Tax changes strengthen economy, help families

The Government's tax changes tomorrow will strengthen economic growth and help New Zealand families get ahead, Finance Minister Bill English says.

"New Zealanders will benefit immediately from tax cuts and they will benefit more over time from the lift in growth and jobs this package will create," Mr English says.

"But we must remember that these changes are being made for important and over riding economic reasons. This has never been a lolly scramble.

"As well as improving the incentives to work, the package tilts the economy towards savings, investment and exports and away from the unsustainable borrowing, consumption and over investment in housing of the past decade.

"Treasury estimates the tax changes will add about 1 per cent to economic growth over the next few years. They are just the next step in the Government’s wider programme to get the economy growing faster."

The main tax changes that take place from tomorrow are:

• Personal income tax rates will be cut across the board leaving 72 per cent of taxpayers facing a top rate of 17.5 per cent or less.
• The resident withholding tax rate on savings such as bank deposits will drop in line with personal tax rates.
• The top tax rate on savings in PIE investments will drop to 28 per cent.
• The rate of GST will increase from 12.5 to 15 per cent.
• New Zealand Superannuation, Working for Families and benefit payments will immediately increase by 2.02 per cent to compensate for the rise in GST.

"This is the first part of the most significant tax reform package in New Zealand for nearly 25 years," Mr English says. "For ordinary New Zealanders it will reward effort, encourage savings and help families to get ahead,” Mr English says.

"At all taxable income levels, the personal tax cuts will more than offset the rise in GST. When other tax base broadening measures such as tighter property investment rules are taken into account, low, middle and high income groups broadly receive about the same proportionate increase in disposable income.

"After the GST-income tax switch, an average income family will be about $25 a week better off, an average wage earner about $15 a week better off and a couple on NZ Super about $11 a week better off. These benefits will actually grow over time as wages increase.

"Even the Opposition now appears to accept that the vast majority of New Zealanders will be better off under the tax switch.

"If Labour really believed New Zealanders will be worse off from these changes, it would promise to reverse them. The fact that it hasn’t speaks volumes. Phil Goff simply doesn’t have the courage of his convictions.

"After attracting single-figure audiences around the country during their failed ‘axe the tax’ bus tour, all Labour can come up with now is a politically desperate gimmick of removing GST from fresh fruit and vegetables.

"This flawed move would deliver a meagre $1 a week for the average Kiwi – and even less to low income earners – and it would force taxpayers to borrow another $250 million a year to pay for it. It’s just one of a growing number of unfunded Labour policies that will add billions of dollars to public debt," Mr English says.

• New Zealanders can calculate how much better off they'll be from tomorrow’s tax changes by visiting the Government's tax information website www.taxguide.govt.nz.

• Weblink to tax table for wage and salary earners:
http://www.beehive.govt.nz/sites/all/files/Fact_sheet_salary_and_wage_earners_table.pdf

ENDS

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