An income tax cut would grow the economy, says the Chamber of Commerce.
President Fletcher Melvin yesterday welcomed government’s pledge to conduct an income tax review, after announcing a $55 million surplus driven by soaring tax revenues.
The review should be conducted independently, he said, to gain a wide range of views from various sectors in the community.
Reducing income tax would improve people’s purchasing power, which would eventually help grow the economy.
“It’s a forward-looking plan from the government,” Melvin said. “By reducing income tax, the government is giving people an ability to spend more and this will trickle down to the economy.
“People will have a lot more choices in their lives including spending more on the education of their children. It improves their buying power and more spending is good for businesses and the economy.”
Fletcher said local businesses would also gain from any such tax reduction, adding extra savings that could be reinvested back in the economy. This would also give the private sector an opportunity to strengthen infrastructure in the Cooks.
“There is obviously an opportunity for the private sector to invest in infrastructure that would help them in dramatic climatic events such as cyclones.
“The insurance premium has soared to about 20 per cent a year which some companies cannot afford any more. Any extra saving by these businesses would give them the ability to pay the insurance premiums to safeguard them against future disasters.”
Fletcher also said many in the private sector, as well as government, were short-staffed. A reduction in income tax would help them recruit workers by offering them competitive and improved wages.
Finance Minister Mark Brown, announcing the surplus in the Cook Islands News, said the ministry was planning a tax review next year.
“One of the things that people ask is ‘well if you’re doing so well, why don’t we reduce the taxes because we are collecting so much revenue,” Brown said.
“That’s a good question because the last time we had a tax review was 2014 so next year the Ministry of Finance is planning a review.
“The current minimum wage is producing an annual income which is above the tax threshold, so even minimum wage workers are paying income tax. So next year, there will be a review of taxation, we will lift the taxation threshold and see if we need to shift tax margins.”