In a statement, Paula Bennett, Social Development Minister of New Zealand, announced that the number of individuals receiving any type of benefit in New Zealand has seen a 10 816 person drop, while the number of Unemployment Benefit recipients has fallen by 4 224.

According to Paula Bennett, the recession has been especially hard on youth workers, and measures created to address unemployment in this sector have resulted in 5 595 individual leaving the benefit and finding employment. The Job Ops and Community Max initiatives have proven vital in making workforce entry a reality for younger workers. The two programs have assisted 6 563 persons in attaining paid-employment, with Jobs Ops responsible for 3 636 positions, while Community Max has provided 2 927. Work and Income New Zealand has also continued to pursue its work-first approach, opting to devote greater efforts to matching individuals with employment before other steps are taken in the benefit application process. Recent figures released by Work and Income New Zealand indicate that in the last week of February over 38 percent of applicants were matched with jobs straight away.

Closing her comments, Paula Bennett said, “While this is early days and the effects of the recession are still being felt; there is light at the end of the tunnel.” Further, she claimed that similar positive results can be expected in the near future with an abundance of seasonal work expected available across the country until the end of April.

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On March 5th the New Zealand Government made public its Tax Outturn data for the seven months to January 2010, which it claimed is one of the earliest indicators available to judge the economic conditions of the country. The data shows that the total direct tax revenues for the time period were 1.3 percent lower than projected in the 2009 Half-Year Economic and Fiscal Update, though indirect taxes had risen by 1.8 percent, making the net effect an approximate 0.1 percent drop below forecasts. Compared to the same period in the previous year, the direct tax revenue had dropped by 14.6 percent, and indirect taxes grew by 1.1 percent.

According to the Tax Outturn Data, individual tax revenues had dropped by 1.7 percent compared to projections, and 9.3 percent compared to the previous year. Corporate tax revenues fell by 24.7 percent in comparisons to last year though exceeded forecasts by 1.5 percent. Goods and Service Tax revenues exceeded projections and last year’s records by 2.7 and 1.9 percent respectively. Excise duties were on par with governmental estimates, and surpassed last year by 0.9 percent.

The Tax Outturn Data shows that the total New Zealand Government revenues were NZD 32 billion in the seven months to January 2010, with NZD 19.4 billion coming from and direct taxes and NZ 12.6 billion from indirect taxes.

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James Talaga Toala, received sentencing at the Wellington District Court on February 26th, after pleading guilty to six charges of using documents to defraud or receive monetary gain. It was alleged by the IRD that in the period between April 2002 and March 2008 James Toala claimed to make a series of donations to a Wellington church, in order to receive an undue tax credit. The court heard that a total of 79 rebate forms filed with the IRD, totaling NZD 163 110, though none of them were ever actually paid. Further, each claim was accompanied by a false receipt. James Toala received NZD 41 491 worth of rebates for his claims.

No reparation is being sought from Mr. Toala, as the court was told that he is not in a financial position to pay. Patrick Goggin, Inland Revenue Investigations Manager, commented on the sentencing, saying that the ruling was a message to anyone else considering committing similar actions. As a warning, he continued on to say “As with other areas where taxpayers can claim rebates, we’re always watching closely for any fraudulent activity involving donations.”

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On March 1st, the NZIER released the March 2010 Quarterly Predictions report, which stated that although New Zealand is no longer facing a recession, its economic recovery will be slow and “jagged”. Growth of only 2.7 percent was projected for the 2010 calendar year, and 1.4 percent for 2011. Shamubeel Eaqub, NZIER Principal Economist, stated that several key economic indicators, both internationally and locally, are giving cause for concern and calling for restraint on any recovery estimates.

According to the report, the New Zealand Reserve Bank does not yet have any reason to raise the Official Cash Rate (OCR) yet, though the move should be considered in September. Unemployment in 2010 will peak at 7.5 percent, compared to 7.3 percent in December 2009. Further, constraints in wages will be seen for another 12-24 months. Household spending is projected to experience a slow recovery. The report also claimed that the housing sector will experience slow growth, and be hampered by rising mortgage rates.

Shamubeel Eaqub admitted to a certain amount of uncertainty in regards to any economic projections made, as there are renewed signs of flagging consumer confidence both within New Zealand and internationally. Additionally, yet to be announced tax regime changes lend a level of unpredictability to the growth and recovery possibilities of New Zealand.

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Phil Goff, Labour Party leader, announced on February 22nd that a two week protest bus-tour will be launched on February 28th to fight the possibility of a the GST rate being raised to 15 percent. He claimed that the tour’s aim was to visit New Zealand communities and “to show them just how unfair John Key’s plans to hike GST are.” The protest plan also includes several visits to local community groups like Grey Power, Citizen’s Advice Bureau, and any local budgeting services.

While introducing his protest-bus idea, Phil Goff claimed that the National Party had not campaigned with the promise that it would raise GST, and the “…Labour [Party] is going to campaign against it.” He went on to say that a GST increase is unfair and would hurt middle and low income earners across the country, while not delivering for families.

Opposition party members have already commented on the proposed bus tour, noting that while Phil Goff is protesting the GST rise he has not yet stated that his party would lower it if it came to power in the next election. New Zealand Prime Minister has stated that he is not concerned with the tour, and believes that most New Zealanders are reserving their opinions on the increase until they see the entire tax reform package in May.

