Treasury, Taxes and Trivial Pursuit with Winston Peters
Political comment By Marc Alexander
Last week must have felt like an episode from the Twilight Zone for the Labour Government. First the embarrassment of
the Treasury analysis which came out strongly in favor of tax cuts. Even the IRD jumped in on the act to say that unless
company tax went down the overall tax take to the government was likely to fall. Then the Government was treated to the
ignominy of Winston Peter's disastrous performance on the foreign policy stage with Phil Goff cleverly but unhelpfully
undermining whatever credibility Winston has left - which isn't much.
Treasury's briefing papers to Finance Minister Michael have pilloried Labour's economic policies. Surprise surprise! The
Treasury provided some ideologically inconvenient research that is highly critical of Cullen's long-held view that tax
cuts do not promote economic growth. Amongst the many recommendations was the advice to make "large reductions", in the
top 39c and middle 33c personal tax rate, dump its plans for a carbon charge, cut government spending, and consider
selling some state assets.
Of course all of this is anathema to the Labour socialists who only see our entrepreneurs and risk-takers as convenient
cash cows to fund their ideological vision. Given the shabby treatment by the Sauvignon swilling socialists at home,
these same entrepreneurs are leaving in droves to participate overseas. The pathetic $85,000 PR campaign to get them to
return will be met with the derision it deserves.
As for Inland Revenue.the department has come to a conclusion that all business owners have known for a long time;
namely that the tax rates must be reduced. New Zealand relies relatively highly on corporate tax as a source of revenue
(15% of the total take) but the combination of high rates and an unfavorable imputation credit regime, poses a risk to
the economy, presenting an incentive to stream the profits abroad. New Revenue Minister Peter Dunne has already
indicated a business tax review as well as a wider examination of the tax structure. It should be a comfort to the
business community that Dunne has no ideological bias against tax cuts.
What Cullen and Co fail to realize is that high marginal tax rates inhibit the decisions that drive investment; people
start to look elsewhere to make the most of their economic opportunities.
But it isn't just the so-called "rich" who are getting slugged anyway; the top rates currently apply to a substantial
proportion of taxpayers on relatively low incomes. Cullen dismissed Treasury's comments as "an ideological burp" that
comes from its advisers every three years. Does it surprise anyone therefore, that 12% of our population choose to live,
work, and pay their taxes overseas? And why not when they are not rewarded for their efforts here at home? Our tax rates
have gone well beyond the reasonable and suppress productivity gains (which is the real driver of much needed higher
In my opinion Cullen who should be charged with racketeering.
And now to Winston.
Hearing Winston argue that black was white took on a surrealist absurdity when he returned to the scene of his first
broken promise - Rotorua - to argue that he had no choice, that he had to accept the baubles of Ministerial office! It's
no wonder voters are disillusioned about politicians who, with hand on heart, promise one thing then, when opportunity
arises for a higher income, chauffeured car and a bigger office comes along, go ahead to do exactly the opposite.
APEC was an unmitigated disaster for Winston in terms of international credibility. The previous Foreign Minister, Phil
Goff, cheekily undermined him by daring to suggest that as Trade Minister he will keep a close eye on Winston's
activities. When you get down to it, Winston has been given a role that will see him eat and drink on behalf of all New
Zealanders in the finest Capitals around the world, but it will be Goff who will do the work.
The news of Winston's political impotence has already traveled abroad. US Secretary of State Condoleezza Rice could not
have been any more dismissive. She and Winston met briefly, said little, and did nothing.
To walk out on his first overseas press conference was not a good start. All because he didn't like the questions!
Winston Peters may shirk his responsibility to front up overseas but here is a salutary reminder to him: we expect
better from an experienced politician who is supposed to be representing all of us.
It also appears that Winston contradicted his foreign policy 'boss' - Helen Clark - by seeking assistance from Australia
for help to rebuild our relationship with the US prompting calls from the National Opposition as to who is driving our
Australia's counterpart Alexander Downer was quite right to ask how the new arrangement is going to work. Most Kiwis ask
the same. It's just not possible for a Minister who represents the Government to be simultaneously in opposition. Maybe
we're the ones who have it wrong. Perhaps Winston is always in opposition even when as part of the government. Look at
the disastrous Shipley/ Winston coalition. He may as well have been in opposition as he and his party crumbled and
scattered. Helen Clark is smart enough to know that a cannibal is still a cannibal even if he does dress for dinner and
use a knife and fork.
Winston was recently quoted as saying that, "I am now asking the media to now please start to report the substance of
what I have done rather than obsessing with the trivial" (Press 21, November 2005). The challenge to the media is that
these two are one and the same; Winston's' trivia is his substance.
And all of this in the first flush of a new Parliamentary term. Do we really expect it to last? For what it's worth
here's my pick:
Helen Clark will bow out gracefully after 18 months leaving the door open for a new leader in the run up to the next
election. Goff stands clearly head and shoulders above the other possibilities - which probably explains why he is
bothering to help Winston self destruct (not that Winston needs much help).
In spite of Cullen's pronouncements, Helen Clark will give Peter Dunne a tax break for business, in payment of her debt
for all his help both in this term and in the last one. Along with a discussion document on Income splitting, Tax breaks
will become his main accomplishment to campaign on.
Winston was quoted as saying to the media that, " You've got to get up in the morning a darn sight earlier than you are
and do a darn sight more work and have a darn sight more experience if you're going to tip this guy over" (Press 25,
November 2005). It's hard to know what he means by that. Anybody who knows him - and the Parliamentary press gallery
certainly do - also knows that even if you got up at the crack of noon, took a leisurely breakfast and walked to work,
you'd still have an hour before he'd be up! Winston isn't dumb.
He knows he's lost credibility but that won't worry him. This surely must be his last term and he wants to quit his
parliamentary career in a ministerial limo. As for a life following a term playing with his baubles, I bet he's been
given the assurance of a high profile appointment like that of an ambassador. Maybe for all our sakes, the lucky country
will be China.