Key looks to 2017 and beyond for tax cuts
By Edwin Mitson
May 16 (BusinessDesk) - Prime Minister John Key used his post-cabinet media conference to indicate he was looking at reducing personal tax levels in next year's budget or he would campaign for a fourth term on a platform of tax cuts.
Last week Finance Minister Bill English said there would be no tax cuts in next week's budget, with the government's focus either on paying down debt or boosting spending on health and education to deal with the needs of a rapidly growing population.
Key said that record low-interest rates and wages rising faster than inflation had limited demand for tax cuts, but that pressure from the public would grow.
"New Zealanders will say as the average wage rises to nearer the top personal rate, that it’s unacceptable that you’re on the average wage and paying the top personal rate. So there’s going to have to be movement".
A personal tax rate of 33 percent is imposed on earnings above $70,000. The New Zealand Labour Market Survey for June 2015 from Statistics New Zealand shows a median hourly rate of $22.83, which works out at a full-time salary of $47,487.
However Key indicated that paying down debt to 20 percent of GDP was also vital, simply because we're a small country at the bottom of the earth.
" I know that our net debt levels are much lower than most OECD countries in the world. But we saw in the Christchurch Earthquakes and the combination of the global financial crisis we needed to rely on the Crown’s balance sheet. That was a lot easier when debt was lower," he said.
New Zealand's net debt to nominal GDP was 26.7 percent at the end of the government's last financial year on June 30, 2015.
On Monday, Key indicated that $3 billion would be needed for a significant cut in personal taxes. But at today's media conference, he clarified that, saying a $3 billion Budget surplus would not be needed in order for the government to act.