Labour beginning to offer economic choice

Labour’s promise to restore the Research and Development (R&D) Tax Credit is a step in the right direction say the New Zealand Manufacturers and Exporters Association (NZMEA). Phil Goff announced that the 12.5 percent credit would be introduced in a speech yesterday that also repeated the commitments to reform monetary policy and broaden the tax base.

NZMEA Chief Executive John Walley says, “To see a major lift in our export performance more high-tech, high value add firms are needed. A R&D tax credit promotes this sort of activity so it must be supported as a tool to help rebalance the economy towards the export sector.”

“It is also hopeful that measures to broaden the tax base are to be used to further balance fiscal policy. Both National and Labour claim to advocate a broad based tax system and neither has delivered as land and capital gains remain tax free pushing the burden onto income and corporate tax. Cracking down on tax dodgers as Labour has suggested is important (although there is still no detail on how this would be done) and applying the Emissions Trading Scheme (ETS) to everyone by 2013 must be encouraged. Generally tax havens and exemptions should be eliminated; wherever they exist everyone else is burdened with more than their fair share of tax.”

Comments from John Key and others that the proposed ETS changes will increase the price of milk, butter, cheese, and meat are way off the mark.

“In a competitive market price is based on supply and demand, not the cost of production,” says Mr Walley. “If Mr Key and others believe that Fonterra or any other agricultural producer operates as a monopoly and can manipulate prices then that is a separate issue.”

“In any event greater support for R&D exists in other jurisdictions; they have experienced its pay-off. A focus on cost ignores that potential pay-off. There are no guarantees with R&D investment other than what happens if we fail to invest.”

“R&D tax credits added to Labour’s promise to reform monetary policy offers the greatest potential for economic rebalancing in New Zealand.”

“There was also some unhelpful tinkering from Labour in the speech with measures to remove GST on fruit and vegetables in particular doing little to help consumers and acting to undermine the integrity of a low and broad tax system.”

“Overall though, efforts to move the economy towards export investment must be commended; there are real political differences developing for the first time in twenty years.”

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