Survey spotlights NZ corporate tax rate

By IRENE CHAPPLE

New Zealand's corporate tax rate is now almost 3 percentage points above the international average, says a KPMG survey.

The survey of 68 countries showed that New Zealand's corporate tax rate of 33 per cent is above the OECD average of 30.68 per cent and the European Union's 31.68 per cent average.

Seven of the 30 OECD countries had decreased their corporate rates over the last year, while most had remained steady.

Germany was the sole OECD country to increase its rate, which is now 39.58 per cent.

Japan has the highest rate in the OECD, at 42 per cent. Countries that cut their tax rates included Ireland, which knocked its down from 16 to 12.5 per cent and Belgium, which decreased its rate from 40.17 to 33.99 per cent.

In Latin America, tax rates were an average 30.55 per cent while Asia-Pacific countries averaged 30.36 per cent.

KPMG senior tax partner Brahma Sharma said New Zealand's tax rate should be a maximum 28 per cent, to undercut Australia's rate of 30 per cent.

Sharma said he had spoken to clients over the past year - including one looking to establish a processing factory and another a regional distribution centre - which had taken their business to Australia after being disheartened by New Zealand's corporate tax rate.

Sharma said presuming all other things were equal, New Zealand needed to offer a better tax rate to attract corporates from Australia.

To compete with countries outside its close geography, New Zealand should offer a rate closer to 20 per cent, he said.

While other factors contributed to corporates coming to New Zealand, Sharma said the question about tax was always the first asked.

New Zealand has had a 33 per cent corporate tax rate since 1989, before which it was 28 per cent.

Sharma said it was not surprising countries had lowered their tax rates considering the global competition for capital. Those making tax policy needed to be less concerned about the potential loss of revenue and more concerned about attracting investment.

Change appeared unlikely under the present Government, but "we need to keep focusing on it. You can't just give up."