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April 1 changes boost wages and cut taxes

Written By: - Date published: 10:02 am, April 1st, 2008 - 15 comments
Categories: economy, election 2008, labour, workers' rights - Tags: , , ,

Today is a big day for government policy affecting Kiwis’ incomes:

  • The minimum wage is now $12 an hour, up from $7 when Labour gained power.
  • Youth rates have been effectively abolished, meaning young people will get the same pay for the same work.
  • From today, employers must contribute to employees’ Kiwisaver accounts equivalent to 1% of their gross pay.
  • The spilt up of Telecom has come into effect, increasing competition in the telecommunications sector and promising lower prices with greater internet speeds.
  • The cap on tax rebates for charitable donations has been removed.
  • The Family Tax Credit has raised affecting 2,400 families, Government superannuation has increased to 66% of the average wage, and student allowances have been risen to match inflation for the first time.
  • The business tax rate is now 30%, down from 33%. Our rate is below many countries‘ including Germany, France, Canada, the US, Italy, Spain, and India, and on par with Australia. This is the first business tax cut since Labour was in government in the 1980s. National opposed this tax cut and most of the other policies listed here.
  • A 15% tax credit on R&D spending has also come in to encourage research, leading to greater productivity.

The government has set the tone; it has put more money into business coffers and people’s pockets. Now, the challenge goes to business. Will they spend their tax cut on higher dividends and more low quality investment or on higher wages and high quality capital investment to boost productivity?

UPDATE [a_y_b]: The government has further info on the announcements here.

15 comments on “April 1 changes boost wages and cut taxes ”

  1. Stephen 1

    Well I’d imagine they have to spend a fair bit on Kiwisaver contributions! Not that sure how much of a burden that is though.

    The cap on charitable donations has not been ‘removed’, but now you can get a 30% rebate on up to 100% of your yearly income, whereas before it was just a 30% rebate up to…about $1,500 worth of donations.

  2. mike 2

    Gee when I saw the title of the post I got my calculator out and got about adding up my “boost”
    Thanks Mr Cullen but $0.00 won’t go to far to improve the weekly budget..

  3. Stephen 3

    Except for the subsidised retirement savings!

  4. Sam Dixon 4

    Stephen – the government will rebate the first $20 of employers’ weekly contributions for an employee’s kiwisaver. So at 1% of gross wages, the government will be entirely covering the contribution for anyone earning less than $2000 a week. In the second year, when employer contributions go up to 2%, the governemtn will be wholly covering anyone earning less than $1000 and over half for anyone earning below $2000.

    And any employer contributions in excess of the rebate are tax deductible at 30%.

    Add to that the facts that most employees are not kiwisaver meembers yet and that wages make up only a portion of business expenses.

    So, no. Employer contributions to kiwisaver will not be taking a sigificant slice out of the busienss tax cut.

  5. East Wellington Superhero 5

    You forget today’s tax increase.
    ACC levies went up today.

  6. Stephen 6

    Ta Sam

  7. Steve Pierson 7

    EWS. Some elements of ACC levies increased, while others decreased http://www.acc.co.nz/levies-and-cover/levy-consultation-2008-09/index.htm

  8. dave 8

    Steve, thats an excellent post. It provides yet more good reasons why we should have a Labour Government in 2008, as I have posted today on my blog at http://big-news.blogspot.com.

  9. Matthew Pilott 9

    Dave, are you link-whoring?

    If so, you might need to work at that, getting your own blog address right is pretty critical.

    A hint to everyone else – it has nothing to do with this post, as implied by the whoresque link above.

  10. dave 10

    No, not link whoring, the URL is correct but clicking on the link does not lead to the blog post. If it did it will be link whoring.So, no link whoring. But feel fre to have a look at the blog. Its a good one.

  11. Phil 11

    “National opposed this tax cut and most of the other policies listed here”

    As I understand it, they were opposed to the budget as an entire holistic entity. Your wording here is misleading.

  12. Steve Pierson 12

    They voted against the tax cut. They didn’t have to, they chose to. yes, they say they did it because they oppose the government’s economic and fiscal plans in general but that doesn’t change the fact they chose to vote agaisnt the business tax cut.

  13. Sadly most businesses in NZ are not large often overseas owned incorperated companies, but are instead owner run with a few staff or their farmers employing a small numer of causuals/full timers.
    The company tax rate cut to 30% does not a thing for them while they face paying out higher wages and also kiwisaver payments. Pity the poor fools. They should know by now the thing to do is close up shop, or sell the farm (especially if they are sheep and beef), layoff their small work forces and go live in Queensland.

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