3. AARON GILMORE (National) Link to this
to the Minister of Finance
How would the Government ensure that all income groups are compensated for with any increase in GST?
Hon BILL ENGLISH (Minister of Finance) Link to this
The impact of any increase in GST on any particular income group will depend on the details of the swap between income tax cuts and a GST increase, and how that group is affected by any taxation of property. Certainly, in the case of people on benefits, New Zealand superannuation, and Working for Families payments the Prime Minister stated in this House the other day that there would be automatic adjustments to compensate for any increase in GST.
How would any increase in GST fit within a package of lower personal taxes to help people get ahead and to improve New Zealand’s economic growth?
New Zealand’s economy needs significant improvement and that is why the Government is considering tax measures in the first place. This economy spends more than it earns, and its export sector has been in recession for the last 5 years. We want stronger incentives for people to get ahead, to save, and to invest. We want weaker incentives for people to spend more than they earn and to borrow too much to fill the difference.
The Government is considering a modest increase in GST as part of a package designed to help this economy get up and out of recession and to grow strongly in the future so that we can have higher incomes and better public services, and so that the Government’s books are in better order. We want a package that is fiscally neutral—we cannot give away revenue; this is no lolly scramble—but improves the incentives in the economy so we can rebalance it in favour of earning, investing, working, and saving.
Yes, it does. The Opposition seems to have discovered in the last couple of days that the Government has been considering changes in the tax system. In fact, we ran a very transparent process, which was announced last May. In August the Tax Working Group put its first GST scenarios on the website, which the Labour Party found yesterday, 6 months after they were published. There has been widespread public discussion, and I think there is a broad base of support for changes in a tax system that is creaking and, more important, for changes in an economy that needs to do a better job to realise New Zealanders’ aspirations.