17 March 2004

Hon Dr Michael Cullen

Media Statement

Corporate Tax cut bonus to foreign investors only

National’s newly announced tax policy is a gift to the foreign owners of New Zealand businesses but offers nothing to the local investor, says Finance Minister Michael Cullen.

He was commenting on Don Brash’s announcement today that a National government would cut the company tax rate ahead of cuts to the top personal tax rate.

“The entire benefit would end up in foreign hands because for New Zealand business owners and shareholders, the company tax is really a withholding tax which is offset against personal tax. For a foreign owner or shareholder, it is the final tax paid.

“The effect would be that hundreds of millions of dollars – money now available for health, education, business assistance and regional development – would be simply transferred out of the country.

“National will also have to justify, having argued over the last four years that the company rate needs to be aligned with the top personal rate, why they now propose to widen the gap. By their own logic, they were either wrong then or they are wrong now.

“The government is concentrating on other priorities – including relief for low to middle income families, making work pay and, beyond this year, encouraging investment in higher productivity and improving work skills.

“Not only will these create a fairer, more inclusive society, they will also yield a much greater economic return over the longer term,” Dr Cullen said.

ENDS

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