Task Force recommends radical tax reforms

But the Report may end up in the shelf

A much awaited report did not disappoint either its protagonists or adversaries and delivered what was expected – promote the wealthy and to hell with ordinary people.

The Don Brash led 2025 Task Force released its recommendations for bridging the gap between New Zealand and Australia by 2025, with a raft of reforms that extended from slashing government expenditure to cutting corporate tax and removing subsidies in health and education.

As well as calling for a downward revision of the minimum wage, the Task Force recommended sale of all government assets including TVNZ, Genesis Energy, Mighty River Power and Meridian Energy, if necessary to foreign investors.

The reforms, dubbed, ‘Big Bang,’ would appease the rich but may cost the National Government its treasury benches.

Among the major tax reform proposals is introduction of a flat rate of 20% to 25% on corporate and personal income, down from the current rate of 38% and 30%.

Also central to the reforms is a sharp decrease in government spending, from the current rate of 37.3% of the Gross Domestic Product (GDP) to 29%, to be achieved during the 2012-2013 fiscal year.

Axe on everything

The Task Force believes that such curtailment can be achieved by limiting universal benefits, such as eliminating interest free student loans, the 20-hour free early childhood education programme and cuts in spending on health and education.

The Report also sought immediate relief to the Government by abolishing the New Zealand Superannuation Fund.

The 2025 Task Force was established in June as a part of the National Government’s Confidence and Supply Agreement with the ACT Party to find ways of closing the income and productivity gap with Australia over the next 15 years.

Dr Brash, an extreme right-winger and former Reserve Bank of New Zealand Governor and National Party Leader, was chosen to lead the Think Tank.

Its members include Electricity Commission Chair and former Finance Minister David Caygill, Founder & Chief Executive of Icebreaker Jeremy Moon, Australian Fair Pay Commission Commissioner and Australian Productivity Commission (Part-Time Commissioner) Judith Sloan and Capital Economics Director Dr Bryce Wilkinson.

While Dr Brash and his Think Tank colleagues were recommending the Government to tighten its fist, the Australian Federal Government has put in place a taxpayer-funded Enterprise Connect Scheme to strengthen management capability and improve productivity.

National MPs were not keen to discuss the implications of the Task Force Report but Finance Minister Bill English said the current level of Government spending would not be sustainable for long.

The Independent Business Foundation said that closing the gap with Australia did not necessarily mean hardcore, rightist approach.

It quoted recent industry surveys, which said a lack of commitment by staff was the prime reason for poor performance and low productivity.

“These surveys revealed that two-thirds of the New Zealand work force is effectively disengaged, with only 12% stating a commitment to the employing company,” the Foundation said in its submission to the Task Force.

New Zealand’s business sector was dominated by “growth-disinclined owners motivated largely by personal objectives,” most of who were “management incapable and resistant to external influences,” the submission said.

Among IBF’s recommendations for improvement were establishment of business incubators to every tertiary institution to provide management education and inclusion of business skills in all apprenticeship training schemes.

“There should be greater emphasis on quality systems such as ISO and QBase and management competence before new businesses are established.”