COM 0500.001 1996-1998 - Laserfiche WebLink

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~ ;'.i4 :vtcLay Limited: Changing an Economy by Changig its Public Sector Page ~ New Zealand economic reforms in the 1980s and 1990s Since the early 1980s, the New Zealand economy has undergone major and radical reform; with the objectives of reducing inflation, increasing international competitiveness and liberalising the economy. The reforms reflected fundamental changes as to the appropriate role of Government - • in many cases, ownership moved from public provision to private provision3; • equity issues are now addressed by "user pays" rather than averaging4; and • public and consumer safeguards are provided by competition rather than regulation. General features of reform process The major reforms have included - • General deregulation of the economy, including, particularly removal of a wide range of regulations in non-trade sectors, such as transport and energy. • Removal of all price, wage and income controls. • A radically overhauled tax system, with substantially reduced personal and corporate raters and introduction of a Goods and Services Tax (GST)6 similar to Europe's VAT. There is no capital gains tax. Dividend imputation prevents double tax on company profits. Double taxation treaties operate with most countries. Virtually all tax deductible expenditures were also eliminated. • Floating the New Zealand dollar and removal of all foreign exchange controls. • Financial management reform in all government departments, including the introduction of accrual accounting. • Removal of most subsidies to agriculture and industry. For example, the former Post Office was corporatised into three State-Owned Enterprises providing telecommunications (Telecom), battkittg (Postbank) and postage services. The first two have since been privatised. With corporatisation, most chazges for government trading activities moved to a user pays basis. Many of these charges had previously been averaged across all consumers of the particular services or activities of the Government department in question. The top personal and corporate rate is thirty three percent. 12.5 percent on virtually all goods and services.