Media statement Thursday, May 19th, 2005
Timid Budget: No tax cuts for business; no surprises from workplace savings
Today’s Budget fails to present a longer term vision for sustaining New Zealand’s economic development, and certainly no tax cuts for business are anywhere in evidence.
However Government has taken into account the issues expressed over its workplace savings scheme - Kiwi Saver scheme.
Considering its election year the Budget appears to have been oversold, said the chief executive of the Employers & Manufacturers Association (Northern), Alasdair Thompson.
“Fixing business tax anomalies and selling them as tax cuts is disappointing,” Mr Thompson said.
“The Kiwi Saver scheme, though helpful in a humble sort of way, is no great leap forward.
“It was important people would be able to opt out since many lower paid people are far better paying off their credit cards and mortgages than saving for low returns.
“Employers will be pleased too they are not expected to choose a savings scheme for their employees, that they choose their own, that the IRD will administer it, and that sincere efforts have gone into minimizing its compliance costs.
“But the scheme will nonetheless bring with it extra compliance costs for business, though minor compared to the weight of the upcoming carbon tax.
“For Dr Cullen to state the carbon tax income will be used to offset his timid moves to reduce FBT and accelerate depreciation on some plant and equipment raises questions over the calibre of the advice he has been receiving.
“Allowing faster depreciation is no tax cut for business; it only remedies a situation where current depreciation rates do not reflect the write off over an asset’s economic life. Faster depreciation merely changes the timing when tax is paid, meaning no overall tax cut.
“Likewise, the reduction of FBT also only corrects an anomaly. It merely recognizes the cost of car ownership has been reducing.
“The Budget’s tax measures appear to have been prepared for an economy at the height of its growth performance, not the one now showing signs of a rapid drop in it growth rate.
“The moves to address ‘bracket creep’ are equally timid; most of us won’t lose sleep figuring out what to do with an extra $8 a week in 2008 – they should have at least have been introduced this year.
“Australians will be laughing. With this Budget in another year or so today’s exodus of 330 Kiwis crossing the Tasman each week will look small as we educate ever increasing numbers to enrich their economy.”