6. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
What advice, if any, has he received outlining the effect of an increase in GST on families?
Hon BILL ENGLISH (Minister of Finance) Link to this
The advice is that the way an increase in GST impacts on families and other taxpayers depends entirely on what other tax changes accompany it.
Hon David Cunliffe Link to this
Does the Government currently have a Budget deficit, and is the Government planning to increase GST—yes or no?
It may be news to that member—in fact, I think it is news to that member—that the Government has a Budget deficit. We are not raising GST to close that deficit now, and that is what the Prime Minister stated before the election.
Mr SPEAKERHon David Cunliffe Link to this
Can the Minister confirm that he told the Dominion Post, in response to a question about whether he would support raising GST or imposing any kind of capital gains tax: “We won’t be doing that … It is not our policy,”?
I can confirm that. I can also confirm that the following descriptions were given just 6 months ago: “His initial plan was right. The things we did on Family Support, accompanying GST as a way of cutting down your huge tax rates …”. That was Phil Goff, just 6 months ago, referring to the plans he was part of back in 1989.
I am on my feet, and there will be silence. Forgive me, my attention was a little divided, but I thought I heard the member’s question, and I am not sure the answer bore a lot of relationship to the question. I think the only fair thing I can do is invite the member to repeat his supplementary question.
Hon David Cunliffe Link to this
Then I will repeat that question. Can the Minister confirm that he told the Dominion Post, in response to a question about whether the Government would be raising GST and imposing any kind of capital gains tax: “We won’t be doing that … It is not our policy,”?
I will give the same answer that I gave before, which was: “I can confirm that.” I also add, if I am allowed to, that the previous Government left the economy in such a mess that we have had to set out to design a tax package that will increase our economic performance.
Amy AdamsWe have not considered increasing GST for the purposes of closing the Government’s deficit, which is a very large one. The Government has been looking to increase New Zealand’s long-term economic performance because, after 10 years of mismanagement, we have a lopsided economy where the incentives to invest and save are weak, and we have had too much consumption and borrowing, as illustrated by the fact that New Zealand now owes the world around $160 billion. So we have proposed a package that bundles up GST, income tax rate changes, and changes to the taxation of property as a way of improving the tax system and our economic growth prospects.
Hon David Cunliffe Link to this
Respectfully, a reprise deserves a reprise, and it was not me that started reprising.
The member will not now argue with the Speaker. I invite him to ask his supplementary question, and to do just that.
Hon David Cunliffe Link to this
How can the Minister say that Kiwis will be better off after a hike in GST, when low and middle income earners will, at best, be compensated for their increased costs? How does he expect those hard-working Kiwis to get ahead?
The member will just have to wait and see. I know it is disappointing for him that the Prime Minister stated yesterday that lower-income New Zealanders, particularly on benefits and superannuation, will be compensated for any increase in GST. That is technically not difficult, and it is a policy objective of the Government if it decides to increase GST.
Hon David Cunliffe Link to this
Can he therefore guarantee that hard-working Kiwis earning $70,000 and below will be much better off in the tax package, or is his version of fairness that the Prime Minister gets a $500-a-week tax cut, the average wage earner gets 35c a week, and the minimum wage earner gets nothing?
Dr Russel NormanDoes the Minister agree that, whether one looks at it from the criteria of fairness and progressivity, of broadening the tax base, or of the size of the revenue actually raised, on all those criteria a capital gains tax excluding the family home comes out way ahead of GST?
As we discussed this morning at the Finance and Expenditure Committee, the Government has been looking at tax changes that might meet a number of criteria, including simplicity of administration, positive impact on the economy, and fairness. In considering those changes in some detail, the Prime Minister stated yesterday that a comprehensive capital gains tax, along with some other options, were put off the table. I note that the Tax Working Group, which looked at this issue in some detail for 6 months, could not agree on whether a comprehensive capital gains tax would work.
Rahui KateneWhat advice has he received about the benefits of introducing a 1 percent transaction tax—a flat tax for everything consumed, whether it be a product, service, or financial transaction—and how would that tax impact on disposable incomes for families?
I have not received particular advice on a financial transactions tax, although I know it has been discussed and dismissed a number of times over recent years. GST amounts to a flat tax on all consumption except for financial services, housing rentals, and interest, and, as such, it is regarded around the world as a model of an effective tax.
Is he aware of my bill, the Goods and Services Tax (Exemption of Healthy Food) Amendment Bill, and does he support the Māori Party’s commitment to assisting those in low-income households to purchase healthy foods?
I am aware of the Māori Party’s bill, and I am also aware of the Māori Party’s desire to participate in extensive discussion about a tax package. I might say this is an example where we need to be a bit careful about criteria. By some standards, milk and bread do not meet the standards of healthy food. Some people are saying to us we should exempt milk and bread, and others are saying we should exempt healthy foods, which may be two different groups. By and large, we favour GST staying as it is.