Possible corporate tax cuts could be on the way in this year's Budget.
Nicola Willis told Ryan Bridge yesterday that our corporate tax system isn't competitive enough with other countries, hinting at potential changes.
Christopher Luxon confirmed to Mike Hosking this morning that they're willing to make changes, and there's a lot of possible options.
Dentons Kensington Swan Tax Partner Bruce Bernacchi told Kerre Woodham that there is an opportunity for New Zealand to bring in increased economic activity by multinationals and other wealthy investors by doing something bold.
He says he’d like to see something a lot more bold than just dropping it down to the OECD average.
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Speaker 1 (00:06):
You're listening to the Kerry Wood of Morning's podcast from
News Talks.
Speaker 2 (00:10):
He'd be possible corporate tax cuts could be on the
way in this year's budget. The Finance Minister and Prime
Minister both say they're open to tax system changes to
incentivize economic growth. Nikola Willis says New Zealand's corporate tax
rate is reasonably high and compared to other countries. To discuss,
I'm joined by Denton's tax partner, Bruce Binaki. Good morning
(00:32):
and happy twenty five to you.
Speaker 3 (00:33):
Bruce, Good morning, Carry.
Speaker 2 (00:36):
If there is a change, would we see all of
these gorgeous, luscious, wealthy foreign investors who are lined up
right now just waiting for us to change our corporate
tax rate flooding in the door and saving us.
Speaker 3 (00:49):
Well, I think that's the billion dollar question, Kerry. I mean,
I think Nikola Willis is right that we are at
the high end of corporate taxes. The OECD average is
twenty four percent and we're sitting at twenty eight percent
and it's been at that level since twenty eleven. I
think there is an opportunity there for New Zealand to
bring in increased economic activity from multinationals. And other sort
(01:13):
of wealthy investors by doing something bold, and personally, I
would like to see something a lot more bold than
just say dropping it down to the OECD average and
trying to see if we could be the island of
the South Pacific or match the Singaporean tax rate which
is down at seventeen percent. Do something really bold.
Speaker 2 (01:31):
I was just going to ask you about Ireland because
they are so similar. They went from a kind of well,
they were in a lot worse condition than we were,
a lot like the Nordic stents as well, a subsistence
kind of agricultural, tiny, sparsely populated country to a country
that actively went out and sought investment.
Speaker 3 (01:52):
Yeah, that's right, and they've dropped their corporate all it's
been like this for a while now, down to twelve
and a half percent, and it attracted a huge amount
of foreign investment. I mean, Ireland is sitting on the
edge of the EU, a member of the EU, so
we've got access to a market of three hundred and
fifty million people. But we have a lot going for
us too. I mean we sit here, we're in a
(02:12):
good time zone. We cross a lot of the US.
US is working day in Asia as well. We've got
a well educated workforce, stable government, or respected legal system
based on common law. I mean, we could be something
like the island of the South Pacific. And I think,
you know, as a country, we've been sitting here, been
doing very orthodox things, sitting inside it, you know, orthodox
(02:33):
approaches to economy and tax, and we've been going no,
we've been going sideways, very backwards. I mean for years
now it's being recognized our productivity is too low and
below international lawns. And I think it's time. If we've
got a government that really is focused on economic growth
and moving the dial for New Zealand, I think we
need to do something bold.
Speaker 2 (02:52):
So what did they do. I remember that they allowed it.
I think there was no tax for a while there,
or wasn't there when they first started.
Speaker 3 (03:01):
They dropped it for certain companies, they dropped it to
twelve and a half percent. That's a massive change when
you're you know, when they did that, the OECD average
is probably more like thirty percent, and even at twenty
four percent now it's a massive change. I mean, they
have they and they also started doing special deals for
some high tech companies that got them into trouble. With
the EU, so they wouldn't necessarily want to go down
that path. But if you really want to make potential
(03:25):
foreign investors and multinationals sit up and notice, I think
you've got to drop it below twenty percent, You've got
to say match Singapore, and then it's not just a
matter of attracting new investment. And we already have multinationals
operating here who you know, through what's referred to as
you know, various transfer pricing mechanisms, to some extent, can
(03:45):
sort of allocate where they have their global income tax.
I mean, there are rules trying to sort of attack
those sort of practices, but to some extent, we could
also see multinationals already operating here deciding to leave more
profit in New Zealand or increase the amount of activity
that they have going on in New Zealand to benefit
from that low tax rate.
Speaker 2 (04:06):
How though, because I know that there were criticisms about
Ireland's GDP being inflated because they were able to do
a lot of international companies could do paper profits in
Ireland without doing anything substantial within the economy.
