I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
Is it just me or does anyone else think it’s silly when Michael Cullen says that reducing tax costs money? His message seems very much ‘politics of envy’.
Surely reducing tax, creates more investment, which creates more revenue, which means that more tax gets paid. Optimists (like me) would actually argue that reducing tax may increase the government tax take. But I’m sure its not a 1-1 match.
I just love this example of how the tax system works.
I’m no macro-economic expert but I do believe that increasing savings is key to promoting a positive investment cycle. So personal tax cuts into a savings scheme would make sense to me.
Business tax cuts will directly increase investment. That allows us to increase productivity, and that would definitely grow the pie for all.
Check out this chart from the NZ Institute …
blog
Trend line = Work less hours, produce higher output.
The chart is reasonably meaningless unless broken down by industry sectors. The NZ economy has several reasonably unique features for an OECD nation, not least the one where agriculture accounts for 30 to 40 percent of our exports. Size is also a big factor given how we are affected by the lack of opportunity for economies of scale and large capital investments.
It is also worth pointing out that according to the OECD itself we are not a heavily taxed society. Falling below just about everyone other than Korea and Mexico. You could equally argue (looking at OECD tables) that in order to increase productivity we need to *increase* taxes, or at least the investment in education, health, infrastructure, support for exporters and so on. There may be arguments about what is and is not counted as a tax but these are pretty marginal and don’t change the fundamental fact that NZ taxation is at the low end of the scale.
More data here:
http://www.oecd.org/document/60/0,2340,en_2825_293564_1942460_1_1_1_1,00.html
Actually, neither argument (more / less taxation) hold all that much water and in my mind are red herrings suitable for politicians, talk back radio and internet bloggers. There is much more serious analysis of the strengths and weaknesses inherent in our economy and society that is required on an ongoing basis.
If we want to promote saving we need to take a serious look at how the property market works and the tax breaks available to owners of more than one property. There is little incentive to invest in alternatives when a year on year, tax free, captial gain of 5% to 10% is available along with all sorts of tax right-offs. The fact is that companies in NZ have to pay dividends that compete with this to stand any chance of attracting investment.
Enough from me. Merry Christmas. Maybe we can continue the discussion at foo camp :-)
The Australian perspective…
“Labour productivity growth will be particularly strong in sectors that are heavy users of ICT technologies or are in the process of being transformed into that status.
These sectors include telecommunications, manufacturing, finance and trade. By contrast productivity growth in sectors that are less heavily exposed to ICT technologies, such as accommodation and restaurants as well as personal, cultural and recreational services is expected to be relatively low.”
http://www.pc.gov.au/commission/work/productivity/conferences/pp2006/presentations/revesz/index.html
NZ needs sound IT infrastructure in order to be competitive. Roll on Wellington 2.0!
In a high cost, high tax country, industry *has* to add a lot of value per worker to stay profitable. So they invest and also concentrate on high added value areas (design and marketing, not production and distribution).
go france!
dang it - - we need more holidays
Don Christie talks sense, and I agree with Brenda. More holidays *would* make us more productive! I’m sure of it!