Free Press

ACT’s regular bulletin

Poor Taxpayer
It seems like another age when political debate last gave the taxpayer a look in. We’re supposed to be grateful we got through the Great Financial Crisis and the Canterbury Earthquakes, but the economic logic of lower flatter taxes hasn’t gone away.

The Luxury of Owning Landcorp
Under questioning in Parliament, Finance Minister Bill English said that Landcorp has returned 0.9 per cent per annum on equity over the past three years. The government’s cost of borrowing is 2.25 per cent on a good day. On that spread owning Landcorp has cost taxpayers around $60 million over three years.

A Sanctuary for the Environment

Landcorp’s poor performance is one good reason why it should be sold down. Another good reason, as ACT announced last week, is to use some of the proceeds to set up Sanctuary Trust. The Trust would make conditional, performance-based grants to private conservation groups with a 100 year mission to bring back New Zealand’s birdsong. Read more here.

Win Some Lose Some
Under the Mixed Ownership Model, Air New Zealand is going gang busters. While answering questions about Landcorp, English pointed out this may be because of cheap jet fuel and frequent flyers such as the Green MPs. However on average, over time, governments are hopeless business owners. They end up gouging the taxpayer because for every Air New Zealand there is a Solid Energy.

When are Tax Cuts Back on the Agenda?
David Seymour also asked English how big the surplus has to be before he considers cutting tax. English had no answer. National should have one. ACT suggests that as soon as the surplus reaches the Governments costs of interest on debt, tax cuts should be on the agenda.

Where to Start
English also lamented that inflation hasn’t boosted the Government’s revenues much. Well, Bill, inflation shouldn’t be relied on to boost the government’s revenues. As ACT has argued before, tax brackets should be indexed to inflation.

The Cost of Bracket Creep
As ACT has previously reported, bracket creep has cost the average income household $1,500 over the past five years as inflation pushes people into progressively higher tax brackets. Indexing tax brackets to inflation would put an end to this stealth taxation.

Top Tax Rate
We won’t even start on lowering tax rates, but for information the top ‘envy’ tax rate of 33 per cent provides only one per cent of tax revenues. Cutting that would be a good start.

The Company Tax
Despite our system of imputation credits, New Zealand’s company tax of 28 per cent means we have one of the highest effective tax rates on capital in the world. Our national history is a history of trying to attract capital investment and boost productivity. Having higher taxes than the countries we’re trying to attract investment from is crazy.

Corporate Welfare
Businesses only pay company tax upon making a profit. Corporate welfare means taxing profitable companies to give money to unprofitable ones. ACT’s alternative budgets have shown how the company tax rate could be progressively reduced to match the Maori Authority Rate of 17.5 per cent by cutting back on corporate welfare.

A Case in Point
Go Bus, an iwi-owned transport company, has just won a major contract to run buses in South Auckland. They have succeeded in part because Trust ownership and the 17.5 per cent Maori Authority tax rate gives them a competitive advantage over businesses paying 28 per cent on income. Imagine giving all New Zealand companies that advantage against their global competitors.

The Government is Making It Worse
Far from cutting taxes, the Government is complicating the tax system further. The so called bright-line test is impossibly complicated but will only raise $5m in revenue per year and have no effect on property prices. Why is National doing this?

Back to First Principles
ACT has often been the only party campaigning for low rate, broad based taxes with no double taxation and simple administration. National is making ACT the only such party once again.

ENDS

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