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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.”