A strategy to build a bigger economy in order to generate a larger tax revenue base is a logical "insurance" policy urgently needed to support long term the Government's ambitious superannuation plans unveiled today.
Michael Barnett, Chief Executive of the Auckland Chamber of Commerce, said he did not dispute the Government's projections that the cost of superannuation could be met under a tax rate of 33%, at least in the short term.
But what about long term? The figures show that the current cost of superannuation is $4 billion a year or 4% of GDP. By 2050 the increasing number of people drawing superannuation will more than double the revenue demand to 9% of GDP. Under the same projections, the pool of those earning taxation revenue will be proportionately smaller.
"To insure ourselves against the likely pressure that will emerge to lift taxes to defray this huge cost on the economy, a prudent step we should be taking now is to diversify the export base and other ways the country earns its living," said Mr Barnett.
"We should be thinking about and actioning this strategy now and not waiting for the inevitable downturn in the world's business cycle and resulting pressure this will bring as prices for our commodity exports fall and resulting taxation revenue reduces."
Mr Barnett gave the Government full marks for its leadership to grasp the superannuation issue by the scruff of the neck and move it along, but he said the strategy would have "a bit more credibility" if positively linked to the equally urgent need for an integrated vison and action plan for business development in New Zealand.
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