web analytics

Just asking

Written By: - Date published: 10:40 am, December 11th, 2009 - 11 comments
Categories: class war, tax - Tags:

It has been treated as gospel that if the Australians, for inadequately explained reasons, drop their corporate tax rate from 30% to 25%, then we, for inadequately explained reasons, will have to follow suit.


Where is the proof that the $900 million a year that cut would cost us is justified? Did the economy fall apart when we had higher corporate tax rates than us for most of the last decade? Do the Aussies feel compelled to cut their top income tax rate from 45% to 38% to match ours for fear of losing their ‘best and brightest’ to our shores? Where is the proof that this would be a better expenditure of money than, say, giving every New Zealand taxpayer their first $2,500 of income tax-free, which would cost the same amount? Where is the proof we wouldn’t be better off spending that $900 million a year on green technology and infrastructure, or on health, or on education?

Why should we take it on faith that the corporate rate must come down if the Aussies drop theirs or, for that matter, that revenue raised by a land tax must go to cutting income taxes for the most well-off?

Why isn’t anyone asking these questions? Why in their otherwise excellent, informed, and intelligent pieces on tax reform do Vernon Small, Fran O’Sullivan, Rod Oram, and others fail to challenge the core assumption – that the benefits of tax reform must go overwhelmingly to the wealthy. Why don’t they ask ‘why’?

11 comments on “Just asking ”

  1. snoozer 1

    Marty, don’t you know by now? Premises never get questioned by the media, they are just blindly accepted as truth.

  2. Bored 2

    Ask who benefits? Yes that same group who also by rare dint of coincidence also own the media (you have to believe these guys though because they really are so disinterested). Let’s face it, when there is a buck to be gained from tax, the facts, the truth and fairness come a very poor second.

  3. Our tax rates are low by international standards.

    It makes you wonder. Perhaps countries with well educated and healthy citizens and properly funded infrastructure function better?

  4. Clarke 4

    If the logic of alignment with Australia made any rational sense, we would have raised our compulsory superannuation contributions to 9% of our take-home pay by now.

  5. ieuan 5

    The business tax rate does not just affect ‘corporations’, the vast majority of businesses in New Zealand are small, 10 or less people.

    Taxing business profits essentially taxes the money that is left in the business that would otherwise be used for funding growth, paying back debt etc.

    Money that is taken out of the business (dividend, wages etc) is then taxed as income at the ‘normal’ rates.

    In a nut shell the reason the government want to align the Australian and New Zealand rates is to stop the drift of companies to Australia, attracted by a (potentially) lower tax rate.

    • lprent 5.1

      Most of the ‘analysis’ focuses on the headline rate, and has a tendency to ignore the multiple layers of taxation. For instance state taxation in aussie. Higher admin costs with the less comprehensive GST. etc etc

      Various businesses I’ve been associated with have looked at setting up operations in aussie. They’ve usually balked at the higher rates of effective business taxation. You can get around a lot of it with a good enough accountant. But that usually costs as much as you save.

      The effective rates of tax combined with the tax compliance costs for businesses in aussie are somewhat higher than they are here.

      • Rex Widerstrom 5.1.1

        Yeah compliance costs are high and tax law is even more hellishly complicated than is NZ’s. And I’m not a tax lawyer I just run a couple of small businesses.

        But it seems that one of the reasons for the complexity is that Australia aims to target deductions to those who need / deserve them, ranging from business people to low income earners.

        One example: starting a fledgling business I was delighted to learn that it’s paltry earnings in the first year meant I got an “entrepreneur’s allowance”.. not much, but in an environment where no one is a venture capitalist it was nice that the Australian government recognised I was giving it a go.

        Unless you’re making or retailing food or something the GST exemptions aren’t a huge issue. I do my own accounts, use the ATO’s own accounting software (admnittedly fairly rudimentary, but free and tailored to their reporting requirements) and their online lodgement tool which “interviews” you to help make sure you get your taxes right.

        Of course bigger businesses would have much larger compliance costs, and state taxes are a pain, especially when they’re wasted by incompetent state governments.

        But I don’t think it’s quite as clear cut as the impression you’ve been given Lynn. Inertia plays a big role in these decisions, whether acknowledged or not. Easier to stay with the status quo unless pushed.

        And a higher corporate tax rate could well be that push…

    • snoozer 5.2

      wouldn’t they be attracted to NZ by the fact that we’re one of the easiest countries in the world to do business? Way ahead of Aus.

      And it’s simplistic to look just at the corporate tax rate. There’s payroll tax etc.

  6. ieuan 6

    I think one of the reasons companies would rather be based in Australia than New Zealand is they would prefer to be listed on the Australian stock exchange rather than the New Zealand one.

    Our stock exchange is a joke, when did we last have a substantial new listing?

Links to post

Recent Comments

Recent Posts

  • Tokelau Language Week reminds us to stay united and strong
    Staying strong in the face of challenges and being true to our heritage and languages are key to preserving our cultural identity and wellbeing, is the focus of the 2020 Tokelau Language Week. Minister for Pacific Peoples, Aupito William Sio, says this year’s theme, ‘Apoapo tau foe, i nā tāfea ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    3 weeks ago