4. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
What was his public response to Treasury’s suggestion in the 2008 briefing to the incoming Minister that he consider a “move towards a tax system more heavily weighted towards consumption taxes”?
Hon BILL ENGLISH (Minister of Finance) Link to this
I do not recall exactly what was said or what I was asked about that. The Government is working with the economy in the state that it finds it in. We set up the Tax Working Group in May last year. It started to publish its proceedings in August last year. Its very thorough and openly debated public report has drawn the Government to the conclusion that it should consider the option of cutting income taxes, offset by a modest increase in GST.
Hon David Cunliffe Link to this
To assist the Minister’s recall, does he still stand by his statement “… we won’t be doing anything with GST. We are focused on personal tax cuts as our top priority.”; or should that now read “Keeping our word is no longer our top priority; raising GST is.”?
Mr SPEAKERThe fact is that the incoming National Government did campaign on tax cuts. We put in place the first tranche of them, and then we had to cancel the second tranche of them because of the effect of the global recession. At the same time we set up the Tax Working Group, which has openly discussed an increase in GST for 6 months. It took till yesterday for that member to think to ask a question about it in this House.
Hon David Cunliffe Link to this
How can he expect New Zealanders to trust his Government’s promise of some kind of compensation for GST, when he said “We want to maintain GST as it is. … We want to keep that rate”, only to break that promise a year later?
I have outlined to the member the circumstances. National campaigned on income tax cuts. In fact, in Budget 2009 there was the option to increase GST in order to fund more of the tax cuts. But we decided not to proceed with income tax cuts, because the country could not afford them. Since then the Tax Working Group has put in front of the Government advice that changing the balance of tax, or cutting income taxes, funded by a modest increase in GST, would result in a better tax system, and from our point of view would result in a better economy.
Amy AdamsWhy is the Government considering a small increase in GST as part of a wider package of tax changes that will help New Zealanders to get ahead?
New Zealand is still a country that spends more than it earns. In fact, our total debt to overseas lenders has now reached $160 billion—
—and it got significantly worse in the last 4 or 5 years. It is time that we took stock and created incentives in this economy that favour working, earning, saving, and investing, because we cannot continue with overspending and borrowing to fill the gap, as happened under that member’s economic management.
Hon David Cunliffe Link to this
If the Minister believes that that was then and this is now, given that he is a former leader of his party and a former finance Minister, how can he expect the public to trust him on GST, when he has now broken two promises on tax cuts since taking office this time around?
The member will just have to wait and see how the details of the package shake down. Those decisions are ahead of the Government. When we have made them, we will announce them, and people will be able to see what impact they will have on them.
Hon David Cunliffe Link to this
Does he now accept that his pledge to maintain GST at its current rate, made in February 2009, after the election, means that his leader’s defence, which was different from his own yesterday, on his GST flip-flop could now have been better considered?