New Zealand yesterday unveiled a jobs and growth plan that included tax reforms aimed at saving businesses NZ$480 million (US$242 million) to fight the recession.
New Zealand Prime Minister John Key said the package was intended to make life easier for small-to-medium sized companies as New Zealand’s economy, which began shrinking early last year, continues to be shaken by the global financial crisis.
“The tax changes will cost 480 million [New Zealand dollars] over the next four years,” Key said.
“The package as a whole is aimed at urgently improving the business environment by reducing the impact of taxes on firms’ cash flows, improving firms’ access to credit and reducing business compliance costs,” he said.
Although the package paled in comparison to the US$27 billion plan announced on Tuesday by Australia, Key said a balance had to be struck between reducing pain now and not burdening the country’s accounts for years to come.
“It is not always about the amount of physical money that you are spending, it is about the ease of doing business ... If you are solely going to measure things on the fiscal cost of them, you are missing the point,” he said.
Key also delivered a blunt message about New Zealand’s short-term economic prospects after the IMF predicted global growth this year could be the weakest since World War II.
“Even worse from New Zealand’s perspective, it predicts that the advanced economies, which make up most of our trading partners, will shrink by 2.0 percent,” he said.
The package focused on increasing the short-term cash flow of businesses and reducing compliance measures.
The main tax measures saw the removal of a requirement for businesses to factor in a 5 percent growth in income when they pay provisional tax and cutting the penalty for underpaid tax from 14.24 percent to 9.73 percent.
Key said this would increase cash flow by NZ$245 million this year, giving hard pressed businesses a breather.
He said the government would also announce soon the fast-track of building projects on top of already released individual tax cuts that come into effect on April 1.
“The combined effect of this infrastructure spending, together with tax reductions, will mean that New Zealand will experience a fiscal stimulus amongst the top five in the developed world, when compared on a relative basis,” Key said.
Finance Minister Bill English described other measures in the package as technical in nature. They included more generous business tax deductions.