LEGISLATION : Legislative Change – On the horizon

When we asked four business thinkers to tell us how they thought the legislative environment would change in the near future, we asked them to focus on one or two areas each. What, we asked, from business perspective, is the single biggest upcoming legislative change now on the horizon? And why is it important to business? What will these changes mean for individual businesses, New Zealand’s economy and to New Zealand’s ability to survive and thrive in changing world economy?
On more practical note, we also wanted to know what key points business leaders need to know about upcoming legislation. And what key actions they should be taking now in the light of this upcoming change.
Here are their responses.



Fast track the talent agenda

Murray Jack, Chief executive of Deloitte

In the early years of this Labour Government, moving New Zealand’s economic performance back into the top half of the OECD rankings was an often stated goal. But progress towards it has proved to be difficult. In part, this is because it is not possible just to wish it will happen – we actually have to do some things differently.
Interestingly, while New Zealand measures up relatively well in competitiveness rankings, one area we have historically done relatively poorly in is the development of our human capital. In modern economy with so much more wealth generated by knowledge-based services industries, attracting, retaining and developing highly talented people is crucial.
As professional services firm we are highly dependent on talented people. After three or four years many of our best people go offshore and it is becoming much harder to get them back. Increasing flows of talent across borders, the global competition amongst firms for talent and the work experience and salaries offered offshore make New Zealand less attractive destination. We can no longer rely on family ties and being “a great place to bring up kids” to attract our people back. Seeing Australian universities talent scouting our best students for postgraduate study is galling.
In addition to attracting and keeping talent we also need to focus on productivity. Increasing productivity is the key to driving sustainable increases in per capita incomes. Increased productivity is driven by increased investment (including, crucially, training and development of skills). Businesses need to be confident that the policy and regulatory environment supports increased investment.
The final ingredient for improving our economic performance is entrepreneurship. This involves risk-taking, recognising and celebrating success, and making our business environment attractive to entrepreneurial individuals.
A number of pieces of pending policy and legislation are targeted at the talent agenda. The way they unfold and are embraced by business will make substantial difference to our economic progress.
A new Immigration Bill is expected next year. It has stated objective of being “responsive to New Zealand’s labour market needs with the flexibility to allow for future changes”. The recognition that skilled migrants make positive contribution to this country is valuable and positive for business. Greater involvement by business in immigration criteria to address skill gaps in the labour market is welcome.
But we need to attract high talent individuals and especially entrepreneurs. Recent changes in immigration criteria along with the proposed investment tax regime have resulted in dramatic reduction in the number of high net worth individuals coming to New Zealand. Australia, the United Kingdom and the United States, by contrast, have been very successful in using immigration as key driver of economic growth.
The Government’s release of its consultative document “Developing the Second Tertiary Education Strategy” at the end of August provides business with the opportunity to advance core issues around aligning delivery of skills and competencies to industry needs and workforce literacy and numeracy. The needs here are urgent. In the information technology industry alone the decline in graduates now and in the next few years will prove serious barrier to improving productivity.
Pending tax legislation also plays major role in attracting and retaining talent. There is no doubt that the proposed investment tax regime will be serious disincentive for entrepreneurs, senior executives and high net worth individuals seeking to relocate here, and potentially for returning New Zealanders. Other countries in our region, and in particular Australia, are fashioning more competitive tax regimes that when combined with superior salaries and work opportunities make them attractive destinations for our talent.
With some of the legislative changes coming there is real opportunity to start to shape set of policies that are far more conducive to winning in the global talent market. Business has an opportunity through its industry associations to influence more coherent policy approach and position to take advantage of the opportunities that will arise. If we do not, other countries will eat our lunch.



Taxing times

Peter Townsend, Chief executive of Canterbury Employers’ Chamber of Commerce

A possible change in legislation that has the potential to impact on New Zealand businesses more than anything else over the next couple of years would be the old one but the good one – taxation.
More than any other issue, New Zealand businesses see reduction in corporate tax (and also the benefits of reduction in personal tax) as key issue that has the potential to positively impact on business. There is no doubt that significant reduction in tax would improve New Zealand’s international competitiveness, boost investment, support employment, enhance productivity and positively contribute towards New Zealand’s economic growth.
The chance of significant change to taxation in the current political environment seems remote but New Zealand will miss out on golden opportunity if the current ‘robust’ review of corporate tax-ation does not result in significant step in the right direction. Most New Zealand businesses work on the fundamental premise that they can spend their money better than the Government.
The burgeoning size of Government, quite obvious by the numbers of increased civil servants and the dire shortage of top-end commercial office space in Wellington, is going to make the much-heralded economic transformational agenda and the associated increases in productivity so much harder to realise.
It is private enterprise that will transform this economy and it needs to be given an environment which is supportive of business to achieve the objective. Taxation is key component in this.
As part of its current review, the Government is suggesting the possibility of incentives – accelerated depreciation, higher allowances for research and development and so on.
In my opinion good tax system is simple and with low tax rates. We all appreciate that an appropriate level of taxation is necessary to continue to support the public good services of Government. What is not appreciated is government that seems to have desire to cling to the concept of maximising tax revenue, which may look good when you are the recipient, but is painful and counter-productive when you are the payer.
My dream for bold legislative change that would materially impact on economic transformation would be to have step change in corporate tax take (much more aggressive than an indicative three percent reduction) in concert with reduction in personal tax threshold levels.
New Zealand is part of world economy and taxation can either be seen to be point of distinctive advantage or handicap to competing internationally.
We are particularly exposed to relativity with Australia and as the Australians continue to track corporate tax take down (and I have heard all of the counter-arguments with other forms of collecting revenue in Australia)

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