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Excessive Company Tax Rate Stifling Growth

The Employers & Manufacturers Association is backing KPMG's call today to lower company tax rates.

"KPMG has pointed out New Zealand's company tax rate is above the average of developed countries," said Alasdair Thompson, EMA's chief executive.

"Twelve of the OECD's 30 member countries dropped their company tax rates in the past year. Of 68 developed countries, only 11 have higher company tax rates than ours.

"EMA has consistently promoted the need to boost investment in New Zealand, but to remain competitive at this we must cut company tax rates.

"The risk to Government's coffers by remaining at the current level of 33 per cent is far higher than if the cuts were implemented; investment will flow to countries with lower company tax rates than ours.

"Economic modeling shows a lower company tax rate will not lower Government's overall tax take. Direct fiscal losses are offset by a larger company tax base, and from retained earnings leading to greater investment and higher economic activity overall. This in turn leads to a higher personal tax base and lower welfare payments, and lower inflation.

"The Infometrics study showed if company taxes were 20 per cent then gross investment would increase by 3.6 per cent, exports by 1.5 per cent, and GDP growth by 1.1 per cent.

"EMA recommends New Zealand urgently announce moving progressively to a 20 per cent company tax rate over the next six years. As company tax is essentially a pre payment of personal taxes paid from dividends on company profit, Government would not lose out."


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