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Stable taxation accrues economic benefits

The National Party is planning to introduce a stable tax system, without making drastic changes to the minimum wage.

The level of minimum wage impacts the level of unemployment in the economy.

National considers a number of issues non-negotiable. Among them are (a) No Capital Gain Tax (b) No change in GST (c) Reduction in Company Tax Rate in the long run.

Loss-making start-up companies are supported by new tax rules that help them to cash out all or part of their tax losses from R&D expenditure.

Inland Revenue Department (IRD) has larger outlay to target property speculators and others avoiding tax, making the system become fairer for everyone.

Minimum wage

While many political parties campaigned on drastic increase in minimum wage, National refrained from making any promises.

Although there is no proven relation between higher minimum wage and unemployment, but employment of new entrants into the job market is directly related to the level of minimum wage. A low pay rate inspires confidence among businesses to hire new employees, especially young graduates.

It is generally believed that companies would shy away from fresh young graduates if there is a rise in minimum wage. Employers would be attracted to recruit workers from overseas, creating a cycle of reactions.

Ideally, minimum wage should be used for new employees who are being trained, and have no experience. It would then become the moral responsibility of employers to lift their pay scale in due course.

Altering GST

The National Government lifted the rate of Goods and Services Tax (GST) from 12.5% to 15% in 2009. It refrained from commenting on any possible change in the structure during its election campaign, again contrary to some of its political rivals who pledged to lower the GST rate or at least exclusive essential items such as fruits and vegetables.

GST is widely detested as unnecessary and inescapable but successive governments have tried to tweak, causing more damage to the existing tax structure.

Always inversely proportional, higher GST would mean lower company and other taxes and vice-versa.

Capital Gains Tax

National Party has not made any announcement that it would introduce Capital Gains Tax but intends to extend the IRD range to find the property speculators and tax them.

Exemption of the family home will make Capital Gains Tax very complex.

National Party advocates a stable tax policy that would encourage people to work hard to earn big.

Saurav Wadhwa is a Charted Accountant and Principal of IBBZ Accounting Limited based in East Auckland. Phone 027-5555458; Email: Saurav@ibbz.co.nz

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