GST Increase Unnecessary

Press Release by Hon Sir Roger Douglas, ACT New Zealand

Thursday, May 20 2010.

ACT New Zealand Finance Spokesman Sir Roger Douglas today slammed the Government’s decision to increase GST to 15 percent, labelling it as totally unnecessary and calling it a reckless revenue grab.

"Rather than cut wasteful spending – of which I identified over $3.1 billion – the Government has instead taken the easy option by increasing GST and adding to the significant cost burden already borne by Kiwi families," Sir Roger said.

"The Government is intent on delivering tax cuts – and that is laudable. But tax cuts delivered by tax increases elsewhere are not the way to go. We need to cut taxes by reducing Government expenditure.

"Worse still, the table of gains and losses from the reduction of personal tax rates and the increases from GST assumes that people save 10 percent of their income. Not only is that not a realistic assumption, it is a wild claim for those on low incomes. Evidence actually shows that those in the lowest income quintile spend more than they earn – suggesting that they will be worse off as a result of the GST increase.

"GST should only be increased if it were accompanied by comprehensive tax reforms that saw all tax rates dramatically reduced. It is lower Government spending, coupled with dramatically lower tax rates that would best encourage productivity.

"Just like the Maori Party, ACT must support the increase in GST as part of our Confidence & Supply Agreement with National - but, that doesn’t mean we like it," Sir Roger said.

ENDS

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