National promises 16-month tax changes

Judith Collins.
Judith Collins.
Tax policy battle lines have been drawn between the two major political parties.

Yesterday, the National Party announced its policy lifting tax thresholds for a period of 16 months from December to March 2022.

National says this would put $46.50 each week in the pocket of the average earner.

The tax cuts would be paid for out of the $14billion Covid Recovery Fund the Government had set aside for the event of a second wave.

Other key aspects of National’s economic plan are a revised debt repayment target, more generous tax write-offs for new business assets and a tighter budget for new spending.

Findex managing director and tax specialist Scott Mason said National’s policy was a clear differentiation from Labour’s move to tax wages above $180,000 at 39%.

"You do have to look at it in the current context ... [it] is really directed to supporting not only the taxpayers themselves in terms of meeting their bills — but particularly the retail and consumer services market and potentially domestic tourism.

"Those industries are going to be the biggest winner."

He said there was a risk that the tax cuts would not actually be spent in the economy and merely saved or used to pay off debt.

The $150,000 write-off for capital investment mirrored an Australian policy, and double appreciation for investments over that was a good way for National to be consistent in its messaging to all sizes of businesses, he said.

Both the main parties had missed the technology sector in their tax policies, though.

"If you think technology is one of the key pillars of our future economic growth, particularly soft technology, then there’s nothing in that for that industry."

Deloitte tax partner Phil Stevenson said National was trying to find its own way to stimulate the economy, if elected.

"National has sought to clearly differentiate their philosophy from the Labour’s tax policy," he said.

"Their philosophy is that this stimulus will create growth resulting in increased total tax revenue compared with maintaining or increasing tax rates."

Restricting the tax cuts to a time period meant the party would not have to raise taxes, and it limited any damage if the policy was a failure, Mr Stevenson said.

He expected National was hoping to attract undecided voters — unlikely to receive a tax cut under Labour — who were "considering their own financial situation when casting their vote". — Additional reporting RNZ

 

National tax policy

  • Change tax thresholds: low from $14,000 to $20,000, middle from $48,000 to $64,000, top from $70,000 to $90,000; estimated cost $4.7billion.
  • Offer 12-month tax incentive for investments over $150,000 for businesses that invest in new plant, equipment and machinery and double depreciation rate for such businesses; estimated cost $430million.
  • Winter Energy Payment would not change.
  • Previously announced JobStart scheme, paying businesses $10,000 for every new job created.

jacob.mcsweeny@odt.co.nz

 

 

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