Govt unveils business package worth $3.4 billion over 4 years

By NZPA

Thursday 17th May 2007

Finance Minister Michael Cullen's eighth budget delivers business a long called for cut to the company rate from 33% to 30% as well as a raft of initiatives intended to develop the economy.

Ever since Dr Cullen became finance minister in 1999, businesses have been demanding he use his surpluses to fund a cut to the company tax rate.

After years of fiddling with the business tax system, Dr Cullen has finally met their demands with some persuasion from Labour's political support partner United Future to reduce the headline rate.

In all, the Government says it is investing $3.4 billion over four ears in its business budget package which includes $2.1 billion in forgone revenue from the company tax cut.

Other initiatives, some of which came from negotiations with New Zealand First, include:

*A 15% tax credit for research and development ($630 million);

*Changes to tax treatment of savings vehicles ($180 million);

*Greater export market development assistance ($87.8 million); and

*Expansion of industry training ($53 million).

In addition to this, Dr Cullen suggested wide ranging changes to tax rules for New Zealand companies doing business overseas which he estimated to have a four-year cost of $112.5 million, if implemented.

"We are confident the changes unveiled today will help businesses expand here and overseas, improve their ability to research and develop new products and processes and invest in skilled staff in order to lift productivity," Dr Cullen said.

"The Labour-led Government is committed to raising the low level of private funding of research and development. The tax credit substantially lowers the cost of research and development, and therefore gives smaller companies the incentive to start investing in research and development and larger companies to expand their research.

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