Finance Minister Steven Joyce and Revenue Minister Judith Collins have released three consultation papers proposing new measures to strengthen New Zealand’s rules for taxing large multinationals.
“Our broad-based low rate tax system continues to perform very well for New Zealand overall,” Mr Joyce says. “However it’s important that it keeps evolving to ensure that all companies operating in New Zealand pay their fair share of tax.”
“The proposals in these documents are in line with the recommendations from the OECD’s base erosion and profit-shifting (BEPS) project which has developed best practice measures for the global response to BEPS.”
The consultation documents contain proposals for:Tackling concerns about multinationals booking profits from their New Zealand sales offshore, even though these sales are driven by New Zealand- based staff Preventing multinationals using interest payments to shift profits offshore, and Implementing New Zealand’s entrance into an international convention for aligning our double tax agreements with OECD recommendations.
“We also need to be mindful of the New Zealand context so the proposals address some specific BEPS arrangements that Inland Revenue has observed,” Ms Collins says.
“We welcome multinationals’ participation in our economy, but we also expect them to pay tax based on their actual levels of economic activity in New Zealand.”
Submissions on the consultation document on implementing the international convention are open until 7 April. Submissions on the other two are open until 18 April. Ministers will consider final proposals arising from the documents later in the year.
The consultation documents are available at www.taxpolicy.ird.govt.nz.
A full cost-benefit analysis on Debt-to-Income (DTI) limits and public consultation will be conducted by the Reserve Bank before any decision is made on the potential use of the macro-prudential policy tool, Finance Minister Steven Joyce says.
“I have discussed DTIs with the Reserve Bank Governor, who remains concerned about the levels of debt in some households in the context of recent increases in house prices,” Mr Joyce says.
“I have decided that, consistent with good regulatory principles, a full cost-benefit analysis and consultation with the public should occur before I consider whether to amend the Memorandum of Understanding (MOU) on Macro-Prudential Policy.”
The Finance Minister and the Governor have signed an MOU that governs the use of macro-prudential tools. This MOU sets objectives for and requires accountability around the use of the tools. The introduction of DTI limits would require that this MOU be amended.
Debt-to-income limits are designed to regulate the amount of debt that a mortgage borrower can access relative to their incomes.
“The Bank has a number of regulatory tools available to it to address systemic risks it identifies and I am cautious about adding further tools.
“The use of macro-prudential tools can be complex and affect different borrowers in different ways. I am particularly interested in what the impacts could be on first home buyers.”
The RBNZ is currently gathering information about the DTI levels that borrowers are obtaining and assessing the potential case for the use of debt-to-income limits.
“Given the novel nature of a DTI tool in New Zealand and the fact there are a number of possible policy actions the RBNZ could take, it is important that the costs and benefits of the different policy options be adequately and rigorously explored.”
The Bank has indicated that public consultation will commence in March and occur during the first half of 2017.
The Government's 2017 Budget will be delivered on Thursday 25 May, and will be centred on providing opportunities for all Kiwis to get ahead, Finance Minister Steven Joyce says.
"The 2017 Budget will build on the strengthening performance of the New Zealand economy over the last several years. It will focus on creating the conditions for further growth and greater prosperity for all New Zealanders," Mr Joyce says.
"New Zealand businesses have generated 328,000 new jobs since 2008, and average weekly wages have grown by 26.1 per cent – more than double the rate of inflation. Budget 2017 will seek to give businesses the confidence to keep investing and keep growing, to provide more opportunities for New Zealand families.”
A key element of the Budget will involve investing in the public services and building the infrastructure for a growing New Zealand.
"As the economy grows, we have a little more headroom to invest in better public services. However, as always, our focus will be on achieving better results, and not just tipping in more taxpayers money," Mr Joyce says.
“It is also very important to remain mindful that the money the Government spends comes from hard working Kiwi families. We remain committed to reducing the tax burden on lower and middle income earners when we have the room to do so.”
Mr Joyce says the Budget will continue a relentless focus on reducing debt as a percentage of GDP.
"A key part of building a resilient economy is creating the necessary buffers to deal with the next economic shock. The Government remains committed to its target of reducing net debt to 20 per cent of GDP by 2020/21," Mr Joyce says.