Speaker 3 (04:23):
Well, I think the rule that when that was done
twenty odd years ago, the international tax rules were not
as sophisticated as they are as they are now. So
there are so many more international tax rules which New
Zealand has implemented domestically to prevent that sort of artificial
profit allocation, you know, so you'd need actual, real increased
(04:45):
activity here. But again I think New Zealand has a
lot going for it. But we are also a relatively
remote spot, which you know, for some people is quite attractive.
But I think we needed to stand out from say
our nearest and dearest neighbor Australian, from other countries in
the region where we need to do something a little
bit bold and it would come with some risk iming.
(05:05):
Unlike say a lot of European countries. We are highly
reliant on three sources of taxes for our government revenues.
So ninety four percent of government revenues comes from a
mixture of GST, corporate tax, and personal taxes, and corporate
tax makes up seventeen percent of the government's revenues. It
was about twenty billion dollars, right, So let's say you
dropped to the Singaporean tax rate. You put eight billion
(05:28):
dollars quote unquote at risk. But then I look at
it and say, well, look, we found sixty two billion
dollars for the COVID Relief Fund sort of out of
nowhere and don't have a lot to show for it.
I mean, isn't it worth a bit of a bet
that Actually, yeah, you risk eight billion dollars, but you
might get that back through through more corporate activity here,
which is going to potentially increase corporate tax collections. You
(05:52):
attract more people here, so you get increased personal tax collections.
You have more activity, so you get more GST. It's
all about driving more economic activity, getting people wanting to
stay here. I mean, I saw a news report this
morning saying New Zealand risks a net explorer of explorer
of people. Again, that's a disaster. I mean want to
keep our people here, and you need good jobs and
(06:12):
good economic activity and a reason to be here.
Speaker 2 (06:16):
See I look at there at some we like the
Center for Brain Research, which has gathered some of the
best minds in the world, because it's got some of
the best minds in the world here, so you know,
I know it's not a great profit maker, this one.
It's our research powerhouse. But when you've got the best
people in the world working in a particular field. That's
(06:37):
what attracts the young ones. They want to work with
those people, they will come from anywhere to work there.
So we've got to try and kind a way of
keeping our brilliant ideas and which we've always had since
New Zealand became alt out or in New Zealand, we've
always had great entrepreneurs and great scientists and people with
great minds. We've got to find a way of keeping
(06:57):
them here and getting the minds to come to them.
Speaker 3 (07:02):
Absolutely and can be a big part of and we
have to have rules that don't disincentivize from people coming here.
So at the moment, the government at long last for
as we have these rules that are international tax rules
that tax foreign investments made by wealthy migrants who want
to come here. That are a major disincentive. I mean,
(07:23):
our firm advisors people all day every day who have
either migrated here or looking at migrating here, and our
international tax settings at the moment are a major disincentive.
We've actually expatriated people back out of New Zealand because
of how bad our tax system can be for them.
Now those rules are finally under consultation. Minister A Revenue
is looking at submissions on how to change these rules
(07:43):
as we speak. But you know that's just one part
of it. You've got to have rules that don't disincentivize
people from coming here and want and retain the people
who are already here. And I think that just requires
some bolder policy than we've been doing for decades now.
Speaker 2 (07:59):
Yeah, it's hard to do bold policy though, isn't it
in a three year election cycle. But we can't go
on the way we go, and we just can't, not
with an age population.
Speaker 3 (08:08):
And absolutely absolutely, and I did listen to you know,
Mike Cosking, he has been on at christph Luxe now
for two weeks in a row. Come on, do something.
And I think there is that sense of growing frustration
I've been in for a year now. You know, you
get the lay of the land, you start, you know,
they come in and cut some government spending and all
the rest, but it's you know, you've got to get serious.
And it's great to see Nicola Willis appointed with a
(08:31):
real clear economic growth agenda. But you know, you also look,
whatever you might think of the guy, you look at
Donald Trump, He's come and he's got an agenda and
with it, you know, like he's implemented these things and
no time at all, and you know, you know, I'm
not like the tariff thing is just a debarcle and
it's economic madness. But at least he's he's doing something.
And it's like, I know, we have a coalition government, etcetera.
(08:53):
We've got more effective checks and balances in New Zealand.
But it's like, well, you know, come on, and one
of the things he did do back and back when
he came in in twenty seventeen. You know, they've been
involved working with US multinationals for a long time, and
they've been talk of US tax reform for about fifteen years.
And Trump comes in his first six months and he
(09:13):
does it. He drops the US tax rate, corporate tax
rate from thirty five percent to twenty one percent, and
he does that in his first year in office. And
the US economy is booming, and so that's you've got
to look at things like that and go, well, we're
not the US. We're a deffinitely structured economy, but let's
do something bold and really try and get some economic
(09:34):
activity and new businesses and new investment that create opportunities
for particularly for our young people and no reason to
stay here.
