No surprises in NZ Budget 2018
The Coalition Government’s first Budget forecasts 3% economic growth over five years, and sets out a plan for the New Zealand economy to face future challenges, but changes to the tax system are deferred.
- Surplus of NZ$3.7 billion for 2018/19, up from NZ$3.1 billion now.
- Economic growth forecast to average an annual 3% over the next five years.
- Tax incentive gives eligible businesses NZ12.5¢ back for every dollar spent on R&D.
New Zealand’s Budget handed down on May 17 contains few surprises, with increased spending on health, education and housing, and forecasts that economic growth will average 3% over the next five years.
The plan to shift the settings of the New Zealand economy to face the challenges of the future include lifting productivity, investment in infrastructure and regional development and tax breaks for research and development for eligible businesses. However, significant tax changes will not be announced until next year or 2020 once the Tax Working Group has made its recommendations.
Chartered Accountants Australia and New Zealand’s Advocacy and Professional Standing Leader for New Zealand Peter Vial attended the Budget lock-up in Wellington and was on the spot to provide the following expert insights. New Zealand Tax Leader John Cuthbertson also provides commentary below.
A no-surprises NZ Budget
The Coalition Government’s first Budget sets out a plan to shift the settings of the New Zealand economy to face the challenges of the future – lifting productivity, making a just transition to a more sustainable low carbon economy, and adapting to a rapidly changing world of work.
Government’s Foundations for the Future “a good start”
Budget 2018 is sub-titled ‘Foundations for the Future’. How solid are those foundations? It depends on who you are. For business, there are some promising signs such as increased support for R & D and investment in infrastructure and regional development. However, business is built on confidence and certainty – and, for it, there are still some critical gaps in the foundations. Those gaps will be filled only once the Government has made a call on, for example, changes to tax settings, policies to boost business use of technology, further welfare reforms and on its full response to climate change.
Crackdown on tax avoidance and other new tax initiatives
The Government is counting on an extra NZ$726.3 million in revenue over the next four years from new initiatives, including a crackdown on tax dodgers. Budget 2018 also gives Inland Revenue NZ$23.5 million to ensure outstanding company tax returns are filed. This is expected to recover about NZ$183.3 million. A proposal on ring-fencing rental losses will restrict the ability to offset tax losses from residential properties against other income. And a plan to bring overseas suppliers of low-value goods into the GST net estimated to produce NZ$218 million of new revenue over the next four years.
2018 Budget: Does the economic vision match the societal one?
Is the NZ Budget visionary in an economic sense, as well as a societal one?
Related: NZ fuel tax gets massive thumbs down in survey
Poll shows Kiwis are not keen on paying Government’s fuel tax, strongly preferring that the money comes from existing Budgets
Related: NZ Government pointed to untapped NZ$1 billion revenue source
The Government is sitting on a potential $1 billion untapped revenue source, says Chartered Accountants ANZ, and ministers should be looking to fully exploit this opportunity before introducing new taxes or raising tax rates.
Photos of Grant Robertson giving budget: NZH/Mark Mitchell
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