2. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Why is he cutting the corporate tax rate, and why now?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I am sorry. The member will have to wait just one more day to find out what is in the Budget.
Can the Minister confirm that his ability to pass a Budget, including a cut in the corporate tax rate, now depends on the Greens abstaining on a vote of confidence, because he has lost his majority with New Zealand First and United Future; and has the Government consulted with the Greens about their views on a billion-dollar company tax cut?
Charles ChauvelHon Dr MICHAEL CULLEN Link to this
Since coming to office in 1999 we have introduced a raft of measures in this area, including reductions in fringe benefit tax in the specified superannuation contribution withholding tax, greater interest deductibility for companies, zero rating of GST on financial services, introducing an exemption on tax in overseas income for new migrants, and allowing high depreciation for low-value assets. We have also introduced tax concessions for the racing industry, and I note that the National Party voted against almost all of these reductions in taxation.
R Doug WoolertonCan the Minister confirm that reviewing the business taxation regime is part of the confidence and supply agreement with New Zealand First, and that New Zealand First has consistently lobbied the Government to reduce the current rate of corporate tax?
Hon Dr MICHAEL CULLEN Link to this
I can confirm it was a condition of our confidence and supply agreements with both New Zealand First and United Future.
Heather RoyDoes the Minister agree that it is good tax policy design to align the top personal tax rate with the company rate, and what is the logic of maintaining—in fact, widening—the differential between the company rate and the top rate of personal taxation?
Hon Dr MICHAEL CULLEN Link to this
At a theoretical level there are advantages. Actually, very, very few countries align the top two rates, and many countries have much wider differentials than New Zealand. In Australia, for example, the differential is between 45c and 30c in the dollar.
Does the Minister expect to be having discussions this afternoon with the Greens in order to ensure that the Government can rely on their support for a billion-dollar corporate tax cut, or have they promised to back Labour, no matter what?
Hon Dr MICHAEL CULLEN Link to this
I spend many afternoons having discussions with the Greens. I think this afternoon is not one of them.
Jeanette Fitzsimons Link to this
Can the Minister tell the House on what conditions the Greens’ abstention on confidence and supply is based, and can he comment on whether the conditions regularly flip-flop according to the Government’s numbers, or whether it is actually based on policy?
Hon Dr MICHAEL CULLEN Link to this
The agreement is based on good faith and on working in a direction that is consistent with the policies of both parties. The Greens remain consistent even in areas where I wish they would actually change their position and support the Government. But they have always been in good faith in terms of their relationships with the current Government. We are on track, I think I can say, on a range of key issues.
Does the last answer mean that the Minister no longer believes all those sarcastic and sometimes funny things he has been saying about the Greens?
Jeanette Fitzsimons Link to this
Can the Minister also confirm that the Greens’ cooperation agreement with the Government is based on a great deal more than good faith and actually includes a considerable amount of policy that is a precondition to our continued abstention on confidence and supply?
Hon Dr MICHAEL CULLEN Link to this
There are specific references to areas around energy, sustainability, transport, and other policy areas, and the Labour-led Government and the Green Party continue to work closely together on those matters. The Government has absolutely no doubt—unlike, obviously, the National Party—about the good faith on which the Green Party works.
Can the Minister confirm that, whereas at the moment his numbers to pass the Budget rely on confidence and supply agreements with both United Future and New Zealand First, by tomorrow his numbers to pass the Budget will depend on a confidence and supply agreement with New Zealand First, a confidence and supply agreement with United Future, and a cooperation agreement with the Greens?
Hon Dr MICHAEL CULLEN Link to this
We have rested on those since the last election, and that is the nature of MMP politics. The National Party has never learnt how to operate MMP politics.
What can New Zealand expect from the 2008 Budget, which the Minister has already started talking about, when in this one he was pushed into a company tax cut by United Future and savings incentives by New Zealand First, and when, clearly, in the 2008 Budget he will be pushed into all sorts of weird economic policy by the Greens?
Hon Dr MICHAEL CULLEN Link to this
We work carefully and closely with other political parties. The member will find out tomorrow what is actually in the Budget. Until that member learns that there are other parties in this House, he has not got the faintest hope of ever being part of a Government.
Why has the Government decided to make a cut in the company tax rate its top priority when people on the average wage used to pay 19 percent of their income as tax when he came to power, and now those people pay 22 percent of their income as tax, which means that the average tax on the average wage has gone up by about 12 percent?
Hon Dr MICHAEL CULLEN Link to this
Actually, for an average wage worker with two children the tax wedge on that household is now down to the second lowest in the OECD, and is about an eighth of what it was under the National Government.
Does the Minister expect to have to modify any policy immediately after the Budget because the Government’s majority now relies on the Greens abstaining from confidence and supply votes, whereas previously its effective majority relied on New Zealand First and United Future alone?
Hon Dr MICHAEL CULLEN Link to this
No, and the last statement is incorrect. Since Taito Phillip Field left the Labour Party he is quite wrong in that regard.