Tax changes could hammer cost of doing business in NZ

The cost of doing business in New Zealand could take a hit if Victoria University’s Tax Working Group suggestions go ahead, according to some property experts.

The Property Council of New Zealand commissioned financial advisers KPMG and tNZIER to produce reports about the impact of the proposed changes.

If depreciation were abolished and land taxes applied, it would have the same effect as if the productive sector’s taxes were increased, making it more expensive to do business in New Zealand, the reports found.

According to Property Council chief executive Connal Townsend, commercial property is the infrastructure of business and is fundamental to productivity, international competitiveness and growth.

“But more than 80% of commercial property is owned or occupied directly by business owners and the proposals around depreciation would be the equivalent of an effective rise in tax from 30% to 32%,” Mr Townsend said.

“That’s at a time when at a time when government and the Tax Working Group have rightly identified that New Zealand needs to be reducing corporate tax rates to remain internationally competitive.”

Mr Townsend said the Tax Working Group expects to raise around $1.3 billion from its depreciation proposals, and these reports shows about $1 billion of that will come from the commercial sector.

“We have major concerns about that additional cost to business but also in the model itself. Based on our collective industry knowledge, we believe there may be as little as a quarter of that figure available in potential revenue to the IRD depending on the figures used by the Tax Working Group,” Mr Townsend said.

“Clearly the numbers need further work.”

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8 Comments & Questions

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Never trust a report put together by a bunch of academics, how do you think we got ACC, Working for Families and all the other looney programmes which drag us down. The Government needs to put a working party together of people from all streams of society when investigating proposals for future changes about anything. Academics live in a different world, they have never had to ever worry about where next months pay cheque may come from, they have a theoretical and naive view of how the world should be.

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I totally agree with Zoro - the road to hell is paved with good intentions and these protected few don't realise that artificial incentives don't always work out the way you planned. Just ask an economist from the old Soviet Union.

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Rearangement of musical chairs, mainly in favour of those who never paid taxes, but getting benefits.
Best bumbling was by mother of all budgets, as meddled into super of those who worked hard, than shown the door, which later was reversed... but causing a lost faith in young, and an initiative for capable to see greener grass overseas. I suppose will be similar initiatives again of some sort for sectros of business or/and to population too.

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Furthermore, who would rely on a report prepared by, or relying upon, the NZIER. They have to be some of the biggest and most out-of-touch looneys in the economic forecasting business.

This is the same group of nutters that in early 2009 they were on their soapbox proclaiming the recession was over and there would be no further fallout.

They are wallies of the highest order! It amazes me that people still refer to them, and or seek their opinion. They are a joke!

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'Property experts"? Dont make me laugh - its the Property Council you are talking about, they are a lobby group for the industry, of course they will seek to attack anything that might harm the interests of their members.

Attack the lobbyists, not the academics who have come up with some great suggestions.

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Only a small minority of the Tax Working Group was made up of academics. Perhaps you should take another look at the people who comprised the group.

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And was the majority of business SMEs adequately represented on the TWG

NO it was the big end of town with Speedo Weldon and mates.

Until we get a grip and realise SMEs are the driver of employment and growth we wont make any progress

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I have always said that "Reality TV programmers should host a programme whereby, Academics, CEO, Politicians etc had to run a small - medium size business in the real world with real problems that occur daily. I don't believe many would be up to the task. I would love to write the list of problems and jobs that they could perform.
We could have opposing teams of the above versus the business people.

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