Prebble Richard: Questions for Oral Answer — Questions to Ministers 
Prebble Richard: Questions for Oral Answer — Questions to Ministers 
[Volume:608;Page:5692] 
10.  
Hon RICHARD PREBBLE (Leader—ACT NZ) 
 to the  
Minister of Finance 
: In light of the tax cuts in the Australian Budget giving every worker a tax cut partly by lifting the tax thresholds to compensate for inflation does he believe it is fair to compensate workers for inflation; if not why not? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I think the assumption in the question is incorrect. As the editorial in the  
Australian Financial Review 
 says all Mr Costello is doing is giving back “some” bracket creep. Of course in Australia there is a much more steeply progressive taxation system; roughly speaking below $36200 Australian tax is lower than New Zealand’s and above that level it is higher than New Zealand’s. This Government’s approach when it considers it prudent to do so is to address tax issues on a more targeted basis to low and middle income earners. 
Hon Richard Prebble 
: Does the Minister know that to compensate taxpayers in New Zealand for inflation the low tax threshold should be lifted from $9500 to $13200 the $38000 threshold should be lifted to $41700 and the $60000 threshold should be lifted to $65000; and does he accept that his failure to adjust the tax thresholds has meant he has increased the real income tax paid by working families and what is fair about that? 
Hon Dr MICHAEL CULLEN 
: The total tax revenue as a proportion of gross domestic product (GDP) has risen slightly under this Government over the last year or so largely because of the growth of the economy and also because of some temporary factors. I note that tomorrow’s forecast will show that proportion falling back to around the 30 percent mark which is well below the OECD average for tax revenue as a proportion of GDP. 
Hon Richard Prebble 
: I raise a point of order Mr Speaker. That is all very interesting but it had nothing to do with what the Minister knows about the tax thresholds. Can I take it that he does not know about them? 
Hon Dr MICHAEL CULLEN 
: It actually does have a great deal to do with it because the proportion of GDP that tax revenue takes in is the best expression of how much of the country’s income the Government is taking proportionately. 
Clayton Cosgrove 
: What areas will the Government be highlighting in tomorrow’s Budget in relation to tax? 
Hon Dr MICHAEL CULLEN 
: The primary areas that will be highlighted tomorrow relate to taxation as it relates to encouraging investment in New Zealand from outside and also issues relating to tax compliance costs of small and medium sized businesses. 
Rod Donald 
: Given that the Minister has said that his priority is tax relief for low and middle income earners why will he not implement the Green Party’s proposal for a tax-free threshold at the bottom of the income tax scale bringing New Zealand into line with several OECD countries and giving low-income families in particular the pay-packet boost that they deserve? 
Hon Dr MICHAEL CULLEN 
: Comparing tax rates between countries is one of the most difficult tasks there is. Many countries have some form of social security or payroll tax which often starts at the first dollar of income. So although their income tax rates may have a tax-free area they may well have social security taxes that do not have a tax-free area at the front end. Of course New Zealand does not separate out hypothecated social security taxes. In any case as I am sure the member is aware in order to achieve rough fiscal neutrality if there is to be a large tax-free area at the front end there has to be a steep increase in the rates paid at the upper levels. 
Hon David Carter 
: Given the Minister’s answer to Mr Prebble’s question that the best method of measuring tax collection is as a percentage of GDP how can the Minister credibly argue—as he did in the House last week—that New Zealand enjoys lower taxes than Australia when the total tax take in Australia as a percentage of GDP is 31 percent whereas in New Zealand it is 36 percent? 
Hon Dr MICHAEL CULLEN 
: The member is confusing Government revenue with the Government’s tax take.