5. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
What is the total impact on the operating balance, over the forecast period, of the fiscal impact of the tax changes in Budget 2010 according to page 70 of the 2010 Budget and Economic Fiscal Update, and how does he reconcile that with the Prime Minister’s statement in the House yesterday that “National’s tax plan 2010 … was fiscally neutral”?
Hon BILL ENGLISH (Minister of Finance) Link to this
According to the table the member refers to, the total impact over the forecast period—5 years—is $240 million. Over those 5 years the average impact is around $48 million a year. In a tax package that involves many billions of dollars of reductions in income tax and increases in GST, this is a very small net impact. As the member will see, the final year of that tax package shows a positive fiscal impact, which means that as time goes on, that tax package will result in the Crown collecting more tax, not less.
Hon David Cunliffe Link to this
In view of the fact that the primary question was very specific in relating to page 70 of a Budget document, which shows a fiscal hole of $1.085 billion over 4 years, I seek leave to table—
Mr SPEAKERHon David Cunliffe Link to this
Will he concede that the difference between his claim of fiscal neutrality and the actual $1.085 billion tax hole over 4 years, according to page 70 of last year’s Budget, has been created because of the rose-tinted growth forecasts in that Budget, which have not eventuated?
No, and as I have explained to the member, and in fact I have tabled a summary of figures from two Budgets and the late 2008 tax package, the Government’s tax changes, of which there are three significant ones—the tax package in December 2010, the tax package in December 2008, and the announcements in the 2009 Budget where we cancelled two tranches of tax cuts—have had the overall effect that the Government’s tax take has increased. If the member looks at the Budget, he will see that tax as a percentage of GDP is rising.
Hon David Cunliffe Link to this
Which, if any, of the following four tests of a successful Budget—building a stronger economy, promoting savings and New Zealand ownership of New Zealand assets, tackling the rising cost of living, and promoting debt reduction and fiscal responsibility—is met by borrowing for tax cuts?
The Budget tomorrow will pass all those tests. The member persists in an error. He is wrong to say that the tax changes implemented by the National Government have meant borrowing for tax cuts. They have not. He has spent a lot of time complaining about the tax changes we implemented to fund income tax cuts, such as the increase in GST, the abolition of the research and development tax credit, and changes in KiwiSaver subsidies. The published Budget documents show, over three significant sets of tax changes, that the Government’s tax packages raise more revenue. In fact, they reduce borrowing. We have not borrowed to fund tax cuts. It does not matter how often the member says it, he is wrong.
Hon David Cunliffe Link to this
When the Minister has, by his own Budget documents, spent $23 billion on forgone tax revenue in the 2009 and 2010 Budgets, and he is currently running a $16 billion deficit, how could some component of that tax remission possibly not be borrowing for tax cuts?
The member needs to go back and do his homework because the one significant piece of information he leaves out is that the Government in 2009 cancelled two tranches of tax cuts, which maintained several billion dollars of revenue. When he adds it all up—he can get the Auditor-General to look at it and he can get Treasury to look at it—the Government’s tax packages over three significant tax changes collect more tax revenue, not less, and he is simply wrong. Being persistently wrong does not make you right, it just makes you wrong.
Chris TremainWhat has been the total impact on the operating balance over the forecast period of all the Government’s tax changes?
According to the official Budget documents, the total impact over the current forecast period of all the Government’s tax changes is expected to be positive $4.8 billion. In other words, all our tax changes together will generate $4.8 billion of extra revenue, which will no longer need to be borrowed. So the truth is actually the opposite of what the Labour members are saying. The biggest contribution to this total is the $4.5 billion we saved when we cancelled tax cuts that both Labour and National had scheduled for 2010-11. We cancelled $4.5 billion of tax cuts. The other $300 million is the wash-up from our tax packages, which are broadly fiscally neutral. The member is still wrong.