Finance Minister Michael Cullen today welcomed the Tax Review’s final report saying he hoped all political parties would use it as a policy resource as they prepared for the 2002 election campaign.

“Labour cannot support the two rate income tax scale recommended by the Review as we favour a more progressive regime than this model allows.

“However the Review has come up with a number of interesting ideas in the areas of international tax and the tax treatment of entities. These have the potential to stimulate economic growth and will be incorporated into the government’s tax policy programme although there are some design details and implementation issues to be worked through before any final decisions can be taken.”

Dr Cullen reaffirmed the government’s opposition to a tax on owner-occupied housing, and noted that the Review does not recommend one having acknowledged the strength of public resistance to the idea.

He also said the government would not be abolishing excise taxes and duties because it valued them as a mechanism to discourage certain behaviours. “An increase in GST is unacceptable.

“Labour promised before the last election that the GST rate would not be increased and this is a government that keeps its promises,” he said.

“I would like to thank Rob McLeod, Srikanta Chatterjee, Shirley Jones, David Patterson, Ted Sieper and their team of advisers for their work.

“We have always been clear that we would not expect to pick up all the Review’s recommendations. But they have made a useful and, I am sure, enduring contribution to the tax debate.

“The Review finds there is much to commend the existing New Zealand tax system and that it compares quite favourably with other jurisdictions. There is no need for large scale change to the basic architecture.

“There is, however, room for improvement.

“I will give a fuller statement of the government’s initial response and the process from here in a speech on Friday to the annual tax conference hosted by the Institute of Chartered Accountants.

“We gave an assurance at the start of this exercise that we would not implement any significant new taxes without first seeking a mandate from the electorate
through the 2002 general elections. We will hold firm to that commitment,” Dr Cullen said.

The Review was given a budget of $985,000 [GST inclusive] and was funded out of Vote: Treasury.

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