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Budget Barely Causes A Ripple On Tax Landscape

Media release

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tax credits, deals with anachronisms in those rules and tries to bring some coherency to rules that have largely been superseded by other measures.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.”

About Deloitte in New Zealand
Deloitte New Zealand brings together more than 800 specialist professionals providing audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. Our people are based in Auckland, Hamilton, Wellington, Christchurch and Dunedin, serving clients that range from New Zealand’s largest companies and public sector organisations to smaller businesses with ambition to grow.

Deloitte’s local experts draw on best practice and innovative methodologies from around the world as part of Deloitte Touche Tohmatsu. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s approximately 182,000 professionals are committed to becoming the standard of excellence. For more information about Deloitte in New Zealand, go to our website www.deloitte.co.nz

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/nz/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

ENDS

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