Recent efforts to refine and balance New Zealand’s economic system have already shown impressive results, with the country outcompeting most others on the world stage in several areas. The World Bank’s Doing Business 2019 report recently ranked NZ first worldwide on its ‘ease of doing business’ scale, which singles out countries with “well-designed business regulation or whose regulatory environments have thrived thanks to comprehensive reform over the years.”
New Zealand’s successes here have also helped the country rise to the top tier in terms of wealth per adult. Investment bank Credit Suisse listed NZ as the sixth-richest country by this measure, behind only Switzerland, Australia, the US, Belgium and Norway. The report estimates NZ to have NZ$289,800 in wealth per adult, including both financial and property-based wealth.
Employment numbers have also shown continued improvement, with unemployment currently listed at 3.9%. A 3.3% rise in weekly earnings for full-time employees last quarter is another indication that the country’s economy is on the right track. The NZ dollar has also been performing well, giving the country the ability to focus on maintaining its strong economic performance in the years ahead.
This plan for the future includes an investment in research and development (R&D), as the government prepares a proposal for a 15% tax credit that applies to money spent on R&D moving forwards. The tax incentive would be capped at $120 million, with a minimum R&D expenditure of $50,000 for the tax credit to come into effect.
In a world economy led by innovation, such a commitment to knowledge-based qualitative improvement bodes well for the country’s businesses. It also increases the likelihood that foreign companies will use NZ as a base for their own R&D needs, to benefit from improved investment conditions. The resulting boost to employment and the overall economy could help keep NZ competitive over the coming decades.
To help pay for these tax credits, the government is also modernising its tax system to more thoroughly integrate digital sales into its existing framework. Beginning in October 2019, online purchases from overseas will be subject to GST, provided they are valued at under $1,000. For goods valued at $1,000 and above, the customs department will collect GST and duty from the consumer. These new rules represent a change from the current system, in which most goods worth less than $400 go untaxed.
Exceptions do apply; overseas companies that sell less than $60,000 per year will be exempt from these new GST policies – a situation which is analogous to the already-existing rule that local businesses with less than $60,000 in annual turnover are also able to avoid GST charges.
This move by NZ follows a similar tax rule implemented in Australia, which began adding GST to goods purchased online in July of this year. The move is intended to keep NZ businesses competitive with overseas sellers, while also raising an estimated $112 million by 2021-2022.
Although future developments regarding Brexit and the US-China trade war are hard to predict, New Zealand’s strong footing and far-sighted economic ambitions have the country in very good position for businesses and citizens alike.