An important initiative in the government’s ongoing programme to strengthen the economy takes effect on April 1st, 2008, when the company tax rate drops to 30%, Finance Minister Michael Cullen and Revenue Minister Peter Dunne announced on Monday.
“Reducing the company tax rate will allow successful businesses to re-invest a greater share of their profits in new technologies and in further building-up the skill base of employees,” Dr Cullen stated.
“We expect that lowering of the company tax rate will serve to strengthen the competitiveness of New Zealand-based companies, and that is good for the long-term interests of all New Zealanders,” Dunne added.
The cut to the company tax rate to 30% (from 33% previously) represents the first time the company tax rate has been reduced in New Zealand since 1988.
Cullen said that the latest initiative is part of the Labour-led government’s economic transformation package, which includes significant moves on depreciation and other business tax measures announced in 2005, tax credits for R&D, and changes to the tax treatment of savings vehicles.
The changes arise from the Business Tax Review carried out as part of the confidence and supply agreements between Labour and UnitedFuture, and between Labour and New Zealand First.
The Labour-led government claims to have so far cut taxes by around NZD4.5 billion (USD3.56 billion) a year, with benefits targeted at businesses, families with children, and personal savings..
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