Tax cuts top business wish list for Thursday

JIM EAGLES comes up with some last-minute advice for the Minister of Finance.

Attention Finance Minister Michael Cullen. Have you thought about a tax cut?

It may be a bit late in the day to point this out, but as far as Auckland business is concerned lower taxes should be the focus of this week's Budget.

A special, pre-Budget business survey conducted last week indicates that, if all the announcements, hints and leaks have painted an accurate picture of the policies to be unveiled on Thursday afternoon, then business is not going to be very happy.

Asked what they would like to see in the Budget, 400 members of the Auckland Regional Chamber of Commerce, covering a random sample of small, medium and large firms from throughout the region, indicated that their priorities were completely different from the Government's.

Top as far as business is concerned is a cut in the rate of company tax. Just to underline the message, second on the list is a cut in the level of personal tax, and third is a reduction in Government-related charges and compliance costs.

The rate of company tax has, of course, been 33c for over a decade. But with the Australian Government having last week cut its company tax rate from 34c to 30c, Auckland business people obviously think it is time for New Zealand to do the same.

Of the 400 businesses surveyed, 130 said a cut in company tax was their number one choice, and for a further 74 it was the second choice, making it easily the most popular policy option.

Commenting on the survey findings, chamber chief executive Michael Barnett said there was an obvious need for Dr Cullen to at least match the Australian rate.

"Australia's move gets it ahead of other small, high-skill nations that both our countries are competing against for talented workers and new knowledge-driven businesses," he said.

"We are now even further behind Australia, and that is simply unacceptable for Kiwi businesses and, I'm sure, most New Zealanders."

A reduction in the rate of personal tax was also popular among those surveyed, with 92 making it their first choice and 74 the second choice for what should be in the Budget.

That is presumably not what Dr Cullen wants to hear, since his first Budget, last year, increased the top rate of personal tax from 33c to 39c.

The third priority for business, action to lower the cost of Government-related charges and compliance costs, has been receiving some attention from a working group set up by the Coalition.

But little has yet emerged from the group, and the Budget is not expected to contain any major initiatives on that front.

The Government could, however, be heading in the right direction if the Budget contains further incentives for research and development.

The businesses surveyed ranked increased encouragement for R&D as their fourth-highest priority.

Dr Cullen may also get the nod if he starts putting into practice his talk of measures to promote saving. Incentives for saving were fifth on the business wish list.

But the Finance Minister has already moved in the wrong direction, from a business perspective, when he said last week that the spending cap would have to be raised.

Far from approving increased Government expenditure, the businesses surveyed made a cut in state spending sixth on their list of what Dr Cullen should do.

Some policies which seem certain to be in the Budget do not seem to rate highly with business either.

These include building more state houses and the regional development initiatives of Deputy Prime Minister Jim Anderton.

And the likelihood of increased spending on infrastructure and improvements to tertiary education to ease skill shortages rated poorly as well.

That is in marked contrast to a study involving 54 business leaders and 14 community leaders conducted by Competitive Auckland.

Asked what should be done to enhance the environment for business in the region, 24 per cent of the business leaders wanted the transport system improved, 11 per cent felt the region should be covered by a single local authority and 9 per cent opted for a coordinated approach for economic development.

The reaction of community leaders was remarkably similar.

Still, if there is a bit of disagreement among business people about how important it is to improve the transport and tertiary education systems, there can be little doubt about what is their top priority: lower taxes and charges.

The message is coming through loud and clear.

Will Dr Cullen listen? Probably not this year. How about next?

* In tomorrow's Business Herald, CTU president Ross Wilson and Alasdair Thompson, chief executive of the Employers and Manufacturers Association (Northern), on what the Budget should contain.