Wednesday, January 26, 2011
The New Zealand National government has slammed Labour leader Phil Goff's proposed tax package, with the Prime Minister John Key, pictured, saying Goff was in “fantasyland.”
"The fact that the leader of the opposition can't stack any of the numbers up shows you that he is not thinking about this from a position of financial responsibility - he's simply just trying to come up with an election pledge which is totally unaffordable," said Mr Key.
In his ‘state of the nation’ speech, Goff had said that Labour would rebalance the tax system so that people would not pay tax on their first NZD5,000 of income and a new top rate of tax would be introduced for six-figure earners.
“I want to announce policy work underway to overhaul the tax system to make it fairer and more effective for our economy. I am setting two goals: to make it fairer for everyone; and to encourage growth and jobs."
"We will get rid of loopholes for tax dodgers and cut back tax avoidance. We will make sure everyone gets their fair share of tax cuts. And I guarantee everyone will be treated fairly whether you live on main street, struggle street – or easy street."
"The Tax Working Group points out that NZD200bn worth of rental property doesn't provide any net tax revenue – it actually generates tax losses. The incoming Labour Government will immediately set up a high powered Anti-Avoidance Tax Taskforce to close tax loopholes."
"A second source of funds to allow us to create a tax free zone will be to claim back some of the windfall tax cuts from the very top income earners."
"We haven't yet set a new top tax rate. Nor have we determined the level of income that it will apply to. But it will only affect incomes comfortably into six figures, the top few percent of earners."
"We will also make sure these very highest earners do not use trusts to avoid paying the top tax rate. We are waiting with interest to see the Law Commission's work in this area."
The response from Finance Minister Bill English was that the speech was an irresponsible and very expensive recipe for a huge amount of extra borrowing. “Labour has clearly learned nothing from the failed policies of its previous term, when New Zealand’s net liabilities to the rest of the world soared to more than NZD170bn and we ran the highest balance of payments deficit in the developed world,” he said, adding:
“When the incoming National Government took office, we faced an economy deep in recession before the rest of the world and Treasury forecasts of never-ending deficits and ever-increasing Government debt."
“Phil Goff has today confirmed he wants to jump back on the conveyer belt of more debt and higher taxes. His recipe will do nothing to help lift New Zealand’s national savings – it will do precisely the opposite. In fact, it will discourage savings and encourage property speculation."
“By Labour’s own calculations, making the first NZD5,000 of income tax-free for all taxpayers plus taking GST off fresh fruit and vegetables would cost more than NZD1.5bn a year – with much of the benefit going to high income earners. On the other hand, increasing the top personal tax rate on incomes above, say, NZD120,000 and ring-fencing property losses would raise only NZD440m. And that’s the shortfall from just two of Labour’s promises. They also want to restore research and development tax credits (annual cost NZD330m); introduce paid parental leave to 18 weeks (NZD50m); increase Working for Families for under twos (unknown cost) and not take dividends from State-owned power companies NZD700m)."
“It’s telling that Phil Goff would not spell out precisely where all this money will come from. It’s now abundantly clear that he will have to borrow it and increase taxes – and New Zealand can’t afford it."