KEY POINTS:
Chief executives of major New Zealand companies are quietly savouring the prospect of company tax cuts from April 1 next year - but they're getting impatient over the Government's failure to deliver personal tax cuts.
That's shown in the Herald's annual Mood of the Boardroom survey which reveals a strong desire by New Zealand's chief executives to get to grips with issues impacting on this country's international competitiveness.
Chief executives believe the Government's 'run out of steam' and have already factored in a Labour loss at the 2008 election.
But that doesn't mean they're not keen to make use of the best parts of Finance Minister Michael Cullen's latest Budget - particularly the tax changes resulting from the Business Taxation Review.
Many intend to plough their upcoming company tax cuts back into developing their businesses and take advantage of the tax credits for research and development expenditure.
But the CEOs are not sure that Finance Minister Michael Cullen's latest Budget has done enough to address our relative competitiveness with Australia.
"The lack of action on personal tax rates or thresholds is a serious gap,'' said Deloitte chief executive Murray Jack. "We will have to wait for 2008 to understand the tax strategy, if any.
"In the meantime, Australia, continues to provide a share in their economic gain for most if not all taxpayers. The contrast is stark.''
The Budget's focus on saving and investing has hit a chord with many chief executives who have to go offshore to access international capital to expand their businesses.
Ninety per cent of respondents to a pre-Budget question said New Zealand's level of savings should be higher.
But Cullen's decision to compel companies to match their employees' KiwiSaver contributions - without under-taking prior consultations with business - has astounded many CEOs.
They rated the Budget's KiwiSaver announcement almost as important as the upcoming cut in the company tax rate from 33 cents to 30 cents.
"To have the KiwiSaver dubbed the 'rabbit out of the hat' shows this budget is all about politics,'' said Simpson Grierson's Rob Fisher.
Fisher argues the savings scheme is discriminatory as not everyone qualifies. "Of those who do, many will not be able to afford to join.''
More than 80 per cent of the 70 chief executives who responded to the Herald's 2007 survey want cuts to personal income taxes.
"It's arrogant to think they can spend our money better than we can,'' said a manufacturing CEO.
Several suggested the Government should follow the McLeod Taxation Review's call for a lower, flatter structure with a medium-term target of reducing all income taxes to 25 per cent or below.
Others saw the necessity to cut taxes to reduce the amount of cash flowing into Cullen's Budget surpluses and curb increases in Government spending.
Nearly nine out of 10 CEOs are concerned about New Zealand's international competitiveness. They cite skill shortages and the loss of talented staff to Australia as particularly worrying.
Many are concerned at the growing personal income tax wedge between New Zealand and Australia. Deloitte analysis shows that any New Zealander on a pay rate of less than $180,000 will pay less personal income tax in Australia. From next year that income level jumps to more than $200,000.
"We simply are not doing enough, nor are we keeping our best,'' said ABN Amro chief executive Simon Allen. "We are way below global benchmarks in terms and conditions and the gap is widening.''
Air NZ chief executive Rob Fyfe said New Zealand needs to create a policy framework and business environment that plays more to NZ's strengths - nimble, innovative, creative, supportive of R&D, genuinely supportive of productivity improvement, technology friendly, attracts offshore investment. "Today we pay lip-service to many of these concepts,'' said Fyfe.
A motor firm chief executive put forward his own international competitiveness plan: Dump the Reserve Bank Act. Replace Working for Families with a lower tax scale at the bottom end. Introduce a carbon tax. Promote and protect the international brand value of New Zealand - clean, green sustainable. Engage in bipartisan talks to ensure bold legislation affecting the country's future is not shoved in the too hard basket.
Other suggestions to boost competitiveness include cutting the company tax rate to 20 per cent and progressively there afterwards.
Begin to understand the implications of their policies over the last eight years.
