Bloggers cause NZX to revise ' SwanBelly' rescue plan

Bloggers have been credited with causing the NZX to make major revisions to its report on the New Zealand economy's prospects in the wake of the current financial crisis.

The New Zealand Stock Exchange report, published last month, was titled "Swan Dive or Belly-flop" -- a reference to different strategies for moving off the "cliff edge". It is now being colloquially called "SwanBelly".

In the new version of the report, coordinated by the NZX's CEO, Mark Weldon, and David Skilling, of the New Zealand Institute, there is a sharper focus on proactive measures, rather than what Weldon calls the "ambulance at the bottom of the cliff" approach, which was adopted by the political parties while in election-mode.

It calls on the new government to deliver a full New Zealand Economic Strategy within 100 days of being sworn into office.

Such a strategy "requires the authentic language of leadership and action, not costly talkfests and meaningless slogans that resonate only as political sound-bites," says the report.

Xero's Rod Drury called up another well-worn metaphor, when he blogged in response to the original report: "It is so frustrating that this election is about re-arranging the deck chairs and not about a coherent plan for really moving New Zealand [ahead]. The rest of the world is investing and using technology to get ahead and we are... blowing our competitive advantage of being small enough to just get stuff done."

Among major tax changes proposed by the new report are 33% additional depreciation on technology investments, including ICT.

A non-partisan Economic Advisory Council, similar to those set up by other nations, is also proposed. This would bring local and international experts together to provide advice and feedback to policy-makers on key economic issues.

One suggestion that was given the thumbs-down by commentators was the first draft's idea of giving Kiwis returning from overseas tax incentives (which would have seen their tax rate limited to just 20% for their first two years back at home -- a measure that would have been relevant to the ICT industry.

Bloggers pointed out people might well come home anyway once their overseas work comes to an end, so the country would gain nothing. And, once their fortunes improved, people might well take off again if there is nothing tying them to New Zealand.

"I believe it is more appropriate to address why they go in the first place, and I also believe that our domestic tax regime is a major factor in that," said email marketer Jerry Flay, on the NZX blog.

Weldon suggests limiting such a scheme to higher-salary returnees -- say, those earning over $80,000 -- might increase its relevance and value. He attributes this idea to journalist Linda Clark. "This ensures they will bring more savings back, consumption/housing support will be stronger and it will not undercut the workers who are most at risk -- the average earner."

However, the idea has been abandoned in the second draft.

The new report says the research and development tax credit scheme should be "reframed" so as to be more effective. Drury points to its weakness for merely sparking the re-arrangement of expenses rather than being used to encourage genuine extra R&D effort.

The second draft also says the advantage of the tax credit is often drastically reduced by compliance costs. To ameliorate these it suggests pre-approval of eligible companies and a simple application procedure. This would be balanced by more stringent penalties in the event of false claims -- against both the company and the chief financial officer or whoever signed off on the application.

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