Speaker 2 (09:43):
Lovely to talk is always Bruce Spinaki, tax partner at
Denton's Yeah Get Cracking.
Speaker 1 (09:48):
For more from Kerry Wood and Mornings, listen live to
news talks that'd be from nine am weekdays, or follow
the podcast on iHeartRadio
You're listening to the Kerry Wood of Morning's podcast from
News Talks.
Speaker 2 (00:10):
He'd be possible corporate tax cuts could be on the
way in this year's budget. The Finance Minister and Prime
Minister both say they're open to tax system changes to
incentivize economic growth. Nikola Willis says New Zealand's corporate tax
rate is reasonably high and compared to other countries. To discuss,
I'm joined by Denton's tax partner, Bruce Binaki. Good morning
(00:32):
and happy twenty five to you.
Speaker 3 (00:33):
Bruce, Good morning, Carry.
Speaker 2 (00:36):
If there is a change, would we see all of
these gorgeous, luscious, wealthy foreign investors who are lined up
right now just waiting for us to change our corporate
tax rate flooding in the door and saving us.
Speaker 3 (00:49):
Well, I think that's the billion dollar question, Kerry. I mean,
I think Nikola Willis is right that we are at
the high end of corporate taxes. The OECD average is
twenty four percent and we're sitting at twenty eight percent
and it's been at that level since twenty eleven. I
think there is an opportunity there for New Zealand to
bring in increased economic activity from multinationals. And other sort
(01:13):
of wealthy investors by doing something bold, and personally, I
would like to see something a lot more bold than
just say dropping it down to the OECD average and
trying to see if we could be the island of
the South Pacific or match the Singaporean tax rate which
is down at seventeen percent. Do something really bold.
Speaker 2 (01:31):
I was just going to ask you about Ireland because
they are so similar. They went from a kind of well,
they were in a lot worse condition than we were,
a lot like the Nordic stents as well, a subsistence
kind of agricultural, tiny, sparsely populated country to a country
that actively went out and sought investment.
Speaker 3 (01:52):
Yeah, that's right, and they've dropped their corporate all it's
been like this for a while now, down to twelve
and a half percent, and it attracted a huge amount
of foreign investment. I mean, Ireland is sitting on the
edge of the EU, a member of the EU, so
we've got access to a market of three hundred and
fifty million people. But we have a lot going for
us too. I mean we sit here, we're in a
(02:12):
good time zone. We cross a lot of the US.
US is working day in Asia as well. We've got
a well educated workforce, stable government, or respected legal system
based on common law. I mean, we could be something
like the island of the South Pacific. And I think,
you know, as a country, we've been sitting here, been
doing very orthodox things, sitting inside it, you know, orthodox
(02:33):
approaches to economy and tax, and we've been going no,
we've been going sideways, very backwards. I mean for years
now it's being recognized our productivity is too low and
below international lawns. And I think it's time. If we've
got a government that really is focused on economic growth
and moving the dial for New Zealand, I think we
need to do something bold.
Speaker 2 (02:52):
So what did they do. I remember that they allowed it.
I think there was no tax for a while there,
or wasn't there when they first started.
Speaker 3 (03:01):
They dropped it for certain companies, they dropped it to
twelve and a half percent. That's a massive change when
you're you know, when they did that, the OECD average
is probably more like thirty percent, and even at twenty
four percent now it's a massive change. I mean, they
have they and they also started doing special deals for
some high tech companies that got them into trouble. With
the EU, so they wouldn't necessarily want to go down
that path. But if you really want to make potential
(03:25):
foreign investors and multinationals sit up and notice, I think
you've got to drop it below twenty percent, You've got
to say match Singapore, and then it's not just a
matter of attracting new investment. And we already have multinationals
operating here who you know, through what's referred to as
you know, various transfer pricing mechanisms, to some extent, can
(03:45):
sort of allocate where they have their global income tax.
I mean, there are rules trying to sort of attack
those sort of practices, but to some extent, we could
also see multinationals already operating here deciding to leave more
profit in New Zealand or increase the amount of activity
that they have going on in New Zealand to benefit
from that low tax rate.
Speaker 2 (04:06):
How though, because I know that there were criticisms about
Ireland's GDP being inflated because they were able to do
a lot of international companies could do paper profits in
Ireland without doing anything substantial within the economy.
Speaker 3 (04:23):
Well, I think the rule that when that was done
twenty odd years ago, the international tax rules were not
as sophisticated as they are as they are now. So
there are so many more international tax rules which New
Zealand has implemented domestically to prevent that sort of artificial
profit allocation, you know, so you'd need actual, real increased
(04:45):
activity here. But again I think New Zealand has a
lot going for it. But we are also a relatively
remote spot, which you know, for some people is quite attractive.
