Northland Chamber of Commerce – Climate Change, Emissions Trading and Tax

It is possible to grow the economy without having detrimental effects on the environment. In fact, economic growth is good for the environment because a strong economy makes environmental care more affordable.

Likewise, concern for the environment can often be good for the economy, for example, sustainable management of scarce natural resources. Many of the ways in which businesses operate efficiently have environmental benefits. For example, cost savings through recycling, reduced use of consumables, and energy efficient practices are ways in which the environment and business overlap.

We consider that the increasing interest in environmental issues amongst the population at large is working in favour of environmental sustainability generally. Voluntary and market-driven practices are effective here – for example, businesses know they can achieve a market advantage in offering consumers “sustainable” products. This makes government intervention to protect the environment less necessary than it would otherwise be.

The Northland Chamber is strongly supportive of sound international measures to address the risk of climate change by reducing global greenhouse gas emissions. New Zealand must do its bit on this critical issue, but measures must recognise that with only 0.2% of global emissions, New Zealand is too small for its actions to have any significant impact on total emissions. While leading the way has some benefits in terms of international kudos, the New Zealand economy must not be jeopardised for this benefit alone.

We are opposed to the proposed Emissions Trading Scheme in the current form. This will result in significantly higher energy and transport costs for New Zealand businesses that our trading partners will not have to face.

These costs will reduce New Zealand’s international competitiveness and result in a loss of investment and jobs as companies contract activity, close down or relocate offshore. If businesses do relocate offshore, this will do nothing to reduce global emissions. In fact global emissions might increase if that economic activity were to shift to an economy with less efficient practices or more lenient climate change policies.

There are cases where increased New Zealand production and corresponding emissions could potentially reduce global emissions. For example, agriculture is a high emitting activity but New Zealand agriculture is less carbon intensive than our trade partners’ and so we should be producing more of the world’s food here.

We believe a broad-based greenhouse gas charge accompanied by a corresponding reduction in income tax should be considered as an alternative to the emissions trading scheme. This would be more transparent and result in much more stable energy prices.

Some New Zealand companies can and are benefiting from moves to voluntarily decrease their emissions, from both a cost savings and a market advantage perspective. Being ahead of their competitors, as carbon becomes more constrained, would also produce benefits. We fully support this and are encouraging our members to voluntarily decrease emissions.

For the2008 General Election the Northland Chamber of Commerce are encouraging Northland Businesses to look closely at candidates and party policies and vote for policy that includes

- Not introducing emissions trading schemes until our major trading partners do the same

- Focusing on a broad based greenhouse gas charge but accompany that with a corresponding reduction in income tax

The Northland Chamber of Commerce is the networking, education, advocacy and marketing group for Northland business, and is part of a nationwide network of 30 and a world-wide movement of 21,000 chambers. Subscription to the free fortnightly chamber e-news can be arranged on info@northchamber.co.nz. Enquiries to 09-4384771 or www.northchamber.co.nz, www.kaiparachamber.co.nz and www.farnorthchamber.co.nz

You can have a say on this by going to the Northland Chamber of Commerce Feedback website on www.northchamber.blogspot.com

Government Spending and Taxes

Following the release of the NZ Chamber of Commerce Election Manifesto we received comments on our position regarding Government Expenditure and Tax Policy.

The NZ Chamber of Commerce is recommending that the incoming Government urgently undertake a review of all Government spending with a view to eliminating waste as soon as it takes office

Since 1995 Government spending has almost doubled and is forecast to grow faster than revenue over the next four years.

While recognising the importance of most government spending and the efficiency of taxes as a way of funding public goods, The Chamber believes that both Government spending and taxes have been growing too fast and that New Zealand’s overall tax-take is too high.

As well as the overall quantity of spending, a particular concern is the quality of government spending. There is a growing impression that much of the new spending is non-productive or low quality. Anecdotal evidence suggests government departments are flush with funds that they don’t know how to spend sensibly. A recent example in the media was the badges promoting

Maori education but there are many others.

ANZ National Bank has recently completed a more scientific assessment and concluded that growth in nonproductive spending (excluding benefits) has averaged 8.4% per year since 1997 compared with 5.2% for more productive spending.

More effort needs to be put into eliminating waste in non-productive Government expenditure and reducing overall expenditure growth. We encourage the in-coming government to focus on the quality of its expenditure over the next three years and on raising productivity in the public sector.

New Zealand’s company tax rate was reduced in 2008 for the first time in 20 years (from 33% to 30%). A program of personal tax cuts is to commence later this year. While there has been relief for families in recent years in the form of tax credits, these will be the first tax cuts since the 1990s. The top personal tax rate has not been cut since 1988. This reluctance to reduce taxes has been against a backdrop of decreasing taxes in most of our trade partners’ economies

Lower taxes would achieve a more efficient allocation of resources and make New Zealand a more attractive destination for capital and people. They would improve our international competitiveness and boost investment, employment, productivity and economic growth. It is likely that Australia and other countries will continue to lower their company and personal tax rates over the next few years and so New Zealand must continue to do the same in order to remain competitive.

Tax cuts should be funded by reductions in the growth of further government expenditure and savings from some specific cuts in non-productive bureaucratic spending. We are aware that as the economy slows, significant tax cuts will be less affordable without some significant decisions in this area. Tax cuts must be delivered in a way that does not exacerbate inflationary pressures.

The NZ Chambers recommend that the incoming Government include reducing the top personal tax rates in the next round of tax cuts.

The Northland Chamber of Commerce is the networking, education, advocacy and marketing group for Northland business, and is part of a nationwide network of 30 and a world-wide movement of 21,000 chambers. Subscription to the free fortnightly chamber e-news can be arranged on info@northchamber.co.nz. Enquiries to 09-4384771 or www.northchamber.co.nz, www.kaiparachamber.co.nz and www.farnorthchamber.co.nz

You can have a say on this by going to the Northland Chamber of Commerce Feedback website on www.northchamber.blogspot.com