Oz budget tax backdown good for NZ
The Australian governent's decision to abandon a promised 1 per centage point company tax cut may help make New Zealand a more attractive place for investment according to a tax expert.
The Australian Budget was delivered on Tuesday night, offering cash hand outs and tax breaks for families and low income earners, but business missed out on a rate cut to 29 per cent.
New Zealand's company rate is 28 per cent down from 30 cents in the dollar in the past.
PricewaterhouseCoopers chairman John Shewan said the headline tax rate for companies was just one influence on investment, and Australia holding that rate up could help New Zealand by comparison.
''The general pointers tend to favour New Zealand over Australia at the moment,'' Shewan said, outside the mining sector.
At a recent meeting of business leaders in Australia the mood was ''very positive'' about investment in New Zealand.
''Tax rate was one issue- but just one issue. The (New Zealand) 28 per cent rate was regarded as attractive, but there are other factors- the general environment is considered more business friendly,'' Shewan said.
Tax rates were not the ''be all and end all'' for business, but it was a factor.
''It is helpful that we will retain that slight competitive advantage (on tax), but it is not going to cause an avalanche of new investment,'' he said.
PWC was hearing talk of further Australian investment in New Zealand. The cost advantages of operating in New Zealand instead of Australia were now well understood in Australia.
''I think it is a good thing, because if we want to lift our growth prospects we need to have more investment,'' Shewan said.
New Zealand labour costs were more competitive than Australia, with wage rates 20 to 25 per cent lower, and a cheap exchange rate advantage with the cross rate at A78c yesterday.
The wide gap on the currency was expected to continue for some years, making it easier to plan new investments.
It was also easier to do business in New Zealand and firms did not have to deal with state as well as federal government regulations. The Auckland single council was also a ''breath of fresh air'' in the planning process.
As a result, companies that already operated on both sides of the Tasman were more likely to invest new capital in existing New Zealand offshoots from manufacturing to call centres, than a year ago, Shewan said.
''That's all good stuff for New Zealand,'' he said.
The Australian Budget carried out a lot of tax redistribution of the government pie, with help for various sectors, in much the same way as New Zealand did with Working for Families a few years ago. The basic direction on tax in the Australian budget was ''diverting'' from New Zealand he said.
The big challenge was for Australia to extract tax revenue from the mining and oil and gas sector, ''without frightening off investment''.
The Australian government had backed off more extreme tax measures, but had left the company tax rate up, instead of cutting it by 1 per cent as earlier expected.
''That reflects the fact that they have some major corporates in an area that is still booming (mining),'' Shewan said.
New Zealand's Budget comes out on May 24 but is not expected to reveal any big surprises.