Tax Cuts Boost Economic Growth in South Africa

Infometrics - a leading economics consultancy in Wellington - have prepared an article (http://www.infometrics.co.nz/article.asp?id=4449) comparing tax rates and economic growth in South Africa and New Zealand. In particular it highlighted the rising living standards in South Africa - especially for the poor.

"The ANC have cut personal tax rates in almost every budget since taking power in 1994. The majority of tax relief has been handed to low and middle income earners."

"A strong economy (which brings healthy government revenue) coupled with a redirection of expenditure to the poor has been the backbone of the ANC’s strategy to achieve ‘A better life for all’. Growing government revenue has enabled them to build 2 million new houses, bring piped water to 17 million people, sanitation to 7 million and implement a social welfare system which is the envy of the developing world. The percentage of the population living in poverty dropped from 41% in 2000 to 32% in 2006. The growth momentum will ensure that further gains in poverty alleviation will be achieved in the future."

New Zealand needs stronger economy

With so many kiwi families leaving for Australia and so many students doing their OE but not coming back home we have to ask what can be done to bring kiwis home in the long term.

Most parents recognise the value of local community sports and cultural groups. The value of New Zealand’s empty beaches and unspoilt bush walks is appreciated by many families. It’s true that there is more to life than the size of the pay packet. However, if we are to create an environment that remains attractive to our children’s generation then we need to ensure that New Zealand remains competitive in terms of income levels and job opportunities.

A recent study by the NZ Institute’s Dr David Skilling compared our income levels with those of Australia. New Zealand's per capita income was $40,021 per annum. Per capita incomes in Queensland ($54,317) and New South Wales ($55,805), are now significantly higher. Western Australia ($58,688), another popular destination for departing NZers is even further ahead. And the mineral boom in the Northern Territory ($78,527) has lifted the per capita to nearly double the New Zealand figure. Even Australia's poorest state, Tasmania ($49,056) now enjoys a lead over this country.

Extensive tax reform is now long overdue in New Zealand. Most New Zealand families would prefer to spend their own money rather than have the government spend it on their behalf. For parents Income Splitting would be a helpful step along the way to giving us more of a choice. In the absence of Income Splitting lower tax rates would be a step in the right direction. Labour has already announced tax cuts in the recent Budget. Commentators now await National’s tax plan (expected in September). United Future remains the only political party to commit to income splitting as well as tax cuts more generally. Tax cuts and higher productivity have been linked to higher economic growth rates. Without higher rates of economic growth our economy will not be able to provide a higher living standard for all New Zealanders. Without attractive job opportunities we will find it difficult to persuade kiwis to move back home.