NZ First says it’s taking a “much-needed bold step” by campaigning to lower the company tax rate to 20% from 28% for companies with turnover under $30 million.
Making the announcement on Thursday, the party says: “This is a much-needed bold step to encourage more investment by our small businesses that will create higher productivity, expand their business, and employ more New Zealanders.”
Currently most companies and organisations pay income tax on their profit at a rate of 28%. By focusing on turnover, NZ First’s proposal focuses on the money a business takes in from sales over a set period.
NZ First says corporate taxes can reduce productivity, especially in entrepreneurial and innovative sectors.
“Lower company tax rates can improve long-run productivity growth, and stimulate the creation of new companies,” the party says in a statement. “A lower tax rate leaves additional cash available for reinvestment and reduces reliance on bank debt.”
NZ First estimates the tax cut would have an initial annual fiscal cost of approximately $1 billion and this would “be more than covered” in the medium term by “more companies collectively paying a lower tax rate, higher employment, a growing economy, and more spending.”
“This is about moving away from policies that give short-term sugar hits to consumers and move toward proper long-term investment in businesses that will grow our economy and increase productivity, increase labour demand, employment, and wages,” NZ First says.
“New Zealand needs smart long-term thinking to turn our economy around and get our economy growing.”
Other parties have also proposed changes to the company tax rate with the Green Party wanting to increase the rate to 33% for the 0.7% biggest corporations like energy companies, banks and supermarkets. This would apply to companies with an annual turnover of over $30 million, but the Greens would keep the corporate tax rate at 28% for small and medium enterprises “to level the playing field for local businesses.”
Te Pāti Māori, in its Kiwi Tax Plan policy, wants to return the company tax rate back to 33%.
Labour would keep the company tax rate at 28% aligning its capital gains tax policy with this rate, and National is campaigning on no new taxes. The election is on November 7.
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