3. JOHN KEY (National—Helensville) Link to this
to the Minister of Finance
Does he stand by his statement that personal income tax thresholds “will be considered in the light of final decisions around the business taxation review in the context of next year’s Budget, for implementation on 1 April 2008.”; if so, does this mean that any changes his Government intends making to personal taxes would take effect from 1 April 2008?
Does the Minister consider that, when the Minister of Revenue last week said in his newsletter that business tax changes will go ahead from April 2008 and will be accompanied by personal tax adjustments, that was an accurate statement, just as Mr Peters’ statement a few seconds ago “They’re on their way.” was accurate?
Hon Dr MICHAEL CULLEN Link to this
I am sure that represents the very deep intentions of the Minister of Revenue, and, of course, we are from the Government, we are here to help.
Hon Mark GoscheAre fiscal constraints the only matters considered when assessing the appropriateness of changes to the personal tax regime?
Hon Dr MICHAEL CULLEN Link to this
No. There are two other important factors. One is trade-offs in other areas of Government spending, particularly over the long term, as well as in the short term. But there is also the macroeconomic environment; with the current account deficit approaching 10 percent of GDP, the Government has to be careful how much fiscal stimulus it puts into the economy, and Dr Brash clearly agrees.
If, as a result of the business tax review, the Minister ends up cutting the company rate to 30 percent, leaving a 9c differential between the top rate and the company rate, widening out from 6c, does he consider that to be an issue; in which case, will he be doing anything about the top personal rate?
Hon Dr MICHAEL CULLEN Link to this
The member will have to wait and see, but I would not raise the mortgage yet.
Rt Hon Winston Peters Link to this
Has the Minister received any reports as to whether Mr Key, the National Party’s finance spokesman, is right when he says that the surplus is $11.5 billion—
Hon Tau Henare
Madam SPEAKERRt Hon Winston Peters Link to this
I would love to, Madam Speaker. Second, what reports has he seen on the kind of financial mind that argues that the surplus for taxation is $11.5 billion when, in fact, every other informed commentator knows that it is $3 billion?
Hon Dr MICHAEL CULLEN Link to this
Indeed, the operating surplus in the full level was $11.5 billion. Of that—[ Interruption] I will wait. I have plenty of time. I have years to answer this. Of that, $1.8 billion was merely an accounting change, but Mr Key had spent it the following morning, and $3 billion was the transfers to the superannuation fund, and the earnings on the superannuation fund—all of which were set aside for a specific purpose. A large amount of the rest represented the profits on the other Government investment funds. That is why Mr Key in the morning promised tax cuts of $11.5 billion and, in the afternoon of the same day, promised tax cuts of $2.5 billion.
Hon Dr MICHAEL CULLEN Link to this
In just the last few days we have seen the implications of running poor fiscal policy with Italy seeing a credit-rating downgrade by both Standard and Poor’s and Fitch Ratings. It is important that fiscal policy supports monetary policy. I am sure that Dr Brash could organise a seminar for Mr Key on these matters.
Can we now assume—given that the leaders of the two main support parties of the Government are now saying there will be tax cuts in 2008, and his own Prime Minister is running around the country telling any group that will listen there will be tax cuts in 2008—that the issue has long since passed being one of affordability and now is a question of political expediency, and that is why people are having to wait until 2008, in the very same way that Mike Williams, the Labour Party President, argued on Agenda on Saturday morning that the validating legislation went through under urgency only as a matter of political expediency?
Hon Dr MICHAEL CULLEN Link to this
We will run it through again for the member. If the member really believes that, with a current account deficit of nearly 10 percent of GDP, the Government right now should be putting in an extra $2.5 billion of spending power with no corresponding cut in Government spending, it shows how stupid a background in money manipulation of financial market speculation is in running a small economy.
Has the Government been considering raising the trust rate to 36 percent, a rate that Mr Dunne as Minister of Revenue has been indicating may be the case, in which case can he tell us when it is likely that the trust rate will be increased?
Hon Dr MICHAEL CULLEN Link to this
There is no active consideration of that. The Inland Revenue Department did suggest it, I think, in its briefing papers, or something similar to that.
In the Minister’s forthcoming speech to the Labour Party conference this weekend, will he be explaining why, after 7 years of healthy and, particularly lately, bumper surpluses, after 7 years of fiscal drag, and after 7 years of seeing tax increase as a proportion of national income, he has finally come to the realisation that tax cuts might make sense; can he also understand why the workers in his audience listening to his speech on Saturday or Sunday—whenever he delivers it—who look across the Tasman will feel a 7-year itch when they see an Australian Labor Party that is arguing for tax cuts and has been doing so for quite some time?
Hon Dr MICHAEL CULLEN Link to this
When it comes to 7-year itches, the Labour Party members know a working-class scab when they see one.