NZ 2nd for international tax competitiveness

September 24, 2014

New Zealand is ranked second in the Tax Foundation’s International Tax Competitiveness Index (ITCI).

The Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a wellstructured tax code. The ITCI considers more than forty variables across five categories: Corporate Taxes, Consumption Taxes, Property Taxes, Individual Taxes, and International Tax Rules.

The ITCI attempts to display not only which countries provide the best tax environment for investment, but also the best tax environment in which to start and grow a business.

Key Findings:

The ITCI finds that Estonia has the most competitive tax system in the OECD. Estonia has a relatively low corporate tax rate at 21 percent, no double taxation on dividend income, a nearly flat 21 percent income tax rate, and a property tax that taxes only land (not buildings and structures).

· France has the least competitive tax system in the OECD. It has one of the highest corporate tax rates in the OECD at 34.4 percent, high property taxes that include an annual wealth tax, and high, progressive individual taxes that also apply to capital gains and dividend income.

· The ITCI finds that the United States has the 32nd most competitive tax system out of the 34 OECD member countries.

· The largest factors behind the United States’ score are that the U.S. has the highest corporate tax rate in the developed world and that it is one of the six remaining countries in the OECD with a worldwide system of taxation.

· The United States also scores poorly on property taxes due to its estate tax and poorly structured state and local property taxes

· Other pitfalls for the United States are its individual taxes with a high top marginal tax rate and the double taxation of capital gains and dividend income

Taxes are a crucial component of a country’s international competitiveness. In today’s globalized economy, the structure of a country’s tax code is an important factor for businesses when they decide where to invest. No longer can a country tax business investment and activity at a high rate without adversely affecting its economic performance. In recent years, many countries have recognized this fact and have moved to reform their tax codes to be more competitive. However, others have failed to do so and are falling behind the global movement.

The United States provides a good example of an uncompetitive tax code. The last major change to the U.S. tax code occurred 28 years ago as part of the Tax Reform Act of 986, when Congress reduced the top marginal corporate income tax rate from 46 percent to 34 percent in an attempt to make U.S. corporations more competitive overseas. Since then, the OECD countries have followed suit, reducing the OECD average corporate tax rate from 47.5 percent in the early 1980s to around 25 percent today. The result: the United States now has the highest corporate income tax rate in the industrialized world.

While the corporate income tax rate is a very important determinant of economic growth and economic competitiveness, it is not the only thing that matters. The competitiveness of a tax code is determined by several factors. The structure and rate of corporate taxes, property taxes, income taxes, cost recovery of business investment, and whether a country has a territorial system are some of the factors that determine whether a country’s tax code is competitive.

Many countries have been working hard to improve their tax codes. New Zealand is a good example of one of those countries. In a 2010 presentation, the chief economist of the New Zealand Treasury stated, “Global trends in corporate and personal taxes are making New Zealand’s system less internationally competitive.”1

In response to these global trends, New Zealand cut its top marginal income tax rate from 38 percent to 33 percent, shifted to a greater reliance on the goods and services tax, and cut their corporate tax rate to 28 percent from 30 percent. This followed a shift to a territorial tax system in 2009. New Zealand added these changes to a tax system that already had multiple competitive features, including no inheritance tax, no general capital gains tax, and no payroll taxes.2

In a world where businesses, people, and money can move with relative ease, having a competitive tax code has become even more important to economic success. The example set by New Zealand and other reformist countries shows the many ways countries can improve their uncompetitive tax codes.3 . . .

Voters rejected the five new taxes a coalition of the left would have imposed on us and this confirms their wisdom.

Labour in the UK has yet to learn that:

Responding to Labour’s plans to introduce a number of taxes and increase spending on the National Health Service, Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:

“This was sixth form socialism of the most uninspiring kind. It is lazy and dangerous to implement populist measures that won’t raise the money politicians promise. Windfall taxes will hurt pensioners who rely on stable returns for a comfortable retirement, sin taxes hit the poorest hardest, and a Mansion Tax would be a vindictive gesture that will eventually find its way down the property ladder to hit much less expensive homes, too.

“If we want more money for essential services and cancer drugs in the NHS then there must be a serious and sustained war on wasteful spending, alongside a rigorous reassessment of priorities.”

A competitive tax code is an important ingredient in economic success.

Parties which think more taxes are the answer have asked the wrong question.

 

 


How much do taxpayers subsidise unions?

November 2, 2012

In Britain taxpayers provided subsidies of at least  £113 million to unions:

The value of this subsidy has been exposed in the most extensive survey of national and local government ever carried out by the TPA. It shows that trade unions received an estimated £92 million in paid staff time (facility time) plus £21 million in direct payments in 2011-12. The research also demonstrates for the first time that public bodies are often deducting trade union subscriptions in the payroll process without charging the unions for that additional administrative support, despite union claims to the contrary. . .

It is compulsory here for all employers to collect union fees.

That will incur a cost which adds to overheads.

A remit from Young Nationals seeking the repeal of that legislation was passed unanimously at this year’s National Party conference.

I don’t think it has made its way to the government agenda yet.

What other subsidies do employers in general and taxpayers provide to unions here?