But I think we needed to stand out from say
our nearest and dearest neighbor Australian, from other countries in
the region where we need to do something a little
bit bold and it would come with some risk iming.
(05:05):
Unlike say a lot of European countries. We are highly
reliant on three sources of taxes for our government revenues.
So ninety four percent of government revenues comes from a
mixture of GST, corporate tax, and personal taxes, and corporate
tax makes up seventeen percent of the government's revenues. It
was about twenty billion dollars, right, So let's say you
dropped to the Singaporean tax rate. You put eight billion
(05:28):
dollars quote unquote at risk. But then I look at
it and say, well, look, we found sixty two billion
dollars for the COVID Relief Fund sort of out of
nowhere and don't have a lot to show for it.
I mean, isn't it worth a bit of a bet
that Actually, yeah, you risk eight billion dollars, but you
might get that back through through more corporate activity here,
which is going to potentially increase corporate tax collections. You
(05:52):
attract more people here, so you get increased personal tax collections.
You have more activity, so you get more GST. It's
all about driving more economic activity, getting people wanting to
stay here. I mean, I saw a news report this
morning saying New Zealand risks a net explorer of explorer
of people. Again, that's a disaster. I mean want to
keep our people here, and you need good jobs and
(06:12):
good economic activity and a reason to be here.
Speaker 2 (06:16):
See I look at there at some we like the
Center for Brain Research, which has gathered some of the
best minds in the world, because it's got some of
the best minds in the world here, so you know,
I know it's not a great profit maker, this one.
It's our research powerhouse. But when you've got the best
people in the world working in a particular field. That's
(06:37):
what attracts the young ones. They want to work with
those people, they will come from anywhere to work there.
So we've got to try and kind a way of
keeping our brilliant ideas and which we've always had since
New Zealand became alt out or in New Zealand, we've
always had great entrepreneurs and great scientists and people with
great minds. We've got to find a way of keeping
(06:57):
them here and getting the minds to come to them.
Speaker 3 (07:02):
Absolutely and can be a big part of and we
have to have rules that don't disincentivize from people coming here.
So at the moment, the government at long last for
as we have these rules that are international tax rules
that tax foreign investments made by wealthy migrants who want
to come here. That are a major disincentive. I mean,
(07:23):
our firm advisors people all day every day who have
either migrated here or looking at migrating here, and our
international tax settings at the moment are a major disincentive.
We've actually expatriated people back out of New Zealand because
of how bad our tax system can be for them.
Now those rules are finally under consultation. Minister A Revenue
is looking at submissions on how to change these rules
(07:43):
as we speak. But you know that's just one part
of it. You've got to have rules that don't disincentivize
people from coming here and want and retain the people
who are already here. And I think that just requires
some bolder policy than we've been doing for decades now.
Speaker 2 (07:59):
Yeah, it's hard to do bold policy though, isn't it
in a three year election cycle. But we can't go
on the way we go, and we just can't, not
with an age population.
Speaker 3 (08:08):
And absolutely absolutely, and I did listen to you know,
Mike Cosking, he has been on at christph Luxe now
for two weeks in a row. Come on, do something.
And I think there is that sense of growing frustration
I've been in for a year now. You know, you
get the lay of the land, you start, you know,
they come in and cut some government spending and all
the rest, but it's you know, you've got to get serious.
And it's great to see Nicola Willis appointed with a
(08:31):
real clear economic growth agenda. But you know, you also look,
whatever you might think of the guy, you look at
Donald Trump, He's come and he's got an agenda and
with it, you know, like he's implemented these things and
no time at all, and you know, you know, I'm
not like the tariff thing is just a debarcle and
it's economic madness. But at least he's he's doing something.
And it's like, I know, we have a coalition government, etcetera.
(08:53):
We've got more effective checks and balances in New Zealand.
But it's like, well, you know, come on, and one
of the things he did do back and back when
he came in in twenty seventeen. You know, they've been
involved working with US multinationals for a long time, and
they've been talk of US tax reform for about fifteen years.
And Trump comes in his first six months and he
(09:13):
does it. He drops the US tax rate, corporate tax
rate from thirty five percent to twenty one percent, and
he does that in his first year in office. And
the US economy is booming, and so that's you've got
to look at things like that and go, well, we're
not the US. We're a deffinitely structured economy, but let's
do something bold and really try and get some economic
(09:34):
activity and new businesses and new investment that create opportunities
for particularly for our young people and no reason to
stay here.
Speaker 2 (09:43):
Lovely to talk is always Bruce Spinaki, tax partner at
Denton's Yeah Get Cracking.
Speaker 1 (09:48):
For more from Kerry Wood and Mornings, listen live to
news talks that'd be from nine am weekdays, or follow
the podcast on iHeartRadio
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