Government releases ‘Economic Plan’
The Labour-led Government has included two small tax changes with its 32 page 'Economic Plan' that paints a big picture for economic and wellbeing transformation. Bernard Hickey reports.
Finance Minister Grant Robertson and Economic Development Minister Phil Twyford have released a 32 page 'Economic Plan' pulling together the strands of the Labour-led Coalition Government's policies into a 'Business Growth Agenda' style summary.
They also announced two small tax changes to go with it that are aimed at improving investment and research and development, particularly among start-ups and small businesses.
They said they aimed to transition the economy to becoming more productive, sustainable and inclusive.
“This Economic Plan provides a one-stop-shop for business and government agencies to view the Government’s long-term plan and see how different policies contribute to it," they said.
The plan lists eight "eight economic shifts for a more productive, sustainable and inclusive economy."
1. Moving the economy from "volume to value with Kiwi businesses, including SMEs, becoming more productive;"
2. "Ensuring people are skilled, adaptable and have access to lifelong learning;"
3. "Making deeper pools of capital available to invest in infrastructure and grow New Zealand’s productive assets;"
4. "Strengthening and revitalising regional economies;"
5. "Enabling a step-change for the Māori and Pacific New Zealand economies;"
6. "Developing a sustainable and affordable energy system;"
7. "Utilising our land and resources to deliver greater value and improve environmental outcomes;" and
8. "Transforming our housing market to improve productivity growth and make houses more affordable."
“These economic shifts represent a broader approach to economic policy than used by the previous Government,” Robertson said.
“The two business tax changes we are announcing today are practical examples of how delivering our Economic Plan will help businesses move from volume to value,” he said.
“These measures will also help to deepen the pool of capital invested in New Zealand’s productive assets, by incentivising innovation. This is all part of a 30-year plan to make the economy more productive, sustainable and inclusive.”
Robertson said the costs of exploring whether to invest in a new asset or business model were often not deductible for tax purposes.
“We’re changing this so businesses can deduct ‘feasibility expenditure’ from their tax bills, including for projects that don’t end up going ahead."
The Government also proposes that qualifying expenditure totalling less than $10,000 be deductible immediately and that deductions should be able to be spread over five years.
This would be included in a taxation bill to be introduced into Parliament early next year so it could start for the next tax year of 2020/21.
The second proposed change is around ‘loss continuity rules’ to make it easier for start-ups to attract investment.
Currently, a firm that suffers a loss one year can use that loss to reduce its taxable income in the future, but the rules don't work well for start-ups who are trying to attract new investment.
As these start-ups attract new investment they often breach the threshold under which they can continue to use these losses.
Revenue Minister Stuart Nash said the proposals would be consulted on this year, along with a review of the existing Research and Development tax loss cash out rules.