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Credits for Investment Beats Tax Cut for Co's

25 July 2006

Tax Credits for Investment Better Than a Tax Cut for Companies – CTU.

The Council of Trade Unions says that tax credits for investment in research and development, skills, and market development as well as higher rates of depreciation would be more helpful in increasing productivity than simply reducing headline company tax rates.

He was responding to the review of business taxation announced this afternoon.

“A 3 cent cut in company tax costing $540 million could simply add to the retained earnings and dividends of overseas owned companies operating in New Zealand,” CTU president Ross Wilson said.

“In the last year, $7.5 billion of our current account deficit was due to the profits of overseas companies and poor decisions in the Business Tax Review could add to this problem.”

“However a tax credit which could be applied to investment in skills would help our transformation to a modern economy. A high wage, high skill economy needs investment in people, skills and modern technology and that is what the Business Tax Review should be about.”

The CTU also warned that expensive tax cuts could jeopardise public expenditure on education, health and infrastructure.

Ross Wilson said that we should not lose sight of the fact that the revenue Government gets from company tax is not just about the tax rate. “For instance, company tax revenue increased from $4.8 billion in 2000 to $8.5 billion in 2005 because of a strong economy and high profits, not because of a higher tax rate,” he said.

The CTU would be consulting its affiliates and encouraging debate among union members, and making a submission on the Business Tax Review.


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