3. AARON GILMORE (National) Link to this
to the Minister of Finance
What are the Government’s objectives for tax reform in this year’s Budget?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Government has two main objectives: to enable the economy to grow faster, and to give people more choices about what to do with their own money in a fairer tax system. Both are important and necessary. We can help to lift growth in the economy, and encourage savings and exports over borrowing and consumption, by making changes in the tax system. We can make it fairer if we apply even tax rates across different sectors and fix some of the glaring anomalies that currently exist.
This issue was addressed by Statistics New Zealand in a release back in February. It calculated that the lift in prices from a 15 percent GST rate would be just over 2 percent. For those goods already subject to 12½ percent, Statistics New Zealand says that the rise would be equivalent to a 2.22 percent lift in price. However, GST does not apply to all expenditure, and rents, mortgage payments, and school donations are exempt. When these are allowed for, Statistics New Zealand says that the overall increase is about 2.02 percent. This increase would be lower than the actual inflation rate in each of the past 6 years, and in 9 of the past 10 years.
How would the Government ensure that real incomes are maintained or increased, in light of a GST increase?
A number of tools are available to the Government. Firstly, income tax rates could be reduced for all levels of income by an amount that is at least as great as any GST rise. Secondly, there could be an immediate upward adjustment for beneficiaries, superannuitants, and those receiving Working for Families and other supplementary assistance. All of these are indexed to the CPI, which ensures that real incomes will be permanently maintained. In the case of national superannuation, as well as CPI-indexation payments, the rate would go up as a result of tax cuts.
Stuart NashIs it one of the Government’s objectives to ensure that the 91 percent of taxpayers who are earning under $70,000 a year will benefit fairly from the tax reforms in Budget 2010, after having missed out so badly in Budget 2009; if not, why not?
What those taxpayers missed out on so badly was the last Government’s squandering of a long period of economic growth, where those taxpayers got not one single cent until the month before the 2008 election. We will fix that.
I seek leave to table the media release by Statistics New Zealand on 21 January 2010.
Mr SPEAKER