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In an effort to foster a greater sense of charitable work amongst New Zealanders, Peter Dunne, New Zealand Revenue Minister, announced on February 23rd that individuals who are working overseas for Partners Relief and Development NZ will now be eligible for an interest write-off on their student loans. The change is scheduled to come into effect on April 1st.

Typically, student loans are charged interest when an borrower works outside of New Zealand, and an individual is required to reside within New Zealand for at least six months to receive an interest-free student loan; exceptions apply when the employer is charitable organization which is named by an Order of Council by the New Zealand Government. Although, the New Zealand Inland Revenue Department (IRD) retains a legal right deny eligibility to an individual, if it finds adequate reason to do so.

The interest-free allowance for was initiated by the New Zealand Government in March 2006, and featured 48 recognized charitable organizations. At the time of the current announcement, the legislation concerning interest free loan had grown to include 76 applicable organizations.

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The New Zealand Government has begun to incorporate the DTA into the country’s law system through a signing of an Order in Council on February 17th, according to Peter Dunne, New Zealand Revenue Minister. Once the legal incorporation is complete for both nations the DTA will come into full effect. Australia is yet to commence their respective ratification process. Changes within the DTA are expected to begin in late 2010, two months after the expected conclusion of both countries’ ratification process.

The DTA which was a product of more than a year’s worth of negotiations was signed on June 29th 2009. The main features of the agreement are superannuation portability and several lowered withholding tax rates. On royalties the withholding rate levy will be cut by half to a level of 5 percent. The rate on interest will be lowered to 0 percent for all financial institutions, and remain at 10 percent for all other firms. Dividend payments will be categorized into one of three rates, ranging from 0 percent to the current 15 percent, differentiated by shareholding levels. Further, tax-exempt pension payments from either country will be regarded as tax-free in the corresponding nation.

At the Order of Council announcement, Peter Dunne described the DTA as a recognition and update of the already close business relationship between New Zealand and Australia. He continued on and said, “I expect the new DTA to bring significant benefits to New Zealand and improve certainty for trans-Tasman business.”

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Speaking in a television interview on February 14th, John Key disclosed that the Government is investigating the possibility of creating infrastructure to facilitate and encourage the registration and administration of international pension funds within the country. The concept was suggested and detailed to the Prime Minister personally by the Capital Markets Taskforce in December 2009.

The intention is currently only in early planning stages, though John Key has said that “we are keen to take the next step.” If current projections prove to be correct, the institution of such a financial center could create 3000 to 5000 middle and back office administration jobs. The fund administrators would also be subjected to taxation in New Zealand. As under the scheme New Zealand would only provide administrative support, the pension funds themselves would not be subjected to taxes within the country. According to the Capital Markets Taskforce’s report several “technical” changes would need to be carried out in New Zealand in order to facilitate the financial hub scheme.

According to John Key, a similar system has been implemented in Ireland with success. He described it as “cost effective, but also predictable.” Australia is investigating similar options, though the Prime Minister said that this is not worrying, as New Zealand is a more attractive destination and Australia would be more focused on attracting the funds themselves as to opposed to their administration duties.

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In a press release issued on February 12th the NZBCSD has stated that they are in full support of equating top personal, corporate and trust tax rates, along with lowering across the board personal rates and broadening the tax base, while raising taxes on consumption, as proposed by Prime Minister John Key in his first statement to Parliament on February 9th. The NZBXSD claims that this would lead to a fairer and more sustainable tax system, eventually expanding the economy and drawing in greater numbers of international investors.

The NZBCSD proposed a similar set of changes to the Government after the Business Budget Summit, held on November 1st 2007, though the advice was not heeded. Peter Neilson, Business Council Chief Executive, explaining the Government’s dismissal of the ideas said, “It seems we are preoccupied as a nation with who might win or lose on the first day of reform.” He continued on to say that GST increases were a primary example of this attitude, with many concerned about the initial price increase while ignoring the long-term benefits. He commented further, saying that as long as tax changes are wide reaching and low income individuals receive some support for any first day price increase, a tax reform package should be acceptable to most New Zealanders.

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With the countries recent focus on the tax system and possible reforms, John Key initiated his speech by disclosing the Government’s plans for the taxation landscape. He indicated that investigations are currently being held around the feasibility of implementing a raised Goods and Service Tax (GST) rate of up to 15 percent, from the current 12.5 percent. It was revealed that there could be a lowering at all levels of personal tax rates, with particular emphasis on top-earners. The Tax Working Group recommended risk-free return rate method for property investment, land taxes, and capital gains tax have all been rejected by the Government. There is a possibility that Working for Families and superannuation will see a rise in payments, pending decision on the GST rate. The complete tax package, which John Key described as significant, will be detailed in May, alongside the national budget announcement.

Within his speech, John Key revealed the Government’s revised view on education, promising a ‘shake up” for the tertiary system, and a shift in emphasis in secondary schools towards trade and practical skills. He also promised to increase support for early-childhood education. Changes to resource laws were announced that will see mining on conservation land, with funds from mining licenses funneled back into conservation care. Higher degrees of training and regulation were also promised for Sickness and Domestic Purposes Beneficiaries.

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