Copeland says “Time for tax cuts”

The above-forecast healthy surplus position indicated in the government’s Economic and Fiscal Update provides head room for an immediate tax cut at both the personal and company levels, according to United Future finance and revenue spokesperson Gordon Copeland.

“The Budget Policy Statement expresses a commitment to three measures which have our full support, namely an assistance package for low and middle income families, incentives for people to move from welfare benefits into paid employment, and assistance to make housing more affordable.

“Throughout 2003 we have consistently been encouraging government to take action in these areas,” said Mr Copeland.

“However our calls for a reduction in the company tax rate to 30 cents and an adjustment to the personal income tax thresholds for inflation (fiscal creep) have fallen on deaf ears.

“The figures contained in the Update show that the government could move now on both these matters.

“Company tax revenue is running at about $900 million p.a. above forecast. A reduction to 30 cents (from 33 cents) would cost just $600 million per annum so is readily affordable. It should occur immediately and has added urgency now that Australian Prime Minister John Howard has signalled an intention to reduce the company rate in that country – already at 30 cents – to a yet lower figure.

“Government’s decision to leave the New Zealand rate at 33 cents in these circumstances will be of very real concern to all New Zealand businesses and their staff.

“An adjustment to the income tax band thresholds for fiscal creep, which would leave between $60 and $840 per annum in the pockets of all NZ taxpayers at a cost of around $480 million, is similarly affordable. Revenue from personal income tax is running at around $500 million above forecast for 2004 and will increase to around $700 million in 2005.

“Since I have been in Parliament, government has increased Customs clearance charges for importers, levied a further 5 cents on petrol excise for ACC, imposed higher excise duties on high alcohol content drinks, and passed laws imposing a vast array of new costs from “pink think” - OSH and employment law changes.

“The government’s fiscal strategy is undoubtedly prudent and takes advantage of the buoyant economic conditions which we have experienced in recent years. But United Future believes that the time is right to leave a little more in the pockets of hard working New Zealanders.

“A family assistance package of $500 million coupled with a reduction in the company rate and an adjustment for fiscal creep would cost about $1.6 billion per annum – well within the operating surplus of between $4.5 and $3.7 billion per annum over 2004/2008 even allowing for the NZ Super Fund contributions of $1.4 billion per annum,” said Mr Copeland.

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