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Tax Cuts – Productivity or a Party?

Media Release 4 April 2008.

Tax Cuts – Productivity or a Party?

The New Zealand Manufacturers and Exporters Association (NZMEA), says that while reducing the corporate tax rate has generated momentum for personal tax cuts, any rebalancing of the tax take should also include changes aimed at boosting productivity and activity.

“Tax cuts and handouts have become inevitable features of election years; but the key issue is how they contribute to the overall economic picture. The choice for the Government is between focusing tax cuts on the long term benefits to the economy to boost productivity and activity or chase voter appeal”, says Chief Executive John Walley.

Mr. Walley says that cutting income tax rates would pass immediate benefits to tax payers, stimulating the economy and in so doing, prolong the already persistent inflationary pressure. Changes to the tax code would be better aimed at lifting productivity levels.

“With regard to election strategies, buying votes with personal tax cuts is winning out. If the Government is really serious about boosting productivity levels, then measures such as expanding the R&D credit, depreciation on equipment and investment in productive equipment and skills must be a substantial part of the tax mix”.

“Tax code changes to better balance the tax take with capital gains sharing a due part of the tax burden would be a bet, for a better, more productive future”.


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