Tuesday, May 18th, 2004

Budget must be judged by action on tax

The upcoming Budget should be judged by the measures taken to underpin and sustain New Zealand's economic growth, and the fairest and most valuable way to do this will be through reducing tax rates, the Employers & Manufacturers Association (Northern) says.

"We agree with Government's advice from Treasury which said recently that the best way to boost incomes and material wellbeing is to reduce tax rates," said Alasdair Thompson, EMA's chief executive.

"Hence business will assess the Budget's value in terms of cuts to tax rates.

"We need to keep pace with Australia in this area too.

"Australia's federal budget last week stole several more marches on us by excluding most foreign income from Australian tax, excluding Australia's super funds from its foreign investment fund rules, and removing tax impediments to the repatriation of foreign profits.

"This type of action more than compensates for spurious claims by our government that Australian businesses face government costs not applied here.

"According to KPMG's Brahma Sharma and Craig McAllister Australia is establishing itself as the natural place to establish a regional holding company because the Australian Budget moved to allow profits earned overseas by an Australian company to be taxed at the rate applying in the country where the profit was earned.

"This will encourage tax paid profits to be repatriated back to Australia.

"EMA and KPMG have warned for several years that our high headline company tax rates are making New Zealand a poor choice behind Australia for investment and doing business.

"In New Zealand we have had five years of compounding growth and growing surpluses, and our tax rates have become too high, especially as they apply to middle and high income people and to the withholding tax paid by companies.

"In 2000 few people paid the newly introduced high personal tax rate of 39 cents per dollar on earnings over $60,000; now 9.5% of taxpayers earn over $60,000. Together, this category pays 45% of all personal income tax.

"On the other hand, low income people with families are not paying tax.

"With more spending power after tax for saving or spending, New Zealand's ability to sustain the much needed investment in education, health and the environment will be secured."

ENDS

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