Budget 2005 reinforces the government’s commitment to economic growth, delivering a multi-million dollar suite of pro-business tax changes, Finance Minister Michael Cullen says.

He said the package more than delivered on the government’s promise to recycle back to business any revenue received from the carbon charge.

"Estimates are that the carbon tax will generate around $720 million over the forecast period ending 30 June 2009. The business tax proposals the government is putting in place are expected to cost almost twice that amount at $1.42 billion.

"This is equivalent to a cut of around 2 per cent in the corporate tax rate. It will deliver a better growth dividend, because the government measures are designed to raise productivity and support the transition to a knowledge-based economy," Dr Cullen said.

Specific themes of the budget business tax pack are to encourage savings, ensure a more productive use of capital, improve New Zealand’s access to worldwide capital, skills and labour, and reduce compliance costs.

To encourage savings and support work-based savings:

• Ensuring portfolio investment by financial intermediaries, such as collective funds, is not overtaxed relative to direct investments.
• Ensuring that income from these funds is taxed at the individual’s correct tax rate, thereby preventing the over-taxation of members earning less than $38,000 a year.

To ensure a more productive use of capital:

• Changing the depreciation rules so that rates better reflect how assets decline in value and to reduce the compliance costs to business.
• Removing barriers to R&D investment [announced last week.]

To improve New Zealand’s access to worldwide capital, skills and labour:

• Assisting the recruitment of top talent by providing a temporary tax exemption on the foreign income of new migrants and of New Zealanders who have been non-resident for tax purposes for at least ten years and who come here to work.
• Making New Zealand more attractive to international investment by aligning our tax rules on securities lending more closely with those of other countries.

To reduce compliance costs: [Announced last month.]