Finance Minister Steven Joyce will appoint current Deputy Reserve Bank Governor Grant Spencer as the Acting Governor of the Bank for six months, following the expiry of current Governor Graeme Wheeler’s term on September 26 this year.
"Mr Wheeler's term as Governor expires on September 26, three days after the general election, and he has decided not to seek reappointment," Mr Joyce says. "Following advice from the Cabinet Office and consultation with Cabinet, I have decided that the most appropriate course of action would be to appoint an acting Governor for a six month period to cover the post-election caretaker period. This will give the next Government time to make a decision on the appointment of a permanent Governor for the next five year term.
"I have decided to appoint Mr Spencer as acting Governor from 27 September 2017 to 26 March 2018, on the advice of the Reserve Bank Board of Directors. The Government is pleased to have someone of his calibre to move into the role. He is a highly experienced member of the Bank’s Leadership team who will provide stability and continuity through this caretaker period prior to the appointment of the new Governor."
Mr Joyce and Mr Spencer have agreed that there will be no change to the Policy Targets Agreement for the period Mr Spencer will be acting Governor.
Mr Spencer has advised the Government that he won't be applying for the permanent role, and intends to retire following his period as acting Governor.
The Bank has had one previous acting Governor. Former Deputy Governor Rod Carr was appointed in an acting capacity for the pre-election and caretaker period around the 2002 General election, following the resignation of Governor Brash.
Mr Joyce thanked Governor Wheeler for his service to the Bank.
"The Governor has performed his role calmly and expertly during a highly unusual period for the world economy. I thank him for his service up until now and for the remainder of his term as Governor," Mr Joyce says.
High-growth councils have until 31 March to submit final proposals for a share of the $1 billion Housing Infrastructure Fund, Infrastructure Minister Steven Joyce and Building and Construction Minister Dr Nick Smith say.
“Council constraints in financing the necessary infrastructure - the water supply, storm water, waste water and roading - can slow down the opening up of new housing areas, which is why the Government announced the Housing Infrastructure Fund last year,” Dr Smith says.
“Eligible councils have already given us an early indication of their interest, with indicative proposals in late 2016 amounting to $1.79 billion for infrastructure. Depending on which final proposals are supported, the Fund could potentially support about 50,000 new dwellings”.
Ministers have encouraged councils to be more ambitious in their final proposals.
“Only a small number of the 17 proposals received through the expressions of interest phase would result in projects being advanced earlier than previously planned by the councils,” Mr Joyce says.
“We want to see more ambitious projects that will have a greater positive impact on housing supply over the next five years.”
Dr Smith says the process for councils to secure funding has been undertaken in two steps to accommodate the local body elections late last year.
“This has enabled councils to ‘test drive’ and refine their ideas before the final proposal stage,” Dr Smith says.
“The final proposals will be assessed by an independent panel, with priority given to those initiatives that enable the most new housing. We expect to announce the final allocations later this year.
“The Housing Infrastructure Fund is part of the Government’s comprehensive plan to grow additional housing supply alongside Special Housing Areas, the new Auckland Unitary Plan, the National Policy Statement on Urban Development, reforms to the Resource Management Act, the Crown Land Programme and the HomeStart scheme. We have been successful in more than doubling the house build rate from 15,000 to more than 30,000 a year.
“This initiative on infrastructure funding is to ensure this strong growth in new house supply continues.”
Councils have until 31 March to submit final proposals. More information is available here.
Higher than forecast tax revenues are the primary reason the Government accounts for the first five months of the financial year are ahead of forecast, Finance Minister Steven Joyce says.Read more
The Government has released the interim Major Projects Performance Report for the period to November last year, covering 53 complex major projects across government with a whole of life cost of $37 billion.
“The Government is in the middle of our biggest ever infrastructure spend,” Finance Minister Steven Joyce says. “We are investing billions of dollars to construct hospitals, schools, roads and courts; provide equipment for our armed forces; and develop ICT capabilities to transform public services.
“These investments are instrumental for the provision of quality public services for our growing country, and it is important that they are delivered well. Transparent reporting is a key part of ensuring agencies lift their performance in investment management.”
The interim report assesses project progress on a five-point scale ranging from Red through to Amber and then Green. 90 per cent of projects have been assessed as Amber or better with four assessed as Amber/Red and one as Red. Overall, there is an increase in the proportion of projects moving towards Green.
