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Business New Zealand says the Budget has not transformed the
business environment, delivering little tax relief for small
enterprises.
Chief Executive Phil O'Reilly says the Budget delivers some welcome
investment in the productive capacity of the economy, including
changes in research spending, broadband and company compliance.
He says the decisions on the international tax regime are generally positive and the government's commitment to increasing skills is particularly welcome.
But he says the thousands of small and micro-sized businesses that pay tax at the top tax rate have received little relief.
"A stronger reduction in their tax burden would have made a significant difference to the nation's rate of economic growth and it is disappointing that this opportunity was not taken."
Also missing from the Budget was any signal about reducing government spending, a key driver of New Zealand's high exchange rate, O'Reilly says.
He says personal tax reductions are positive, though initially small, and apart from the initial impact in October this year, taxpayers will have to wait a year and a half for the next round.
Lost opportunity
The Auckland Chamber of Commerce says the Budget lost the opportunity to align both corporate and personal tax rates to those in Australia.
"This in time would have reflected in New Zealand's standard of living and skills retention," says chamber chief executive Michael Barnett.
The chamber welcomes the tax cuts as going some way to restoring the purchasing power of New Zealanders, given increases in food, fuel and interest rates.
Budget initiatives identified by the Auckland Chamber of Commerce as being positive for business and an investment in the economy include:
- Increased funding for Ministry of Foreign Affairs. The chamber wants assurances that these funds will be targeted towards activity that will grow export opportunities for all NZ businesses.
- Beachheads. This activity is focused on high growth companies entering selected markets and should be further expanded, Barnett says.
- Broadband. The availability of a $500m fund to accelerate broadband access to business, local government and schools and to extend the reach of broadband to under-served regions.
- Simplification of tax compliance and therefore paperwork for SMEs.
- Skills strategy
Patronising
The Northern Employers and Manufacturers Association says the
tax cuts totalling $1.5 billion are patronising and a complete let
down when the government has been running surpluses four times that
for years.
"Its disingenuous to promise tax cuts for the next three years
while the polls say the government won't be around to deliver
them," says Alasdair Thompson, association chief executive.
"Telling people with pockets emptied by rising food and fuel prices
they can only have $12 to $28 a week to prevent inflation is
laughable."
Low wages still an issue
Meanwhile, unions say tax cuts can't make up for low wages and the pressure is on employers to lift them now that workers have some certainty on the size of tax cuts.
Council of Trade Unions vice president Richard Wagstaff says workers are feeling the pinch with high food prices, rising petrol costs and high rents and mortgage payments.
He says tax cuts announced in the Budget, targeted at low and middle income earners, will be welcome for many workers.
But he says the wage gap with Australia cannot be closed by tax cuts.
"It requires ongoing wage rises for New Zealand workers and it does not help workers or the economy if employers try to avoid decent pay rises because take-home pay has gone up through lower tax."
Wagstaff says the Budget shows that even reasonably modest tax cuts still cost a lot of money. About $2.7 billion a year is needed to deliver tax cuts that start at $12 to $28 a week and rise to $22 to $55 a week, he says.
"This means less money is available to build on the improvements in social services we have seen in recent years. Unions are therefore concerned about the long term impact of these tax cuts on the social spending."
Wagstaff says the focus on the Budget is mainly about personal tax cuts but the CTU also welcomes the earlier increase to family tax credits worth $275 million a year, the $168 million over four years for language, literacy and numeracy, broadband investment and funding to reduce the class sizes for new entrants to one teacher per 15 pupils.
