Lower company tax “high hurdle”

In today’s post-Cabinet press conference Bill English said that he wasn’t keen to lower company tax, saying their was a “high hurdle” to show it’s a panacea.

NZ Herald: Businesses over-egg the power of corporate tax cuts, says English

Cutting New Zealand’s 28 per cent corporate tax rate is “not a panacea in the way business groups sometimes market it,” says Prime Minister Bill English.

Responding to criticisms from the business community that the Budget had ignored the trend in other developed economies for lower corporate tax rates, English said New Zealand’s was an unusually “comprehensive, fair” tax system.

“They might pay a lower intermediate tax rate in the company but once the money comes out of the company they pay a much higher personal tax rate.”

“A lower company tax is … most beneficial to foreign owners because they just get a straight cut whereas in New Zealand it just reduces their intermediate tax rate,” he said.

“You need a pretty high threshold to show there’s going to be equity benefits for it.”

He was not ruling out a move on the corporate tax rate, saying it “can have benefits in an economy like this, which is basically cooperatives and small businesses where retained earnings matter as a source of investment more than publicly raised capital”.

“The point I’m making is those are fairly involved, complex discussions,” said English, who would not be drawn on whether the issue might be covered in the National Party’s election manifesto.

“You’ll have to wait and see for a manifesto”.

Trump orders TPP withdrawal

Donald Trump has signed an executive order that will pull the US out of the Trans-Pacific Partnership Agreement, as signalled in his campaign.

He has warned business leaders he will impose “very major border tax” if companies move their manufacturing out of the US. Unless he also acts on the huge number of companies who already manufacture outside of the US this will give existing off shore manufacturers a big price advantage.

He has also said he intends slashing company tax rates from 35% to 15% or 20%.

BBC: Trump executive order pulls out of TPP trade deal

President Donald Trump has fulfilled a campaign pledge by signing an executive order to withdraw from the Trans-Pacific Partnership (TPP).

During his presidential campaign, Mr Trump criticised the TPP as a “potential disaster for our country”, arguing it harmed US manufacturing.

“Great thing for the American worker what we just did,” said Mr Trump as he dumped the pact with a stroke of a pen.

This was well signalled.

He also cut funding for international groups that provide abortions, and freezed hiring of some federal workers.

Also on Monday morning, Mr Trump pledged to “massively” cut regulations and taxes on companies, but impose “a very major border tax” if they move factories outside the US.

“All you have to do is stay,” he told executives from 12 companies including Lockheed Martin, Under Armour, Whirlpool, Tesla and Johnson & Johnson.

After meeting the business leaders in the White House, Mr Trump pledged to lower corporate taxes to 15% or 20%, from the current 35%, and slash regulations by up to 75% if they keep jobs in the US.

As promised Trump will radically change business and trade regulations, tariffs and taxes for the US. How this will affect the US and the rest of the world is unknown – there is certain to be negative effects and unintended consequences.

When the world’s largest economy gets a good shake up it’s anyone’s guess what will froth over the top.