NZ Business Group Fears High Taxes are Eroding Competitiveness

by Mary Swire, Tax-News.com, Hong Kong

19 May 2004

Following tax measures presented in the Australian budget, a prominent New Zealand business association is urging the government to maintain the country’s level of competitiveness and rate of growth by cutting taxes in the upcoming budget.

“Australia’s federal budget last week stole several more marches on us by excluding most foreign income from Australian tax, excluding Australia’s super funds from its foreign investment fund rules, and removing tax impediments to the repatriation of foreign profits,” the Employers and Manufacturers Association (Northern) noted in its pre-budget statement released on Tuesday.

The association continued: “According to KPMG’s Brahma Sharma and Craig McAllister, Australia is establishing itself as the natural place to establish a regional holding company because the Australian Budget moved to allow profits earned overseas by an Australian company to be taxed at the rate applying in the country where the profit was earned. This will encourage tax paid profits to be repatriated back to Australia.”

EMA added that it has given several warnings to the government that New Zealand’s high headline rate of corporate tax is eroding the nation’s competitiveness internationally.

“In 2000 few people paid the newly introduced high personal tax rate of 39 cents per dollar on earnings over $60,000; now 9.5% of taxpayers earn over $60,000. Together, this group pays 45% of all personal income tax.

“With more spending power after tax for saving or spending, New Zealand’s ability to sustain the much needed investment in education, health and the environment will be secured,” the EMA concluded.

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