New Zealand's Corporate Tax Could Deter Future Investment

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

30 April 2003

A recently published study of worldwide corporate tax rates by accounting firm KPMG has found that the prevailing trend in the developed countries is tending towards lower rates of tax. Accordingly, New Zealand's 33% corporate tax rate is now relatively high in comparison with the global average, and one local expert fears that this will undermine the country's competitiveness.

The annual KPMG corporate tax survey, undertaken by the Dutch tax and legal arm of the firm, has revealed an average tax rate of 30.35% in the Asia Pacific region, down from 31.05% in the previous survey. Similarly, the European Union average is calculated at 30.68%, down from 31.39% in 2002. The OECD average is now 31.68% from 32.53% in 2002.

The New Zealand government disputes that its tax rates are substantially different to those of its regional competitors, citing its low level of stealth taxes. However, Brahma Sharma, a senior tax partner at KPMG maintains that the widening gap between New Zealand and the rest of the OECD members will have serious consequences for future inward foreign investment.

"It is getting to the point when, combined with our broad tax base, pegging our tax rate at the higher end of the corporate tax rates for OECD and Asia Pacific countries runs a risk of marginalizing New Zealand as a jurisdiction receptive to inwards foreign investment," Sharma observed in a Dow Jones Newswire report.

"It is timely for the government to rethink its position on New Zealand's corporate tax rate," Sharma added, suggesting that New Zealand's corporate tax should be nearer 20%, and certainly no higher than 28% if the country is to attract increased levels of investment.

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