which are currently struggling to find growth and which use tax breaks to stimulate certain sectors or industries.

“Important decisions can be taken on the basis of existing tax breaks and if the breaks go, the decision may look like a poor one because the goal posts have changed. Business likes certainty so any change needs a long lead in and clear communication,” he said.

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Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 44 economies. This unique survey draws upon 21 years of trend data for most European participants and 10 years for manynon-European economies. For more information, please visit: www.internationalbusinessreport.com

Data collection
Data collection is managed by Grant Thornton International's core research partner -Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.

Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,450 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted in November/December 2012.
Notes to editors:
About Grant Thornton International Ltd*
Grant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms. These firms help dynamic organisations unlock their potential for growth by providing meaningful, forward looking advice through a broad range of services. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to solve complex issues for privately owned, publicly listed and public sector clients. Over 31,000 Grant Thornton people, across 100 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.
Grant Thornton International is a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales. References to "Grant Thornton" are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, which are not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients.
*All references to Grant Thornton International in the press release and this “Notes to editor” section are to Grant Thornton International Ltd. Grant Thornton International Ltd is a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales.

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