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Taxation a Real Issue in this Campaign

Friday 5 Jul 2002

Speech by ACT leader Richard Prebble, outside the IRD Christchurch office, Cashel Mall, Christchurch, on Friday 5th July 2002 at 1.30pm

I've come here to the IRD in Christchurch because today is the last working day before July 7^th for filing company tax returns.

ACT has chosen Christchurch to make this statement because the manufacturers in this city are exporters. Christchurch's manufacturing base is being crippled by having to pay the highest company tax rates of any of our trading competitors.

The government's own McLeod Tax Review has stated that New Zealand companies can't compete when Australia's company tax rate is now below ours.

In the past, it was the policy of successive governments to always have a lower tax rate than Australia, so that our companies could attract investment, and create jobs and growth. But this Labour government has abandoned the policy of lower taxes than Australia.

Australia's company tax rate is now 30 percent - New Zealand's is 33 percent. ACT is campaigning to immediately drop New Zealand's company tax rate to 28 percent - below Australia.

Helen Clark this week told the nation that only Mexico has lower taxes than New Zealand. The Prime Minister's statement is false. Our Prime Minister is either totally ignorant of things economic, or she is lying - or possibly both.

Here are the facts.

The Labour/Alliance/Green government taxes companies very harshly. Only Denmark and Sweden in the OECD have higher taxes on income and company profits than New Zealand.

In the last three years, 16 nations in the OECD have reduced taxes. Only New Zealand has increased income tax.

Now, with a rising Kiwi dollar, the folly of having higher company tax rates than our competitors is being seen.

Very little investment has been attracted to new greenfield businesses. Most foreign capital is hot money coming to take advantage of our rising interest rates.

McLeod also reported that New Zealand's effective rate of income tax is relatively high.

This was confirmed recently in a study by the accounting firm KPMG, which found that New Zealanders pay higher tax on low and medium incomes than in Australia, the UK, the US or Canada.

Low-income workers in New Zealand, typically students and people starting their careers, pay the highest rate of income tax in the world. My son Malcolm is a university student. Today he is working as a painter in the university holidays. He is paying an effective income tax rate of 21 cents.

In Tony Blair's Labour Britain, the tax rate on someone earning $20,000 is just 3.2 percent. No wonder our graduates go overseas to repay their student loans.

ACT proposes to immediately adopt the McLeod tax report suggestion of just two income tax rates - 28 cents and 18 cents. No one will be worse off. It will give every working person a tax cut.

A school teacher on $40,000 will be $670 in the hand better off.

ACT is proposing, in effect, a pay rise for every worker.

There are now 400,000 beneficiaries. For too many of them, they are better off being on a benefit than working. ACT's tax package will encourage more beneficiaries back into the work force.

So here is the real choice. Labour is campaigning on a pledge to keep our company tax rates higher than our trading partners', and to keep income tax for New Zealanders earning less than $60,000, higher than Australia, the UK, the US and Canada.

I challenge Helen Clark. The Automobile Association said today that this government, if re-elected, is going to increase petrol tax by up to $1 a litre.

And the so-called health tax, which Michael Cullen yesterday admitted the government is considering, is really a way of increasing income tax. Labour says the health tax of 8 percent will be matched by an equivalent cu tin income tax, so there will be no net increase.

I warn the public, that's what Labour said when it introduced GST. Helen Clark and Dr Cullen then increased GST from 10 percent to 12.5 percent.

If a health tax is introduced, then in the next Budget the government can increase it - and technically they haven't broken Labour's credit card promise.

Labour and the Greens are tax, spend and bust Socialists.

Only ACT is campaigning to give every worker a tax cut.

To send the government a clear message, you can use your party vote for ACT as a referendum to cut taxes below Australia, and give every worker a tax cut.


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