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Taxation policy needs direction

MEA Media Release - 6 November 2007.
Taxation policy needs direction, other than the election.

The Government should defer cutting personal tax rates; a move that will increase the strong inflationary pressure already in the economy, according to the New Zealand Manufacturers and Exporters Association (MEA).

“The MEA welcomes a reduction in taxation but cutting the personal tax rates could inject further inflationary pressure into the economy, especially at a time of a strong NZ dollar and rising oil prices”, says Chief Executive John Walley.

“Any changes to the system need to have clear objectives as to the overall benefits to the economy, how inflation pressure can be reduced and provide tax treatment for productive investment and activity”.

“In the current political climate, pressure from opposition parties and statements such as last month’s OECD report showing New Zealand as the 13th most taxed country within the Organisation, higher than Australia in 24th place, is pushing the Government towards making some sort of commitment in this direction”.

“Unfortunately, the Government’s response is to tinker around the edges of the economy".

Mr. Walley says that tactically, personal tax cuts may prove a smart move for the Government in the run-up to the election, but in a long-term economic strategic sense, countering inflationary pressure requires a deeper policy response.

“Personal tax cuts should be deferred until the gap between New Zealand’s two economies is eliminated and the average annual growth rate in multifactor productivity is significantly lifted above the current level of 0.7%, that it rose to between 2000 and 2006”.

“Therefore, instead of focusing on cutting the personal tax rates that may win votes, the Government should be focusing on improving productive investment and activity, and finding a solution to a tight labour market through a coherent and comprehensive review of the tax system. Without a solution to skilled labour shortages and the shortfalls in available investment for plant and equipment, we cannot expect to see improvements in productivity or the levels of inflation pressure anytime soon”.

The MEA’s OutLook report titled, Assets, Tax and Productivity will be released on Wednesday, November 7.

MEA – the authentic and independent voice for manufacturers and exporters.

For further comment contact John Walley, 03 353 2545, 021 809 631.

David Miller, MEA Media Liaison.
Phone: 03 353 2544, 021 605 771
davidmiller@mea.org.nz or david@cma.org.nz

The New Zealand Manufacturers and Exporters Association (MEA) is a national organisation that was founded by the Canterbury Manufacturers Association (CMA) and the New Zealand Engineers Federation (NZEF). The MEA is New Zealand's only sector focused and independent voice of manufacturers and exporters. MEA members make nearly $2.0 billion in sales and have an export value of around $1.0 billion. Our organisation can trace its beginning to the early history of New Zealand.

As a legacy of the hard work and careful financial management of the past, we have a significant asset base that enables our independence and extends our activity. Subscriptions fund only a small part of our current operating costs.

Membership is open to all manufacturers and exporters and others at the discretion of our Council. Enquiries should be directed to mea@mea.org.nz

Ends

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