Tax & KiwiSaver policies generally on the right path

Business NZ has described National’s tax & KiwiSaver policies as generally sensible and on the right path given current economic circumstances.

Chief Executive Phil O’Reilly says business has been calling for some time for tax relief and the party’s plan to move over time towards a flatter, broader tax structure with only three tiers would be healthy for economic growth.

“We particularly applaud Mr Key’s statement that over time the party wants to move to a top rate of 33%. This would put our economy in a far stronger position than the current 39%. It will be important especially for the many small businesses that are unincorporated and taxed at the top personal rate.”

But Mr O’Reilly described the decision to remove the R&D tax credit as unfortunate and unhelpful.

“We feel that the R&D credit scheme should have been given time to see whether it would work to build innovation by New Zealand firms. Companies that have already invested significant amounts to get ready to take advantage of the tax credit will be unhappy with this policy change. The National party needs to commit to a thoroughgoing review of New Zealand’s innovation system to work out alternative ways of ensuring our companies can invest more in innovation and research and development.”

He said there were positives in National’s approach to KiwiSaver.

“Lowering the KiwiSaver minimum contribution rate to 2% will help make the scheme more affordable for those on lower incomes, and getting rid of the recent legislation that discriminates against those who can’t afford to join KiwiSaver will make it fairer. Of course it will still be important for employers and employees to be free to negotiate mutually acceptable terms and conditions of employment.

“There may be some concern however around the removal of the employer tax credit, especially among small businesses that will be more exposed in the short term to additional costs incurred when employees join the scheme.

“It will be important for the government to work with the business sector to reduce other compliance cost areas to help offset these cost pressures from KiwiSaver.”