Richard Prebble's Letter from Wellington 20 May
RICHARD PREBBLE'S Letter from Wellington
Monday, 20 May 2002
First, the good news. Dr Cullen has adopted ACT's policy of a 19.5% tax rate for business. The new rate is in the Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill introduced to Parliament last week and referred to the Finance and Expenditure Select Committe for public comment. Dr Cullen hopes to pass the law before the election. Imagine the boost to business of tax being cut from 33 to 19.5 percent.
Now the bad news. It only applies to Maori authorities and trusts - such as the Crown Forestry Rental Trust (worth over $200M) and the Waitangi Fisheries Commission and its subsidiary companies that control half the fish quota. Hundreds of Maori businesses will qualify to pay only 19.5 percent tax.
It gets worse. The government is removing the restriction on setting up a charity for your own family, to avoid paying tax. The proposed change is intended to make iwi and hapu tax-free. The IRD says it's still grappling with the implications of this change. The Letter's advice is to enrol on the Maori electoral roll (one drop of Maori blood qualifies). Register your business as a Maori authority, set up a charity for your family hapu, declare your home your marae, and be tax-free for life. ACT's policy is one law for all. (You can read the bill at www.act.org.nz/taxapartheid.)
Father of all Give-Away Budgets
The Letter believes commentators will be stunned by the size of the spending announcements in Thursday's budget. The government started announcing budget spending in December, when the Health Minister said there would be $400 million extra for health each year for the next three years. That was based on the Treasury forecast that economic growth would be 1.9%. But the latest Reserve Bank estimate is for growth of 2.75%. This will result in extra tax revenue of about $2 billion. So Dr Cullen will be able to announce addi-tional health spending of not $400 million but $800 million - and still be within the fiscal cap he set.
The budget will spray money on every interest group.
We Are Still Getting Poorer
Missing from the budget will be a strategy to get to 4 percent per capita sustainable economic growth - the target Dr Cullen agrees is necessary to return New Zealand to the First World. No country has grown sustainably at 4 percent where the government takes 40 percent of the nation's earnings.
ACT's Positive, Practical Alternatives
Rodney Hide has drawn up an alternative budget setting out how New Zealand could attract investment and grow at 4%. ACT's plan is to cut tax rates by adopting a suggestion in the McLeod tax report. It would see a company tax rate of 28 cents, and two tiers of personal tax - 28 and 18 cents - while keeping the low-income rebate of 15 cents. This would give every working person a pay rise. ACT would introduce real welfare reform. The number of able-bodied adults on welfare today is 60,000 more than a decade ago when unemployment was over 10 percent.
ACT favours a bonfire of red tape - including expensive compliance costs from the Employment Relations Act and the Resource Management Act.
ACT would lift standards in education by letting schools pay good teachers more.
(ACT's Budget for Growth is at www.act.org.nz/budget.)
Last week, Don Brash gave his first public speech since announcing he will stand for Parliament. He said he favoured time limits for welfare. Bill English promptly distanced himself from Brash's statement, which the media accurately reported as being ACT policy. Dr Brash's only chance of being Finance Minister is if ACT does well.
Security is the Issue
This year the Australian and New Zealand governments are issuing their budgets only a week apart - but at opposite ends of the electoral cycle. It's interesting to note the different priorities. Australia has put the emphasis on security. The Australians believe the events of September 11, and the Tampa, show Australia needs more security. Australia also believes it needs to reform its health system, or future health costs will blow the Federal budget.
Security (national and personal) will not figure in the NZ government's priorities, nor will there be any solutions to the exploding health costs.
Personal Security - the Election Issue
In ACT's alternative budget, the only increased spending is on police and defence. New Zealand has a lower ratio of police to population than any state in Australia, and one of the highest violent crime rates in the English-speaking world. Truth-in-Sentencing and Zero Tolerance for Crime do require extra resources. But the annual cost of crime is over $6 billion (more than $4000 per household), and early-release prisoners do $1 billion worth of crime a year! In comparison, the annual cost of prisons is just $355 million. (See www.act.org.nz/crimecosts .)
Governor Rod (Le Pen) Carr?
Labour Party president Mike Williams at the weekend attacked Richard Prebble's comments on government immigration policies, suggesting that Prebble is New Zealand's Le Pen. Is Mike Williams suggesting Reserve Bank Acting Governor Rod Carr is also a follower of Le Pen? The Acting Governor gave as his reason for increasing interest rates, the rising house prices and retail sales in Auck-land, caused by increased immigration. ACT is not anti-immigration, but believes in quality, not quantity.
The Letter has reported that Brian Edwards' sycophantic biography of Helen Clark is being remaindered in some bookshops at $19.95. A reader of the Letter has now told us that on the PM's website the biography is being sold for $39.95 - a discount on the full price of $44.99. How can the PM's website get away with engaging in retail marketing? When you get to the order page, you find it has turned into a Labour Party site. (Go to www.primeminister.govt.nz , click on speeches and releases, then scroll down and click on '5'.)
Send the Letter to a Friend If you have a friend who you think would enjoy the Letter, why not forward it to them. You can also sign them up for the Letter at: http://www.act.org.nz/subscribe.jsp
The latest version of the Letter will always be available at http://www.act.org.nz/latest.jsp?type=1183 All previous Letters from Wellington will be found at http://www.act.org.nz/search.jsp?type=y1183