Flat business tax floated to aid Canterbury

MICHAEL BERRY
Last updated 15:58 24/01/2013

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A flat business tax rate of 10 per cent could help Christchurch flourish and speed up the city's recovery, business commentator Sam Stanley says.

A former foreign exchange trader and businessman, Stanley is now head of business strategy and sales at stock market operator NZX in Wellington.

Today he floated the idea of the Government introducing a flat tax of about 10 per cent for a number of years to encourage large companies to invest in Christchurch, increasing employment and boosting the regional economy.

It would also support start-ups in the city and help existing businesses that were struggling, he said.

Stanley stressed his views did not represent those of NZX.

The former Cantabrian has been living in London for a decade and returned to New Zealand almost 18 months ago.

At the time of the earthquakes, the idea of creating a low-tax area seemed a good one, but he had not heard it discussed since, he said.

"The first thing that came to mind was, wouldn't it be good to bring in a really low corporate tax rate like they've done in other places," Stanley said.

Ireland instituted a flat corporate tax rate of 12.5 per cent in the mid-1990s which gave life to the Celtic Tiger, a period of unprecedented growth for the country fuelled by foreign investment.

Singapore also benefits from low tax rates.

Stanley thought it would be a more efficient way of paying for the recovery than by tax hikes or new levies.

It would also "take the burden off the Government", he said.

If it worked there would be an influx of businesses from overseas and other parts of the country, he said.

"It would stimulate business activity in Christchurch and start an economic recovery much quicker than the Government would be able to do," Stanley said.

"And two years on that's still the case."

He acknowledged it would be an unorthodox move and could be seen as unfair by other regions, but it would be a response to an extraordinary situation and for a limited amount of time.

"It's the sort of thing that I'm surprised that it hasn't actually been discussed," he said.

Although the tax rate would be dropped, he believed an influx of new business would mitigate the loss in revenue for the Government.

If it did not offset it completely, a speedier recovery would be worth more than the forsaken tax, he said.

Stanley admitted a flat tax could be susceptible to abuse from unscrupulous companies, but said it was simply an idea that should be looked at.

If it was viable, potential problems could be ironed out later, he said.

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"I think it's an interesting idea to consider as a temporary incentive for a new economy that needs assistance and something that's not burdensome for Government," he said.

- The Press

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