Posts Tagged ‘Incentives’

Why are we not looking at a return of the Japanese massage parlour visit incentive scheme for our exporters?

How come a country where exporting is less important – the US – has more incentives for exporters than a country where exporting is critical – New Zealand?

Can we do more for our exporters who’ll help us trade our way out of the effects of the recession and towards a more prosperous future?

Kiwi exporters are also at a disadvantage because of distance from markets, so surely a little helping hand wouldn’t hurt.

In the past we have been very generous and our exporters took full advantage.

In today’s New Zealand Herald, Andrew Keech, a Kiwi businessman now based in the US, says “I love New Zealand but it is difficult to build an exporting business.”

He lists what he gets in the US as an exporter:
• He is taxed in the US at the capital gains rate of 20 per cent, rather than the company tax rate of 40 per cent.
• He receives incentives to travel to US trade missions.
• Half of his accommodation and half of his expo costs are met by the US Government, to help him promote his products overseas.

And that’s not getting into things like the Dairy Export Incentive Program which is open to US dairy exporters.

The tax one is a biggie. Our exporters at the moment pay 30 cents in the dollar, the same as every other New Zealand business .

Tax incentives for Kiwi exporters were removed back in the late 1980s.

The logic is that tax incentives for exporting are a bad idea because they’re not a sustainable way to boost export performance.

It’s also not clear that they work. Back in 2006 the New Zealand Institute of Chartered Accountants said you can’t ”draw any meaningful conclusions from the fact that exports increased in the early 1980s (when the NZD was falling against the USD) on the back of the then export market development tax credits”.

However, “Exploitation of subsidies was rife.

“Export market development expenditure, which qualified for a credit of two-thirds of the amount spent, proved to be a bonanza for overseas travel. A significant amount of export market development activity coincided with All Black tours, Commonwealth Games and the Olympics.

“Fascinating debates ensued with IRD as to whether expenditure late at night in Tokyo massage parlours, but as part of a genuine and successful export promotion, qualified for the 67.5% cash subsidy. The IRD had to reluctantly concede that no matter what the moral value may be of some aspects of such expenditure, it was eligible and squarely qualified for the incentive.”

Once again  BigCake wonders whether what we do in New Zealand makes a hell of a lot of difference.

Tax, regulations and (good) incentives make some difference for sure, and efforts to get these right shouldn’t be ditched, but the way of export sector is set up at the moment with its commodity focus we’re mostly at the mercy of world events.

Exporting from New Zealand is bloody hard and exporting commodities makes it relatively easy.

How do we make exporting value easy?