The failure to make a firm recommendation on the mutual recognition of imputation tax credits clouds the value elsewhere in the joint report, Strengthening Trans-Tasman Economic Relations, just released by the Productivity Commissions of New Zealand and Australia.
The Employers and Manufacturers Association says the failure not to come out strongly in favour of mutual recognition of the tax credits suggests, despite all the analysis put up to the contrary, that at least $300 million of benefit to our trans Tasman economies is not important.
“The Productivity Commissions shy off from the single most significant impediment to the development of CER,” said Kim Campbell, EMA’s chief executive (pictured).
“Mutual recognition of tax credits is by far the most important outstanding issue,” Mr Campbell said.
“At stake is New Zealand’s very ability to build and retain world scale companies head quartered here.
“So long as the issue remains unresolved, the risk is their head offices will always migrate to Australia.
“Under the present regime, when the success of a New Zealand company means it attracts more shareholders in Australia than here, then those shareholders will always oblige the company to transfer its head office to Australia.
“There have been several high profile examples of this modern day economic colonialism; the Australian government is reluctant to act on it because Australia is benefiting from the value created by New Zealanders.
“It’s extremely disturbing, and we urge our Prime Minister to redouble New Zealand’s efforts to resolve it.
“Continuing the present arrangement also reduces the returns that Australian businesses with operations in New Zealand can achieve.
“It’s a pity the Productivity Commissions didn’t take into account these longer term implications in their economic analysis as other recommendations in the report are most worthwhile.
“For example the concept of a trans Tasman visa where people from third countries can apply for a single visa for both New Zealand and Australia is a great idea.
“Its logical that the Rules of Origin could be reviewed to reduce compliance costs, and we support the extension of the use of Smartgate to facilitate efficient travel.
“It’s also important to resolve the lack of alignment between Australian states for such as biosecurity as that issue remains a serious impediment to trade.”