Tuesday 22nd May 2001 Richard Prebble Media Release -- Economy

The ACT Party is calling for a tax cut to boost the economy, as growth continues to slow despite the low dollar and favourable terms of trade.

In the mid-1990s, after Ruth Richardson's reforms, the economy grew by 6 percent a year. When the Labour/Alliance coalition came to power, growth was 4 percent.

“Now, it’s 1.6 percent, less than half the OECD average,” ACT leader Richard Prebble said.

“The latest Westpac Trust survey shows household wealth has fallen for five consecutive quarters and the bank predicts slow growth.

“Most OECD countries are boosting growth by tax cuts. Last year 15 OECD nations cut tax, including 11 with centre-left governments. Australia is cutting company tax to 30 percent – 3 percent less than New Zealand’s company tax rate.

“New Zealand was the only OECD nation to increase income tax last year and only two others worldwide - Venezuela and Zimbabwe – raised income tax.

“Despite Labour’s campaign pledge not to increase taxes, it imposes secret taxes:

- A $100 million cigarette tax;

- The roll back of tariffs;

- The $200 million retrospective GST on the tourism industry and English language schools.

“An Auckland Regional Chamber of Commerce survey of large, medium and small businesses indicates a cut in business tax is commerce's first priority from the Budget,” Mr Prebble said.

“The ACT Party has done its own survey which shows overwhelming public support for lower taxes. The party sent out 95,000 household survey forms and received back more than 1,600 - a satisfactorily valid number,” he said.

“The survey presented people with the real budget priorities and asked them to rank their own spending choices. Most of us can’t comprehend a figure like $38 billion - the government's budget. So ACT put the figures in household terms. This year the government will spend $200 per person per week. As there are five in my household, that means the government spends $1,000 - more than my own weekly budget!

“Most tax surveys ask loaded questions, such as ‘would you be willing to pay more tax for a better health system?’ Of course we all would. Interestingly, a third, who no doubt realise the extra money will be wasted, will say no. Surveys also show that most who answer, don’t expect to have to pay the extra tax themselves,” Mr Prebble said.

“In ACT's survey, we pointed out that people are working 123 days a year for the government, based on the 34 percent of GDP taken by the government in taxes. We then noted the number of days each item of expenditure takes. For example, social welfare takes 26 days; health 23 days and police just two days.”

The survey results are as follows:

- The number of tax days should be 80 to 100 days a year;

- Reduce welfare spending to an average of 12 days;

- Cut superannuation spending to 12 days from the current 17;

- Reduce health spending to 17 days (currently 23).

The poll found support for increased spending in four areas – pre-school education (the average preference being two days instead of one), prisons (1.7 days rather than one), police (four days instead of two) and defence (five days rather than four).

Most respondents believed the current 14 days spending on primary and secondary education was about right, along with the current seven days for tertiary education.

“When taxation facts are presented alongside expenditure, the public don’t favour tax and spend. A tax cut is needed to keep New Zealand competitive with Australia. I am sending a copy of this survey to Michael Cullen,” Mr Prebble said.

“ACT expects the Budget to confirm more secret taxes. This year's Budget will be a welfare budget, with more than 50 percent of all new expenditure going on welfare.

“We expect the Budget to be sold as ‘transforming the economy.’ But an examination of the figures will show that less than 1 percent of total government expenditure will be on ‘transforming the economy.’

“Like the now-discarded label, ‘closing the gaps’, ‘transformation’ is another meaningless slogan,” he said.

“New Zealand business has repeatedly stated it does not want Jim Anderton as an investment partner, taking 50 percent of all profits, but sharing no risks.

“The Cullen superannuation fund appears to be going to lock the country into a high tax, low growth path. This Thursday would be a good time to change direction to a low tax, fast growth course.”

ENDS

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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