Package a boost to business confidence

Today’s five part package will help shore up business confidence the Employers & Manufacturers Association (Northern) says.

The change to the formula for estimating profit on which provisional tax is calculated, and the cut in the interest rate charged on underpaid provisional taxes are especially timely, said Alasdair Thompson, EMA’s chief executive.

“Measures like these greatly help small businesses by releasing more cash at a time when it may be slow coming through from some customers,” he said.

“The reduced compliance costs on PAYE, FBT and GST returns, and the expansion of the export credit scheme, will also be greeted warmly.

“While measures like the expensing of legal costs are welcome, others such as accelerated depreciation on plant and equipment would be more valuable.

“Though no announcement on cutting the company tax rate was expected today, EMA is hopeful the government will drop it this year from 30 to 25 cents, even if only for the duration of recession.

“This would do more than anything else to assist businesses by making cash for investment available to enhance productivity and keep people in work.

“New Zealand’s company tax rate is amongst the highest in the Asia Pacific region.

“South Korea has just announced it will cut its company tax rates from 25 to 20%.

“Cuts to the company tax rate would leave businesses with more cash to invest in staff and better equipment which would grow profits and expand the tax base. When the company pays out more in dividends to shareholders, then they would pay more personal tax.

“If our company tax rate is lower than other countries more foreign investment will be attracted here, and foreign owned firms will be encouraged to report more of their company profits in our tax jurisdiction.

“History shows that whenever company tax rates are reduced, the total tax paid by companies and their shareholders goes up.”