India’s rise and her values of self-sustainability are in stark contrast to New Zealand’s economic decline.
Indian Kiwis are amongst those who tell me manufacturing is in crisis.
Fisher & Paykel Appliances was recently sold to an offshore investor, and hence will be delisted from the stock exchange.
Advanced crystals manufacturer Rakon has laid off 60 hardworking New Zealanders.
Since 2008, about 8000 manufacturing businesses have closed and 40,000 jobs have been lost.
Indian Kiwis (like all of us) know that such things cannot go on forever.
New Zealand already has the second-highest external deficit in the OECD, and by next year, we will overtake Greece in the wrong direction.
We just are not paying our own way in the world and, as a result, we are getting deeper and deeper into debt.
Because most of this debt is private, no amount of trimming the Government’s budget can solve the problem; rather, it would be fuelled by a rampant tax-driven property sector and the mega-profitable banking industry which supports it.
New Zealanders, who design, make and export products and services are finding it tougher to stay afloat.
Mainstream solutions
There are internationally well-known mainstream solutions, of which, pro-growth tax reform should be a part.
Reform starts with the realisation that the current tax system has a fundamental and inappropriate bias towards speculation and against production and exports.
New Zealand is one of three OECD countries that do not have a Capital Gains Tax and both OECD and the IMF have reminded this creates real problems.
Why should every dollar that you and I earn in wages or small business profits be taxed, while nearly every dollar arising as gain in the value of property or shares is tax free?
It is not fair. And it is not good for the economy.
Tax-free property speculation drives money into the property sector, meaning more competition to buy properties, meaning rents go up, and meaning young families are locked out of home ownership.
Incentives for businesses
Tax-free capital gains on business disposals create incentives for entrepreneurs to sell their businesses offshore, instead of growing taxable profits and creating jobs in New Zealand.
Without CGT, capital would be scarce for young companies to commercialise research and development. Too many would sell early and lose their intellectual property to offshore buyers.
That is why Labour believes that a realisation-based, first-home-exempt fair CGT is a no-brainer.
Pro-growth tax reform also means giving our innovators a break; recognising the huge spill-over effects for our economy from a healthy innovation ecosystem.
Research and development tax credits are one such incentive and Labour is seriously looking at bringing them back.
The bottom line is this: Everyone outside the National Party can see that the current system is not working. With this Government, we are on a road to ruin for today’s businesses and tomorrow’s young New Zealanders.
Something must change.
Let us start with the Government.
Let us have an economic policy that allows New Zealand to shine again.
David Cunliffe is an elected Member of Parliament for Labour and the Party’s Spokesman for Economic Development.
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