Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Labour to double depreciation rate in targeted industries

Labour to double depreciation rate in targeted industries

By Pattrick Smellie

April 17 (BusinessDesk) – The major new element in the Labour Party’s manufacturing policy, announced today, assumes depreciation rates for assets in each affected industry would double, a party spokesman says.

The additional details from this morning’s manufacturing policy announcement by Labour leader David Cunliffe comes as predictable brickbats and bouquets arrived from across the political spectrum.

Economic Development Minister Steven Joyce called it “same old, same old”, while the First Union headlined its press statement “at last: a manufacturing policy.”

Peak lobby group Business New Zealand headlined its response “focus on manufacturing welcome” but went on to suggest “some of the policies need more work.”

Instead of accelerated depreciation, BusinessNZ would prefer an across the board cut to the corporate tax rate.

The accelerated depreciation policy is assumed to cost $30 million in its first year, rising to $70 million, and Cunliffe it was “envisaged” that the policy would apply to all manufacturers when fiscal circumstances permitted.

In the meantime, “the policy has been costed on the assumption that the diminishing value (DV) rate of depreciation for each asset class within the affected industry would double,” said a Labour spokesman in an email responding to questions from BusinessDesk.

“For example, the default class for the ‘chemical plant and machinery’ industry category currently has a DV rate of 13 percent per annum. This is based on an assumed useful life of 15.5 years. Our costing has assumed that this (DV) rate of depreciation increases to 26% per annum.”

The policy had been costed, in part, from official statistics on gross fixed capital formation, broken down by industry grouping.

“We got some advice from external consultants, particularly on working out an appropriate average weighted (across asset classes) rate of depreciation for each industry grouping.”

Assuming the policy contributed to higher economic growth rates, its net fiscal cost would be expected to be lower.

BusinessNZ said “allowing certain sectors accelerated depreciation on plant and equipment would provide assistance by reducing the tax burden in the early period following the equipment purchase.”

“However, choosing which sectors or industries should get this tax assistance would be problematic. Any policy changes should assist all industries. More fundamentally, given that the depreciation proposal would essentially be a reduction in the tax burden on manufacturers, a better form of assistance would be a simple reduction in the corporate tax rate.”

O’Reilly was more supportive of Labour’s plan to increase government procurement from local firms by a target of $200 million a year.

“In many instances, government contracts have gone to overseas companies even when New Zealand-made options were available at better price and quality,” he said. “New Zealand manufacturers would prefer government agency purchase decisions based on explicit, transparent criteria so local manufacturers have a fair chance when competing against overseas providers for New Zealand government business.”


© Scoop Media

Business Headlines | Sci-Tech Headlines


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Speaking For The Bees: Greens Call For Neonicotinoid Pesticide Ban

The National Government should ban the use of controversial pesticides called neonicotinoids after evidence has revealed that even at low doses they cause harm to bee populations, the Green Party said today. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news