Manufacturers back call for targeted business tax cuts

Manufacturers have joined the call for lower company taxes.

The Canterbury Manufacturers Association welcomed a report by Business and Economic Research Ltd analyst Ganesh Nana suggesting a zero company tax rate but only for profits reinvested in the company.

Profits distributed to individuals or other corporates should continue to be taxed, Dr Nana said.

Dr Nana put the suggestion forward as an alternative to suggestions that a payroll tax be introduced to offset revenue lost from cutting the corporate rate.

"To me, penalising labour to get more investment in capital equipment and machinery is travelling down a dangerous road," he said. That was especially so in light of skills and labour shortages.

A payroll tax would especially hurt companies with highly skilled, highly paid staff, he said.

Instead, a zero business tax on capital investment would make a bold statement about New Zealand's desire to be competitive, Dr Nana said.

"If we are serious about a business tax review in the context of productivity and competitiveness, then I believe changes to 30 per cent or even 20 per cent to be far too tentative.

"It needs to be something that puts us noticeably apart from others in the game."

Canterbury Manufacturers Association's chief executive John Walley agreed targeted tax relief for companies would be more effective than general cuts and cost less.

"A tax system that supports companies in their spend on research and development spend, investment in productive plant, staff development and more investment in early stage high technology opportunities that will help increase our export receipts.

"We hope that the imminent tax review will see some 'targeted' based policies."

- NZPA