Craig Stobo. Photo / Paul Estcourt
More than half, 54 percent, of business leaders surveyed for this year’s board sentiment believe the corporate tax rate is uncompetitive when it comes to attracting foreign investments.
third of respondents, 38 percent, say they are not worried and 8 percent are unsure.
“At first glance, 28% is too high. But we only have one corporate income tax, not the double taxation that is common in many other countries,” says a finance industry president.
At 28%, New Zealand’s nominal corporate tax rate is above the global average of 25.2%. It is significantly higher than the UK at 19% or the EU Member States which average 21%. Closer to home, Australia is moving to a corporate tax system where most businesses will pay 25%.
About two-thirds, 64%, of survey respondents believe the government should consider a gradual reduction in the corporate tax rate to 25% by 2027.
This will see our corporation tax match Australian rates. About 22% don’t want this to happen and 14% aren’t sure.
A gradual reduction is backed by an airline industry CEO who comments: “Capital and talent are very mobile, don’t learn that at your own expense.”
The executive chairman of a fund manager said the move doesn’t help domestic businesses: “Our tax rate is effectively the highest individual tax rate.”
Professional director Craig Stobo wants to see the government consider the idea, but says it shouldn’t be done in isolation from other tax rates, including personal, trust and PIE tax rates. He is not alone; an energy CEO says any changes should be part of a broader review of taxation and how it works. A business owner wants to see “a better strategy, not an isolated one-off solution.”
Labor tax policies
There is some agreement with government tax policies that impact the real estate and housing market. Beyond this sector, support for initiatives is mixed at best.
The most popular real estate-focused policy is the exemption that build-to-rent investors will get from the interest deductibility rules. This was announced earlier this year by Housing Minister Megan Woods. About two-thirds of respondents, 63 percent, say they have some level of support for the plan while 20 percent have no support for it.
Poll responses are similar for the historic 10-year build-to-rent exemption with 23% of respondents having no support for the policy, 24% saying they “somewhat support the policy”, 23% saying they have reasonable support for and 12% give it their full support.
A quarter, 26%, of respondents are unsure of the planned residential loss quarantine rules, while 29% do not support them.
Last year, the government announced it was extending the clear line test for residential land disposal tax to 10 years.
The initial test, set by the previous national government, was two years, then extended to five years.
More than a third of survey respondents, 37 percent, say they have no support for the extension. Almost the same number give him either reasonable (18%) or full (17%) support, with 25% saying they somewhat support the measure.
The CEO of a real estate company says: “Bright-line is a test. This should not necessarily mean that capital gains are taxed.
“It’s good that these transactions are reviewed and capital gains schemes taxed if there is evidence of trades.”
Recent legislation to limit interest deductibility for investment in residential property that can be used as long-term accommodation is not popular with New Zealand entrepreneurs; 45 percent say they have no support for the move.
Speaking of property tax initiatives in general, the director of a food and beverage company describes them as: “Absurdly complex workarounds. A low-rate property tax or a capital gains tax is a much better and more effective approach.”
A professional manager says he would rather see a simple capital gains tax, while a bank CEO says, “Honestly, have the guts to put in a capital gains tax.”
Red Shield CEO Fabian Partigliani said: “Fixing housing supply should be the primary focus.”
There is little enthusiasm in corporate boards across the country for leaving the top marginal tax rate at 39%. The rate applies to high-income earners who bring in more than $180,000 per year. Almost half of those polled, 48%, say they do not support the policy, with only 11% giving it their full support.
Foodstuffs North Island CEO Chris Quin says, “The 39% marginal tax rate is acceptable if government spending is efficient and the lower tax rate is reduced through lower government spending. In this way, we can reduce the gap between revenues and costs without causing inflation. “.
The government’s plans for various wealth disclosure initiatives are not supported by nearly half, 47%, of business leaders surveyed, with one director describing the measures as: “A socialist-Marxist campaign that brings New Zealand in the Dark Ages”. Another director says, “The Wealth Project is misguided and simply drives the wealthy to hold their assets offshore.”
The government’s planned social unemployment insurance scheme is unpopular, with more than half (62%) of survey respondents saying they did not support the scheme. Only 19 percent say they support him.
An energy chief executive responded to Labour’s tax policies with an alternative approach: “I think there should be a reintroduction of inheritance tax. You shouldn’t be able to enrich future generations without put the effort in. Taxing income is a retrograde tax, it is better to tax consumption more.”
Green tax policies
The Greens’ tax policies were not popular with survey respondents. Nearly 90% say they don’t support the idea of a wealth tax on net worth over $1 million.
When asked if they support a wealth tax as a way to broaden the tax base, respondents were split 80:20 against the idea. Among those who oppose the idea, 41% are generally against it, while 8% say: “the budgetary situation does not require such a measure” and 31% say: “is largely symbolic and does not really attack wealth inequality”.
Roger Partridge, chairman of the New Zealand Initiative, warns: “The Green Party’s proposed wealth tax will lead to capital flight, which is the last thing New Zealand needs.” Two respondents said they would prefer to see a capital gains tax while two others say an inheritance tax or inheritance tax would be a better option.
More than nine in 10 business leaders say they do not support the Greens’ idea of introducing a maximum personal tax rate of 42% for anyone earning more than $150,000. One suggests that the $150,000 threshold is far too low. Communications company CEO says, “Their policies aren’t aiming high enough. They should be taxing the mega-rich, not the hard-working Kiwis.”
National tax policies
National’s plan to index personal tax rates has the full support of 42% of survey respondents, with 41% saying it has reasonable support. Only 2% do not support it. There is less enthusiasm for the opposition’s idea to repeal most Labour’s property taxes. A third of respondents, 34 percent, fully support the plan, while 1 percent have no support.
Opinions are more divided on the proposal to repeal the 39% tax rate, with 41% of the sample saying they fully agree and 23% saying they do not support the plan. A tech company president says he thinks “the 39% cut might be a politically tough sell. I think the tax cuts for true middle-income people are probably better.”
Two-thirds of business leaders, 62%, say they have increased their levels of concern about wealth inequality after successive waves of quantitative easing and monetary policy responses have raised the value of many assets. A third, 35%, say they have similar levels of concern as in the past. A business executive says, “This government has ironically increased wealth inequality. They don’t know what they are doing.
Seven in 10 New Zealand business leaders believe the primary role of government in tackling wealth inequality should be to “ensure appropriate minimum levels of well-being and income”. In other words, a reinforced safety net. About 13% of those who answered the question believe that taxing wealth and assets in addition to income is the answer. Nobody thinks that taxing income above 39% is a viable option.
“Focus on economic growth and job growth that will increase incomes,” says a food industry CEO. An infrastructure boss has a similar comment suggesting the government is focused on: “Building a competitive economy and increasing productivity.” Chris Quin, CEO of Foodstuffs North Island, said, “Reducing the tax burden on low-income people to better balance income and costs.”