Tax Burden Adds to Business Woe

17 January 2005

Tax Burden Adds to Business Woe

With Business confidence slumping to its lowest level in almost twenty years Ernst & Young Tax Director Jo Doolan says is it time to get serious about tax cuts.

The last time business was so depressed about the outlook was at the end of the Asian crisis.

“Declining investments in plant and machinery do not bode well for the much needed improvements in productivity,” she says.

Ms Doolan says with inflationary pressures preoccupying the minds of the Reserve Bank, the continuation of increased interest rates along with the high dollar all adds to the air of negativity.

“Talk of recessions and hard landings are supported by clear indications that the domestic activity is slowing.

“The NZIER’s Quarterly Survey of Business Opinion is a well respected indication of how businesses are feeling. Just how much can be blamed on the Government?” Jo Doolan asks.

“Platitudes like blaming the red tape and the tax burden on business are as easy to cite as it is for the Opposition to badger the Government for not doing enough.

“Ronald Reagan once said: “Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

“Rightly or wrongly there is a perception that the Government is not business friendly. This is re-enforced when the Government delays business friendly tax measures such as the depreciation changes to rush through the interest free student loan and Working for Families legislation,” she says.

“Lures thrown into the taxing sea at the end of 2005 included teasers on potential tax cuts and a business tax review.

“With a report due for consultation by mid June Finance Minister Michael Cullen and Revenue Minister Peter Dunne are promising bold measures that will be much more than tinkering with the tax rules.

“Distractions like this cannot beguile taxpayers away from the significance of the impact of the pending changes in 2006 and those that will influence business tax from 2005.

“While taxpayers are, getting used to playing "second fiddle" to those who live off the taxpayers’ money the depreciation changes that are yet to be legislated were supposed to apply from April/May 2005 and others have a supposed application date from 1 April 2006.

“The importance of creating a business friendly environment is not news to our Revenue Minister after all he is an experienced campaigner and so far Mr Dunne’s report card for 2005 is "has the ability and needs to do better".

“Dedicating all petrol taxes to improving our roading would be a good starting point.

“The promised business tax review for 2006 is a teaser. We wait with baited breath to see if the outcome is of crescendo proportions or akin to a candle in the wind.”

Jo Doolan says the Government’s failure to give back is a real de-motivator for businesses, and the self-fulfilling ‘doom and gloom’ economic outlook can be avoided by the Government taking action.

“There’s been a lot of talk about alleviating taxes on business but we’ve yet to see any tangible progress.

“The Government has the ability to create a business-friendly environment and now is the time to do so.”

ENDS

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