18 May 2007

Hidden tax cut potential for top earners within Budget for rich

The fact that those on the top 39c tax rate can take advantage of the corporate tax cut, divert money into portfolio investment entities and reap a considerable tax advantage at 30 cents in the dollar is merely one example of the basic unfairness of this year's Budget measures, Green Party Social Development Spokesperson Sue Bradford says.

"Kiwisaver, the Budget centerpiece, is available in theory to beneficiaries - if any could afford to divert a slice of meagre benefits into savings. Even then, there would be no matching employer contribution," Ms Bradford says.

"Clearly, there are two New Zealands emerging - one enjoyed by those who can afford to save for retirement, and one in which low paid workers and beneficiaries are barely keeping their heads above water. Michael Cullen has chosen to put Government backing and extend most of his new Budget goodies to the better off.

"Cutting the corporate tax rate will inevitably throw more of the revenue burden onto wage and salary earners and consumers who pay GST.

"Now that business has got its tax cut, the onus is on them to invest productively. Our major listed companies need to show some backbone, stand up to their shareholders and stop paying out such a huge and internationally unusual percentage of their profits in dividends - and re-invest them instead in new technology and productivity.

"To nudge them along, the Budget offers tax breaks for investment in research and development. Access to these credits will need to be rigorously defined and policed to stop them being mere tax avoidance mechanisms. The Greens would support a review process to check if r & d innovations haver actually delivered.

" It is alarming to hear that Kiwisaver is being expected to reduce pressure for wage increases. The situation is quite the reverse. Business has just received a $1 billion tax cut, and the current low levels of wages will mean relatively few ordinary workers will be able to afford a meaningful contribution to the scheme.

"Working for Families already discriminates against beneficiaries. The lowly paid and those on benefits now have Kiwisaver entrenching the gaps between rich and poor well into retirement. Michael Cullen has simply walked away from traditional Labour concerns about the low wage economy and inadequate benefit levels - in favour of corporate tax cuts and savings schemes for the relatively well-to-do," Ms Bradford says.

ENDS

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