Major projects are a collection of the most challenging projects Government is undertaking. A Red or Amber/Red rating highlights that there are issues or risks that are either currently being addressed or need to be addressed to ensure the project is delivered successfully, and those projects are working with central government agencies to resolve those issues.
The interim Major Projects Performance Report is available here.
The Red / Amber/Red rated projects are:
- ANZAC Frigate Systems Upgrade – Defence (Red)
- Lincoln University/AgResearch Stage One Building Project
- Māori Land Service – Te Puni Kōkiri
- Transforming the System of Service Delivery Programme – Department of Internal Affairs
- National Bowel Screening Programme – Ministry of Health
The Police Human Resource Management Information System Project was rated Red in the previous period and has improved to Amber in this reporting period.
Two projects are close to completion and no longer require monitoring: the Christchurch Schools Rebuild Programme and the Burwood Hospital Redevelopment.
The Canterbury Public Sector Quarterly Rebuild Report content is now included in this report to provide the public with a single source of information about the Canterbury Rebuild Recovery.
The interim report covers the period July – November 2016, and was finalised before the Kaikōura earthquakes on 14 November.
The New Zealand economy continued to grow solidly in the September quarter, posting a higher than expected 1.1 per cent growth rate for the quarter and 3.5 per cent over the last year, Finance Minister Steven Joyce says.
“New Zealand’s focus on developing a strong and open economy is delivering good results for Kiwi families, especially relative to most of the rest of the developed world,” Mr Joyce says.
New Zealand’s economic growth in the year to September was the fifth strongest in the OECD ahead of Australia (1.8 per cent), the USA (1.6 per cent), Canada (1.3 per cent) and the Euro Area (1.7 per cent).
“We are starting to see the benefits of a clear and stable focus on economic fundamentals coupled with a determination to build a competitive environment from which Kiwi companies can succeed on the world stage.”
Growth in the quarter was strong across 13 of 16 industries, including:
- Business services (up 2.0 per cent)
- Transport, postal, and warehousing (up 3.7 per cent)
- Construction (up 2.1 per cent)
- Manufacturing (up 1.2 per cent)
“It’s hard to overstate the importance of key service sector exports like tourism and education in New Zealand’s economic success in recent years. They have taken up a lot of the shortfall as the dairy sector went through its downturn. Other food sectors and hi-tech exports have also contributed significantly,” Mr Joyce says.
The Current Account deficit was unchanged at 2.9 per cent for the year, well below the long-run average. New Zealand’s external debt was 58 per cent of GDP, compared with 83.8 per cent of GDP back before the GFC in 2008.
Treasury’s half-yearly Fiscal Update predicts growth to average 3 per cent per year out to 2021, with a further 150,000 jobs expected to be added to the New Zealand economy over the same period.
“The future is looking positive for New Zealand, but these are of course just forecasts. The world remains an uncertain place and it is important that the Government, businesses and households collectively keep our feet on the ground and not go crazy with the credit card. If we work hard, maintain our economic programme and increase our competitiveness we can continue to improve the outcomes for Kiwi families,” Mr Joyce says
Standard and Poor’s decision to affirm the AA foreign currency and AA+ local currency sovereign credit ratings with a stable outlook for New Zealand reflects international confidence in New Zealand’s economic and fiscal performance, Finance Minister Steven Joyce says.
“The assessment released by S & P today confirms the increasing resilience of New Zealand’s economy as we head into 2017. The Government’s careful economic management is seeing continued improvement across a range of economic measures,” Mr Joyce says.
“S & P noted an improved outlook for New Zealand’s current account deficit and an improving forecast for our net government debt.”
“The agency also noted their expectations that New Zealand’s fiscal performance will continue to improve over the medium term – and that remains the Government’s clear intention.”
The Westpac McDermott Miller Employment Confidence Survey released earlier today also shows New Zealanders are increasingly optimistic about the state of the labour market with employment confidence at its highest level in eight years.
“Strong employment confidence together with the positive recent survey of quarterly business opinion directly link back to the strength of New Zealand’s economic management,” Mr Joyce says.
“By operating sensible conservative economic policy, the government is giving businesses the confidence to invest and grow, creating more jobs for Kiwis and their families.
“There remains significant uncertainty about the world economy in the year ahead. However New Zealanders can take confidence that our country is well placed to deal with any issues as they arise.”