May 24, 2012
Budget Barely Causes A Ripple On Tax Landscape
Tax measures barely caused a ripple in the 2012 Budget with two of the three key measures already well foreshadowed, Deloitte CEO Thomas Pippos says.
The third measure, relating to tax credits, deals with anachronisms in those rules and tries to bring some coherency to rules that have largely been superseded by other measures.
“The surplus is within reach but only time will tell how quickly we move to surplus. It certainly seems reasonably imminent albeit fragile,” Mr Pippos says.
“In terms of stimulus and growth the Christchurch rebuild stands out as a material contributor at around 1% of the estimated growth numbers which will likely also mean that growth is skewed to that area and reasonably anaemic elsewhere.”
Some difficult questions remain unanswered and will have to eventually be addressed, such as New Zealand’s ageing population and its right to superannuation, the level of private sector savings, the student loan mountain, and the inequities that arise from some social assistance measures.
“In many respects the lack of tax surprise was a relief. History has shown that substantive Budget tax surprises carry a considerable risk of collateral damage, such as the exclusion of depreciation from all buildings in 2010 that created an inequity for industrial property let alone a material financial reporting anomaly.”
In terms of the tax mix, the status quo prevails, noting the corporate rate is competitive, the reduced highest marginal tax rate sets the right signal, and GST continues to be by far the most efficient way to gather revenue – particularly when the economy starts to expand and consumption improves.
“Seen through the eyes of Europe, and bearing in mind the lingering effects of the GFC on the New Zealand economy, and the impact of the Canterbury earthquakes, Budget 2012 is sensible, unexciting and provides a sense of relief to be able to visualise a surplus.”
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