This year’s Budget sees a gradual shift in gear as Government progresses towards its promise of a surplus by next year – albeit a fairly thin one. There is also a sense of a shift closer to the centre of the political spectrum, perhaps leaving Labour with increasingly limited movement as it competes with the Greens.
This may indicate a gradual recognition of an increasingly precarious position in the polls and the dwindling prospects of political allies. Perhaps not surprising that provision has been made for programmes to work with ACT, United Future, the Maori Party and even New Zealand First.
Although Government may have expended political capital in ploughing on with the sale of Mighty River Power, the proceeds have provided some room for additional spending through the Future Investment Fund. $1.5 billion from the Fund has been allocated to hospitals, education and infrastructure – a social focus that erodes Labour’s ability to promise reversals. Given the need to finalise this programme before the next election, the announcement of a second sale before year end is not surprising.
Voters hoping to see strident tax reform may be disappointed. The only tax relief is a reduction in ACC levies and there is no suggestion of any pre-election tax relief cornucopia. The widening of the thin capitalisation regime was predictable. The most notable tax features are the provision of refundable tax losses to start-up R&D firms and deductions for certain ‘black hole’ expenditure. Details to come.
Bill English’s speech included concepts that may be designed to attract opposition swing voters: ‘multinationals must contribute their “fair share” of tax’, ‘we must take measures against child poverty’ and ‘housing affordability is a key issue’. Some of the specific policies announced bear a striking resemblance to past opposition offerings – the R&D tax concessions are reminiscent of Labour’s R&D tax credit programme. Consideration is even given to a limited form of the Green party’s proposal to have warrants of fitness for rental properties.
There is a clear vision of where the blue bus is going. Some gentle detours are added to the route providing an opportunity to pick up some red and green passengers.
Our tax team has analysed the implications of the proposed reforms. Click here to read their commentary.