Budget 2010 - Headlines

As predicted, the rate of Goods and Services Tax (“GST”) has increased in the budget from 12.5% to 15% (which equates to a 2.22% increase in the price of goods and services which include GST) effective from 1 October 2010.

As predicted, the rate of Goods and Services Tax (“GST”) has increased in the budget from 12.5% to 15% (which equates to a 2.22% increase in the price of goods and services which include GST) effective from 1 October 2010.

The global competition for skills and capital has been intense. One merely needs to reflect on the number of Kiwi trained engineers, medical professionals and business people now living comfortably offshore to recognise that over the last decade we have lost a significant level of our home grown skill base.

From the time the Tax Working Group released its long-awaited report on the design of the tax design, speculation has been rife on how the budget would fix a tax system which was widely regarded as “broken.”

Health is one of the few areas of public spending receiving an increase in funding allocation in a budget that has many government agencies receiving no increases.

When any Government is faced with falling revenues, a recessionary environment and an inability to raise its headline tax rates, there is little room for movement.

Many would have expected today’s budget to announce the opening up of the ACC Work Account to competition. 

Will this year’s Budget see the Government re-open competition for ACC’s Work Account?

One of the major questions asked of this year’s budget is … will the budget help deliver the leap in productivity and economic growth this Government has vowed to achieve?

Are New Zealand investors really out of the woods when it comes to a capital gains tax being introduced in this year’s Budget?

GST rising to 15% in the Budget is a given. What will come with it, is not so clear cut.

The Minister of Health has asked Primary Healthcare to reduce next year's spending growth by $25 million. What does this mean for the provision of primary healthcare for New Zealanders and are universal subsidies a luxury that cannot be sustained?

Many baby boomers eyeing a successful succession from their businesses will be looking to the Budget to provide a sufficient economic stimulus package to assist them in this goal.

In the international tax arena, transfer pricing continues to dominate the news particularly the banks tax cases and the new international tax rules for companies.

This year’s budget will be eagerly anticipated for the tax changes that are undoubtedly coming.

While the Government knows that in the current climate businesses need all the help they can get, there is likely to be little in the way of tax benefit for SMEs in the Budget, irrespective of the amount of discussion in the media.

In the international tax arena, transfer pricing continues to dominate the news particularly the banks tax cases and the new international tax rules for companies.

With an increase in the rate of GST likely in the upcoming budget and the desire to increase inbound tourism, there is no better time to redress the current imposition of GST on overseas visitors to keep New Zealand competitive with other tourist destinations.

For New Zealand businesses and Government agencies to fully reap the potential benefits of SBR (Standard Business Reporting), sufficient money needs to be set aside in the Budget to ensure that the programme is fully operational by 2011 when Australia goes live with its SBR programme.

Moves by the government in the Budget to tighten tax legislation in relation to property could end up in driving more New Zealanders to Australia to live.

It doesn’t matter how highly tuned the racing car, athlete or business model, there is always the temptation to fiddle. Hopefully the Government does not fall for this temptation when it looks over Kiwisaver prior to the Budget.