Tax Reductions are Welcome but More Needed
22 May 2008
Tax Reductions are Welcome but More Needed to Boost Growth
The Wellington Regional Chamber of Commerce has welcomed the tax reductions in today’s Budget but says some tougher decisions in the area of government spending were needed to make the cuts fully sustainable.
“Today’s tax package will go some way towards improving our international competitiveness and making New Zealand a more attractive destination for capital and people but it is not enough to fully transform the economy. Most of the expenditure described as economic transformation is frankly a joke in this context,” said Chamber CEO Charles Finny.
“Upgrading Eden Park and buying Toll is not going to transform the New Zealand economy in the way the Chamber thinks it should.
“We are disappointed the opportunity was not taken to further reduce overall expenditure growth by further improving the quality of government expenditure and eliminating waste in non-productive expenditure thus making further tax cuts affordable. The ratio of Government spending to GDP continues to grow.
“We also would have preferred more of an emphasis on reduced tax rates as opposed to threshold adjustments. The differential between the company rate and the top rate of personal tax is far too high.
“While today’s budget should not delay a reduction in the official cash rate this year, we are concerned that the increase in government expenditure will keep interest rates and the dollar higher and for longer than should be the case.
“We are pleased the government has demonstrated its commitment to broadband and fibre but we would have liked to have seen more investment in infrastructure across the board.
“We think the government has some policy the wrong way round. Compare for example the amount spent on the Toll purchase with the amount to be invested in improved new rail infrastructure.
“The IRD changes to lower tax compliance costs including the higher tax return thresholds will be welcomed by small and medium sized businesses. The international tax changes are also very positive, as are the skills training initiatives,” Mr Finny concluded.