New Zealand First leader Winston Peters says his party wants to cut the corporate tax rate for exporters from 28 per cent to 20 per cent.
Well firstly it is a good thing that Winston recognises that a lower corporate tax rate is a good thing for the NZ economy. It is.
Commerce is more and more globally mobile. Companies can choose where to locate much easier than in the past. For Internet based businesses, even more so.
So all for lowering the company tax rate. But two big issues for Winston’s proposal.
The first is what spending will he cut, to fund a drop in the company tax rate? If NZ is in surplus, then you can cut taxes. But when we are in deficit, adding to debt is a bad idea.
Has NZ First even costed what their policy would be? That should be the first question from media – how much will this cost, and how will you pay for it?
The second issue is why exporters only? It is an arbitrary distinction. What if a manufacturer produces stuff for both domestic and international markets? Are they at 20% or 28%? Is Fonterra at 28% or 20%? My polling company has some international clients. Does that make me an exporter that can claim the 20% tax rate?
Tax systems are best kept simple. Two separate levels of company tax is a bad idea.
If Winston proposed an across the board lowering of the company tax rate to 20%, what it would cost, and how it would be funded – then people should take it seriously.
Also worth recalling that Winston, as Foreign Minister, opposed the FTA with China, launched a nationwide newspaper and billboard campaign against it. He campaigned against an FTA which increased exports by $5 billion a year. So much for his concern for exporter.s