Business tax review has retro air
Proposals in the Business Tax Review discussion document released yesterday have an air of Muldoonism, says Craig Macalister, Tax Director for the New Zealand Institute of Chartered Accountants.
"Targeted tax credits, as suggested in the document for research and development, export market development and skills improvement, tend to be distortionary," Mr Macalister warns. "Unless there is evidence that something is broken, and that credits will fix it, we would be concerned about incentives of this nature. This appears to be a step back to more intervention."
The Institute also questions the focus solely on business tax considerations. "We agree with the government's statement that any changes to company and trust tax rates will have impacts across the tax system. In fact, we have – from the outset – expressed concerns about the sole focus of this review. In a country where almost a third of workers take their income from businesses with fewer than twenty employees, the links between personal and business taxes are very strong, and we struggle to see how one can be divorced from the other."
The Institute is on record as asking for a flatter, lower tax rate structure. The proposals will not deliver this. The Institute is working on a substantive response to the proposals.