By Packer Murdoch
Sep 13 2012
The Ministry of Social Development has released a report showing that all companies who now pay 28% tax, down from 33% in 2008, will cost hundreds of billions of dollars in lost revenue if they remain on the lower tax rate for the rest of their lives.
This is the first time a Government has forecast how much it will
cost if a group of current companies get tax cuts for life.
In September last year Cabinet agreed to fund the $1 million research
carried out by Australian company Fry Taylor Consulting Actuaries. In Parliament's question time, Prime Minister John Key was asked why a million dollars was spent on research which seemed nonsensical. He replied "This is valuable research giving insight in to the nature of corporate welfare dependancy. The company is owned by a good friend of mine so I knew they would do a good job".
The aim was to use the valuations to better target benefit reforms and classify groups who are the most benefit dependent, which now appeared to be corporations.
The Fry Taylor report finds companies who also get a 15% tax rebate for research and development have the highest individual lifetime cost. If other tax cuts, like those given to overseas film productions were taken in to account, the figures became astronomical.
The Government would also spend $1.1m over four years on the Corporate tax board who will advise the ministry on how to best implement corporate benefit reform and report to the social development, finance and state
service minister. Former Commerce Commission chairwoman Paula Rebstock will head the panel
overseeing the ministry's decision to have an "investment approach" to corporate benefits in New Zealand. Mr Key, when asked about Ms Rebstock's appointment stated "well we've given her every other cushy job and she always comes up with outcomes which we seem to be in total agreement with. Its a positive relationship."
Social Development minister Paula Bennett said the figures showed that
the Government needed to put more focus on corporations, rather than on people on the sickness or
domestic purposes benefit, which
made up only a fraction of the total costs of benefits.
She conceded there were many variables in the figures, but said the exercise would force Government to be more accountable.
"We've known the unemployment benefit has relatively low numbers and
people move on and off it quite consistently, yet it's where we put most
our punitive policies, most of our resource, most of our energy and
most of our negative legislative changes."
Ms Bennet stated that the report showed there needed to be a dramatic shift to concentrate on the costs of corporate beneficiaries. "The other point to remember is that Corporations have essentially the same rights as people, but their life expectency is potentially infinite. So if we are looking at the true costs of giving corporate tax cuts over the the corporations lifetime, it actually extends in to the trillions of dollars."
Finance Minister Bill English agreed and said that the change in focus would come
at the expense of those companies who now paid much lower tax rates - he was
currently in negotiations for next year's Budget and expected to
approve more funding for the welfare reforms on top of the $237 million
(see the original article here)