Decisive work on tax reform needed

Business NZ endorses the rigorous and transparent approach to the report released today by the Victoria University Tax Working Group.

Business NZ Chief Executive Phil O’Reilly said many recommendations would find support among the business sector, with caution on some.

“Business will be firmly supportive of the recommendation to get our company tax rate competitive with rates in other countries, an important factor for economic growth.

“There will also be support for alignment of company, top personal and trust tax rates and for lower personal rates.”

Mr O’Reilly said he shared the group’s concerns about the distortions that would arise from a capital gains tax and also agreed that work is required on the tax treatment of residential rental properties.

But he said there could be problems with the recommendation for a land tax as this would be an anticompetitive cost on New Zealand’s many land-based enterprises.

“Enterprises already face a fairly stiff land tax through local body rates and this recommendation if accepted would impose a second tier of land taxation.”

Mr O’Reilly said the group’s call for a review of welfare policy and the use of relevant tax treatment for low income families in place of the poorly-targeted Working for Families system had much merit.

“We know from feedback from our members that Working for Families can act as a disincentive for workers to improve their income from employment.”

He said he would ensure rapid consultation with Business NZ’s members on these and other recommendations.

“It will be important for the Government to give a clear direction on its thinking on tax reforms by the time of the Budget as the current system is a drag on New Zealand’s capability and competitiveness. The sooner it is fixed, the better.”