Is that fair and reasonable or is there more scope for change, especially when some unions have political affiliations and will soon gain 20% of the vote for the Labour leader under proposed changes to the party’s rule?


Moral argument against high taxation

May 25, 2012

Quote of the day:

WE ALL know the moral arguments for taxation: it pays for police, roads, hospitals and other vital services. But there is a moral case against taxation too – and a surprisingly strong one.

First, while most of us would happily make some voluntary contribution to essential services, it is only the threat of prison that makes us stump up taxes at today’s eye-watering levels. Tax is extracted by force – and the use of force is an evil we want to minimise. That puts an awesome responsibility on governments to ensure that every penny they extract through coercion is spent wisely. Waste and bureaucracy are not just a drain on the economy – they are a moral outrage.

But not only is taxation a form of confiscation by coercion. It is confiscation by groups who believe their values and priorities are superior to other people’s – a breathtaking moral claim. . . EAMONN BUTLER

Hat tip: Taxpayers’ Alliance


Public money funds trade union campaigns

March 5, 2012

Could this happen here:

It’s the end of another week in Westminster when the issue of taxpayer-funded trade union activity has been on the agenda. Wednesday morning saw MPs debating the issue and now new evidence appears which suggests that the problem has reached a whole new level, with taxpayer-subsidised trade union branches openly campaigning against government policy in the very departments in which their members are supposed to be working.  . .

The quote comes from the Taxpayers’ Alliance which has a paper on union funding.

  • Trade unions received £85.8 million from public sector organisations in 2009-10.
  • That is made up of £18.3 million in direct payments from public sector organisations and an estimated £67.5 million in paid staff time.
  • The total is up 14 per cent from 2008-09, when trade unions received £76.1 million from public sector organisations.
  •  Direct payments include a total of £13.0 million in 2008-09 and £14.9 million in 2009-10 paid by the Department for Business, Innovation and Skills through the Union Learning Fund and the Union Modernisation Fund.
  • 2,493 full time equivalent public sector employees worked for trade unions at the taxpayers’ expense in 2009-10.
  • Total public funding for the trade unions in 2009-10 was 20 percent more than the combined political contributions to the Labour Party and the Conservative Party in 2008-09.1

Does anything similar happen here?


Crowds rally to support spending cuts

May 15, 2011

Hundreds of people rallied yesterday in support of government spending cuts in Britain.

The rally was organised in response to a march opposing the cuts earlier this year which attracted thousands.

The difference in numbers shows how difficult it is to sell the need for austerity.

Taxpayers Alliance which helped organise the rally reports on it with quotes from participants:

Matthew Sinclair, Director of the TaxPayers’ Alliance, said:

 It would be awful to see more and more of our money going to pay for interest on the debt instead of sustaining public services, and it would be immoral to leave the next generation with the bill for services today. . .

Annabel, 16, said:

 It’s my generation that will have to pay. I’m glad to see that people are concerned about the size of the national debt. Yes, cuts are difficult, but we are in a bad situation and we need to face up to it. If you have a problem and you put off dealing with it, it gets worse.

That point is often lost on people who oppose the cuts – every cent borrowed today has to be paid back some time.

It is immoral to spend money on luxuries today when it will make it more difficult to provide necessities tomorrow.


Twice as many civil servants as needed

May 4, 2011

New Zealand isn’t alone in needing to trim the public service.

In Britain, Labour Peer, Lord Sugar, says the civil service has twice as many staff as it needs:

The close confidant of ex-prime minister Gordon Brown said that private companies’ use of multitasking made them much more efficient, and also suggested that a more hard-nosed approach to government procurement could save taxpayers £1billion a year.

“They employ God knows how many million civil servants, and if you spent the time that I spent in Whitehall, you do have to ask yourself sometimes what half of them are doing,” said Lord Sugar, in an interview in this week’s Radio Times. “When I compare it to my commercial organisation, we have people who multi-task, and if you applied that multi-tasking philosophy within the civil service you would cut the labour force by half.”

The public service isn’t directly comparable with private enterprise but our government’s directive to move resources from the back office to front-line services shows improvements can be made.

Interestingly Lord Sugar’s view shows some consensus between the left and right in Britain on the need to rein in the public service.

The left here is still to realise the wisdom of reducing the burden the state imposes on taxpayers.

Hat tip: Taxpayers Alliance.


Debt’s a dirty word again

April 5, 2011

The Taxpayers’ Alliance is organising a rally against debt in Britain:

An exciting event, the Rally Against Debt, has been organised for 14 May.  It will be a major demonstration highlighting the importance of tackling the huge public sector deficit, and the need for substantial spending cuts.  So far over 1,300 people have signed up to a rally that aims to be a well mannered alternative to the unrealistic trade union march and the vandalism of the UK Uncut protest on March 26.

Unlike most marches, this one is not asking the government to spend more, it aims to be a – polite – request for reductions rather than increases.

New Zealand households are saving more which shows they’ve understand the need for personal spending restraints. People of my parents’ generation who had been through the Depression regarded debt as a dirty word and it’s getting that way again.

I think most people also understand the need for similar frugality from the government even if no-one is suggesting we take to the streets to ask for less.


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