CTU Releases Business Tax Review Submission

Thursday, 12 October 2006, 11:31 am
Press Release: Council of Trade Unions

CTU MEDIA ADVISORY
12 October 2006

Advisory: CTU Releases Business Tax Review Submission

Following on from comments by CTU president Ross Wilson this morning on the need for greater investment in education and skills, social services and infrastructure, rather than large tax cuts, the CTU now releases its submission to the Business Tax Review.

The executive summary is attached, and key points below.

Key points:

* Current company tax is not an unreasonable burden on firms.

* We are prepared to support tax credits where they can be linked to investment in factors to underpin a high wage, high skill economy, such as R & D and skills improvement.

* We also propose an alternative to tax credits which is to allow tax deductibility for (compulsory) firm contributions of up to 4% of gross wages to workplace savings.

* Our concern is that much of the discussion about tax cuts does not take account of
- the importance of public services to all New Zealanders;
- the catch up required in infrastructure after a decade of underinvestment;
- the need for ongoing increases in investment in skills and tertiary education;
- the difference between cyclical and structural surpluses;
- the adverse consequences of significant tax cuts in the 1980s and 1990s at the same time as a growth in the use of foodbanks, huge income inequities, an outbreak of infectious diseases, and the development of user pays; and

- the fact that the demands from the public and business for government spending to be improved in numerous areas does not decrease just because there are tax cuts.

The exec summary is below and the full document can be downloaded here: www.union.org.nz/policy/businesstaxreview2006.html

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New Zealand Council of Trade Unions Te Kauae Kaimahi

Submission on the
BUSINESS TAX REVIEW

8th September 2006

2.0 Executive Summary

2.1 The CTU is extremely concerned that this review of business taxes is occurring in a context of a lopsided debate on tax issues in general. It is lopsided because few commentators examine the fiscal surpluses in the light of cyclical economic outcomes, the value of social services, the legacy effects of chronic under-funding and income disparity from the reforms of the 1980s and 1990s, and the investment needs we have as a country if we are to become a high wage, high skill economy.

2.2 The current level of company tax in New Zealand is not an unreasonable burden on firms.

2.3 The CTU is opposed to dropping the company tax rate.

2.4 Where tax credits can be directly and successfully linked to higher levels of broad-based investment in factors that will underpin a high wage, high skill economy, we are prepared to support such an approach.

2.5 We do not however support tax credits if there are negative side-effects and high opportunity costs in terms of expenditure.

2.6 We support tax credits for research and development, and skills improvement.

2.7 We are less supportive of tax credits for market promotion and prefer instead greater government support for industry initiatives to promote market development rather than firm-level incentives on their own.

2.8 We propose an alternative to tax credits which is to allow tax deductibility for (compulsory) firm contributions of up to 4% of gross wages to workplace savings.

2.9 We suggest leaving depreciation rates at their current level.

2.10 The CTU does not support the other proposals in the paper (Deferring losses from significant upfront expenditure; Deduction for 'blackhole' expenditure, such as losses on buildings, increasing low value asset write-off thresholds). We have no submission to make on reducing compliance costs for assets with low depreciated values. The CTU supports increasing the threshold for taxpayers allowed to submit an annual FBT return.

The full document is available on the CTU website: www.union.org.nz/policy/businesstaxreview2006.html

ENDS

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New Zealand Council of Trade Unions

Te Kauae Kaimahi

The New Zealand Council of Trade Unions Te Kauae Kaimahi brings together over 350,000 New Zealand union members in 40 affiliated unions. We are the united voice for working people and their families in New Zealand.

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