Tax change foolish, say manufacturers

The Government's move to scrap accelerated depreciation write-offs on new plant and equipment has been described as "stupid" by a manufacturing industry group chief.

New Zealand Manufacturers and Exporters Association chief executive John Walley said it was not a change a government with the correct approach to the productive industries would make.

"[Scrapping accelerated depreciation] doesn't recognise that other jurisdictions offer substantial support for investment in plant and equipment," he said.

Walley said equipment did not necessarily depreciate because of use, but because of upgrades made by competitors. Garth Wyllie, the Employers and Manufacturers Association's executive officer for tax policy, said there needed to be incentives for manufacturers to invest in new machinery.

"What you could say is that [the Government's decision] could be harming productivity in some areas - particularly when we're talking about manufacturing equipment.

"Our argument has always been to incentivise productive industry in any way possible to increase productivity ... plant and equipment generally does improve productivity," he said.

Bruce Goldsworthy, also of the Employers and Manufacturers Association, believed there was still time for businesses to lobby the Government on retaining accelerated depreciation.

"We will be looking to talk with, or consult with, the IRD on this," he said.

Fisher & Paykel Healthcare chief executive Michael Daniell said the Government's lowering of the corporate tax rate from 30 per cent to 28 per cent would be helpful for the company, and set aside capital to invest in future growth.

But gains made in the lowering of the corporate rate would be offset by changes made to depreciation laws.

"We're yet to work through the detail of that," he said.

ACCELERATED DEPRECIATION

Extra depreciation on top of the base rate. Businesses were able to claim 20 per cent accelerated depreciation for new plant and equipment (everything other than land and buildings). Businesses can no longer claim the accelerated rate on assets purchased after Budget day.