Key's 10-point plan for business tax

John Key

National's Finance spokesman, John Key, has used the Herald's Mood of the Boardroom breakfast briefing today to outline a ten-point plan for a more wide-ranging review of business tax.

Mr Key said that the Government's launch last month of its tax plans was "pretty underwhelming".

He said it offered neither a road map for business tax reform nor a more precise report on what money was available to spend on changing business tax, currently at 33cents in the dollar.

"Business in New Zealand is realistic. It doesn't expect a big-bang approach, it knows things take time, that measures can be expensive, and that governments have other priorities as well," Mr Key said.

"But I think business does want to know what is going on, to have some genuine say in this, and to know that the Government is committed to thinking broadly and to making some bold tax changes over time."

The review was demanded by Revenue Minister Peter Dunne as a condition for United Future's support for the Labour-led Government. Mr Dunne billed it as the most significant review of business tax in 18 years.

Finance Minister Michael Cullen said the proposals were intended to help businesses prosper, increase competitiveness, improve productivity and the potential for economic growth.

Under the proposal, one of a range of options in a business tax review discussion document released yesterday, the 2007 Budget could signal a cut in the company tax rate from 33 per cent to 30 per cent.

Mr Key outlined 10 ideas for a wide-ranging review of business tax.

"I am not arguing that my ten would all make the cut, or would be affordable, or could be implemented fully on day one. They do, however, constitute a stronger dose than the proposals in the decaffeinated report we saw a fortnight ago."

The Key 10 are:

* A strategy for any future changes to the company, personal and trust rates, so that changes are co-ordinated.

* Changes to tax on foreign investment, especially non-resident withholding taxes on interest, dividends and royalties.

* Changing the controlled foreign company regime to distinguish between active and passive investments in foreign countries.

* A 100 per cent write-off for all R&D spending.

* A 100 per cent write-off for all purchases of plant and equipment, as is the case in Germany.

* A differential rate for new businesses, for example a lower rate of company tax payable in the first 3 to 5 years.

* Extending the four-year exemption for foreign income of new migrants who satisfy defined criteria.

* Adoption of an Irish-type approach where a low rate is applied to new operations in high-growth sectors.

* Mutual recognition of imputation credits with Australia.

* Reducing compliance costs and the administration of the Tax Act.

"When we gathered here for the Mood of the Boardroom only weeks before the general election, tax was also the centre of debate," Mr Key said.

"On that occasion, Michael Cullen took the opportunity to characterise National's proposed tax plan as a Ferrari when compared to his faithful and reliable old Honda Accord.

"What I think the Government's business tax review shows is that putting a plastic spoiler and a pair of fluffy dice on your Honda Accord doesn't fool anyone into thinking you have a faster or better-performing car. And ultimately, if we want New Zealand to be in the fast lane of the world's economies we need to have a fast car. Its no fun having to keep pulling over to let others overtake us."

- NZHERALD STAFF

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