INDEPENDENT NEWS

Lost – Billions in Revenue

Published: Wed 7 May 2014 05:42 PM
Andrew Williams MP
Spokesperson for Revenue
7 May 2014
Lost – Billions in Revenue
The National Government’s ill-advised income tax cut in 2010 for higher earners has cost New Zealand over $4 billion in lost revenue, says New Zealand First.
“This was a totally misguided and irresponsible action that ignored the welfare of New Zealanders as a whole,” says New Zealand First Revenue Spokesperson Andrew Williams.
“In Parliament today Finance Minister Bill English struggled to provide adequate answers to questions on the subject and claimed additional revenue from GST, and property tax, offset the loss. The figures dispute everything he is saying.”
The Government reduced the tax rate on incomes over $70,000 from 38 per cent to 33 per cent in the 2010 Budget.
“Given all the cuts to public services in the four years since then, including conservation, biosecurity services, and a multitude of other cuts to agencies and important programmes, New Zealanders have paid a big price for this mismanagement of our finances.
“The New Zealand purse has also lost the benefit of dividend streams as the government sold state assets, against the wishes of a majority of New Zealanders.
“The lost revenue from three power companies – Meridian, Genesis and Mighty River - and Air New Zealand totalled about $146 million in the last six months alone. Imagine the services this revenue could have funded.
“The Government has ignored the overall welfare of most New Zealanders by cutting taxes for the higher earner and foregoing dividends by selling performing assets.
“The Government also stopped contributions to the New Zealand Superannuation scheme. The lost income from both the tax cuts and the dividends could have been invested for New Zealanders retirement super.”
ENDS
Income tax reduction
From 1 October 2010 the top income tax rate was reduced from 38 percent to 33 percent for incomes over $70,000.
The estimated cost of this income tax rate reduction is shown in the following table. Note that as the top income tax rate was reduced, the Crown would have received additional revenues through GST, excise duties and company taxes. This is because households would have spent some of their additional net disposable incomes, leading to further tax receipts in these other areas. Therefore, I have included two sets of numbers. The cost of reducing the top income tax rate, and the net cost after taking into account estimates of additional revenues through these other sources.
Year ended 30 JuneReduction in the top income tax rate from 38% to 33% (lost revenue ($m)Increase in revenue from additional GST, excise duties, and company tax revenues ($m)NET estimated cost of reducing the top income tax rate from 38% to 33%9 months ended 30 June 2011642-132.072420121,079-166.391320131,092-168.392420141,202-185.21,017Total of above ($m)4,015-651.83,578
The estimated cost of reducing the top income tax rate from 1 October 2010 through to 30 June 2014 is estimated at $4.0 billion. After taking into account additional GST, excise duties and company tax revenues, the net cost over this period is estimated at $3.6 billion.
Source: Parliamentary Library

Next in New Zealand politics

Concerns Conveyed To China Over Cyber Activity
By: New Zealand Government
GDP Decline Reinforces Government’s Fiscal Plan
By: New Zealand Government
New Zealand Provides Further Humanitarian Support To Gaza And The West Bank
By: New Zealand Government
High Court Judge Appointed
By: New Zealand Government
Parliamentary Network Breached By The PRC
By: New Zealand Government
Tax Cuts Now Even More Irresponsible
By: New Zealand Labour Party
View as: DESKTOP | MOBILE © Scoop Media