"Bold, radical" Budget say tax experts
"Bold, radical" Budget say tax experts
by Pattrick Smellie
May 20 (BusinessWire) - Tax experts are welcoming the Budget tax package, hailing it "bold", "radical" and "smart" for returning New Zealand to simpler, more rational tax rules that should encourage investment in productive assets rather than housing.
"The property sector will understandably not welcome some aspects of this Budget," said accounting firm KPMG's chief executive, Jan Dawson. The surprise cut to 28% in the company tax rate from next April would help offset any negatives among a raft of changes removing or tightening property investment and other sources of tax deductibility.
The Budget was "the most radical in
years", said Deloitte chief executive Murray Jack, and
represented "a big bet on the delivery of the required
impetus for the government's growth strategy."
The
New Zealand Institute of Chartered Accountants pointed out
that it was history repeating. The corporate tax rate was
28% in 1989, while the top tax rate only rose beyond 33% in
2001.
"Ever since then, the tax system has fallen
into disarray as governments have tried to apply band-aid
arrangements to avoid the 39% rate," said NZICA's Craig
Macalister. "This is a welcome return to a simpler tax
system, and it removes some of the incentives to structure
for tax purposes rather than for commercial purposes."
Chapman Tripp tax partner Casey Plunket said "no one
should mourn the passing of the 38% top personal tax
rate."
"It was always a fraud, the cost of which was
not borne by the wealthy but by those who earned ... income
which they could not shelter in companies or trusts,"
Plunket said. "People with substantial assets, the real
wealthy, were almost completely unaffected by it."
By stealing a march on Australia and going to a 28%
corporate tax rate three years earlier than across the
Tasman, the government might not convince Australian firms
to relocate here, but was giving the signal of being
"serious about trying to close the growth gap between the
two economies."
"The Budget represents the biggest
overhaul of the tax system since 1987, and has the capacity
to - finally - wean New Zealanders off their propensity to
over-invest in property."
KPMG expressed concern
about the short timetable for the change to GST at 15%,
saying some businesses would be scrambling to implement by
October 1.
Macalister said the absence of capital
gains tax would continue to distort investment in New
Zealand, but accepted the depreciation removal on buildings
as "a more principled approach than ring-fencing rental
property lossses and introducing bright-line tests to tax
property purchased and sold within a specified time."
Both such measures had been feared by property investors
and gained little traction with officials or Ministers
because of their complexity and likelihood of encouraging
new tax avoidance structures.
The New Zealand
Property Council wasn't happy with the investment property
tax changes, but called it a "bold Budget" that was "good
for New Zealand, at the property sector's expense."
(BusinessWire) 17:53:03