Mood of the Boardroom: 'We're sending prospective business elsewhere'

'We need to do what is right for us - not just match Australia' said Peter Thompson. Photo / Supplied

Almost two-thirds of respondents to the Herald's CEOs survey — 64 per cent — believe New Zealand's headline corporate tax rate is not sufficiently internationally competitive to attract foreign investment.
Some 27 per cent are not concerned and 9 per cent are unsure.

In 2020, New Zealand had the seventh highest headline corporate tax rate of 38 OECD countries, and some of those with higher rates have plans to reduce them in the future.

"This plus our immigration policy is sending prospective business opportunity to other countries like Australia," said real estate boss Peter Thompson. "We need these people bringing their intelligence and businesses to New Zealand."

A high-profile director commented they regularly came across companies structuring their affairs so as to minimise the income they report in New Zealand because of NZ tax rates.

A major funds boss challenged the premise of the question: "What about the total tax impost and general ease of doing business, as opposed to a focus on the headline tax rate? This question is designed to elicit a particular answer."

Others underscored the imputation regime makes the effective New Zealand corporate tax rate lower than that for some NZ investors.

Similar response numbers were elicited when they were asked whether the Government should consider a phased reduction of the headline corporate tax rate to 25 per cent by 2027, to match Australia.

Some 67 per cent say a reduction should be considered, 17 per cent say no, and 16 per cent are unsure.

"Anything higher than the current level of 28 per cent is uncompetitive," said Mainfreight's CEO Don Braid who runs a global logistics business. "I am unsure we need to lower further."

Said a director: "We are part of a global market and need to be internationally competitive — including with tax rates, to make New Zealand a destination of choice."

"We need to do what is right for us — not just match Australia. It may be quicker or slower or could go lower or not as low; but it has to be what is best for New Zealand," said Thompson.

CEOs were also asked to look at the global tightening of policy setting that is occurring. A further natural effect of international stimulus and related measures is a heightened awareness that all taxpayers need to pay their fair share. They were asked to consider the initiatives that US President Joe Biden is looking to introduce to ensure corporate America pays a fairer share which include increasing the US corporate tax rate to 28 per cent and increasing the minimum tax on US multinational corporations to 21 per cent.

Asked if they thought this might influence policy-making in New Zealand, 42 per cent said it wouldn't, agreeing with the proposition that NZ's tax settings were already tighter than most.

Some 34 per cent thought the Government would use the Biden impetus to tighten NZ tax setting further; 9 per cent were unsure.

"The US had a ridiculously high corporate tax rate — 36 per cent — but umpteen loopholes, with the result that any company with a smart accountant did not pay anything like 36 per cent," said a banker.

"Reducing the corporate tax rate in the US was a good thing to have done, though I suspect that too many loopholes still exist.

"We already have a 28 per cent corporate tax rate, which is high compared with most of the countries in Asia."

"Sadly, our lot will follow through," — infrastructure boss.