Analysis

Difficult to know what to make of John Key’s speech in parliament on Tuesday. It provided no incentives for manufacturing and industry overall and focused more on getting people off the benefit and raising GST. It is probably too simple to ask where those coming off a benefit will find a job seeing that unemployment is currently over seven percent? I find the lack of vision for New Zealand’s future sadly lacking. If we are to be a highly productive nation, incentives and opportunities need to be available. We need to arrest the slide of the Fisher & Paykels overseas and Fonterras to greener pastures. Manufacturing needs a moratorium from stress and more accessible schemes and business assistance to go forward. We cannot rely on tourism to bring in the loot and to be really cynical “How will we keep on paying the All Blacks?” Raise GST at the gate – of course, how silly of me! If taxes are reduced in the May budget, one needs to ask who will benefit. GST is going up, so the savings in personal tax has found another place to be spent. The spread of income to government stays high and – again – no vision is being shown to grow manufacturing. Dr Bollard was right – and Blind Freddy could have seen it – when he said we cant catch up to Australia. Who can? They were never in a recession, their income is thirty percent higher than ours and even though it can be said they have expenses and inflation, they have wider choices and greater employment opportunities. They have a better cricket team (now there’s a successful business story for you) In essence, our people will continue to drift ‘across the ditch’ because they can’t see a future here. A […]

The New Zealand Manufacturers and Exporters Association (NZMEA) is calling for the Government to heed the Tax Working Group’s advice and broaden the tax base to lower personal and corporate tax. The majority of the Tax Working Group (TWG) suggested closing tax loopholes around residential property investment, imposing a land tax and increasing the GST rate to 15 percent. NZMEA Chief Executive John Walley says, Tax changes must be designed to incentivise investment in productive industries and the TWG’s report has started to move in that direction. Tax advantages for rental properties have already cost the country billions in lost tax revenue and the poor investment incentives created by the tax free status of property has been even more damaging and inflationary. The sooner these loopholes are closed the better. However, the recommendation to take away the 20 percent depreciation on new plant and equipment will hurt productive firms and should be discarded, says Mr. Walley. There was some debate from within the group on the best way to tax property. A comprehensive Capital Gains Tax would be the fairest way, but any move to level the playing field is welcome. The TWG has also recommended that the GST rate be raised to 15 percent to discourage consumption and encourage saving. This change in the balance of incentives is welcome. New Zealand relies heavily on personal and corporate tax for its income so reductions in this area are necessary. The reductions in the corporate tax rate would enhance New Zealand’s international competitiveness. The need for international competitiveness extends beyond fiscal policy, and the impacts of monetary policy on exchange rates must be part of the rebalancing equation. John Key has started the year by underlining his intention to focus on the economy; the recommendations of the TWG and the Capital […]