One tax law for all? Apparently not
The other week it was announced that Tainui and Ngai Tahu-owned Go Bus had picked up four South Auckland public transport contracts. Initial media reports suggested that this was not a sign of the best man (or company) winning, but rather the result of a quirk in New Zealand tax law that sees Maori Authorities pay only 17.5% company tax rather than the usual 28%.
In fact, it was worse than that. An article today by the National Business Review reveals that the two owners of Go Bus, Ngai Tahu Go Bus and TGH Direct Investments (owned in turn by Ngai Tahu Charitable Group and Waikato Raupatu Lands Trust) are charitable trusts, therefore paying no company tax at all.
It was later revealed that Go Bus Chief Executive, Calum Haslop, sought to downplay the significance of his business not being subject to company tax:
“It’s really only the last two years or 18 months really that we’ve been an iwi subsidiary. Nothing has changed in terms of our competitiveness. The tax or otherwise question is not something we turn our minds to, and it is not an element in terms of our competitiveness or any reason we’ve been able to win these Auckland contracts.”
The CEO can do all he can to downplay the fact that Go Bus has a significant tax advantage, but for its competitors, paying the usual 28% corporate tax rate, the remarks are fanciful.
Many New Zealanders will be shocked to learn that New Zealand is unique in the Commonwealth in allowing organisations whose membership is defined by blood to qualify as "charitable". We believe that companies should be required to pay taxes, no matter what the racial or ethnic background of their ultimate shareholders.
The only silver lining out of this is that it has once again ignited the debate about tax advantages and ways we can lower the tax burden for businesses. Our research shows that abolishing corporate welfare alone would allow the corporate tax rate to be reduced from 28% to 22.5%. Such a move would significantly improve New Zealand's competitiveness, encourage investment and create more jobs for Kiwis.