Guy Nathan: Questions for Oral Answer — Questions to Ministers Questions to Members 
Guy Nathan: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Volume:653;Page:2278] 
1. NATHAN GUY (National—Otaki) 
 to the  
Prime Minister 
: What tax changes has his Government delivered today? 
Hon JOHN KEY (Prime Minister) 
: 
 From today the threshold above which people pay 33c in the dollar rises from $40000 to $48000 a year. This means that 80 percent of taxpayers will now face a top rate of only 21c in the dollar. A new independent earner tax credit will return $10 a week to people earning between $24000 and $44000 a year who do not receive any other type of income support from the Government. In addition the top tax rate drops from 39c in the dollar to 38c in the dollar. In total 1.5 million workers will receive a personal tax cut today. 
Nathan Guy 
: What are the benefits of these tax cuts? 
Hon JOHN KEY 
: They are many and varied. The tax cuts we have delivered today will inject an extra $1 billion into the economy over the coming year thereby helping to stimulate the economy during this recession. More important over the longer term these tax cuts will reward hard work and help to encourage people to invest in their own skills in order to earn and keep more money. 
Hon Phil Goff 
: Is it correct that low-income families with children will get nothing from the tax cuts today and that that is why the Prime Minister told high-income earners who get hundreds of dollars extra in tax cuts that they should give to charities in line with his trickle-down theory? 
Hon JOHN KEY 
: No that is not true. They get a Working for Families increase which started on 1 October. Let me make this one point: let us take somebody on $44000 a year with two children. It is true that he or she gets a small tax cut— 
Hon Phil Goff 
: No tax cut! 
Hon JOHN KEY 
: On $44000 the person does Phil; do the maths. But that person does not pay any tax. Somebody on $44000 a year with two children pays zero tax. 
Nathan Guy 
: How many people will be eligible for the independent earner tax credit? 
Hon JOHN KEY 
: The Inland Revenue Department estimates that around 630000 lower-income earners will be eligible for this tax credit. People will need to change their tax code in order to get this tax credit each day so it is important that people know about the tax credit. They will have to go about getting it. That is why we have set up a very modest advertising campaign with a budget that is one-fortieth of the amount that Labour set aside for the Working for Families advertising. 
Dr Russel Norman 
: How can it possibly be good policy and be right to give large tax cuts to those earning $100000 a year or more—like Cabinet Ministers and others—while those struggling on $20000 a year will see their PAYE” tax deductions increase today? Is it any coincidence that this is coming in on April Fool’s Day which might be renamed “Fool the Low-paid Workers Day” because they are going to end up paying more tax than they did previously? 
Hon JOHN KEY 
: To start off we have a progressive tax system in New Zealand so inevitably when we have adjustments it will affect higher-income earners more than others. But secondly I think that New Zealanders should acknowledge the fact that those high-income earners pay a huge proportion of PAYE tax in this country. They work hard; they pay a lot of taxes. Nevertheless a fact of life today is that 1.5 million New Zealanders are getting a tax cut and they did not have to wait for 9 years under a National Government to get it. 
Hon Sir Roger Douglas 
: Does the Prime Minister agree with Professor Eric Leeper’s statement in the latest Reserve Bank  
Bulletin  
that counter-cyclical fiscal policy could actually be counter-productive; if not why not; if yes why then is he borrowing $1 billion plus interest a year in order to give tax relief of $1 billion? 
Hon JOHN KEY 
: No I do not agree with that statement. The reason why we are having tax cuts at this time is that if we look at most of the stimulatory packages in countries around the world and not just in New Zealand we see they have a tax cut component as part of those packages and that is an important stimulatory part of those economies. In my view if we were not to do that then we would drive our economy into a much deeper recession. I acknowledge that Sir Roger Douglas and the ACT Party probably would want to have a much more contractionary position but in my view that would actually drive us into a deeper recession. 
Hon Phil Goff 
: How can the Prime Minister possibly claim that his tax cuts are progressive when as he can see from this graph if people earn under $40000 a year under National they get nothing but if they earn $1.5 million a year they get $500 a week in tax cuts? How is that progressive; how can that possibly be fair? 
Hon JOHN KEY 
: We have a progressive tax system; 1.5 million New Zealanders are getting a tax cut. If those who earn under $40000 a year and who get Working for Families payments have more than one child then they pay no tax whatsoever. If those people earn between $38000 and $40000 a year they pay a tiny bit of tax. So ours is a very fair tax policy. New Zealanders have not had to wait 9 years for it and I think New Zealanders will welcome it today. 
Rahui Katene 
: How do low-income New Zealanders benefit from the tax changes introduced today? 
Hon JOHN KEY 
: They benefit because 630000 New Zealanders—the New Zealanders who do not have children and who have been relatively low-income New Zealanders and who got absolutely nothing under the previous Labour Government for 9 years—get $10 a week or $500 a year. It is a small start and it will be welcomed. 
Nathan Guy 
: Are businesses also getting the benefit of any tax changes? 
Hon JOHN KEY 
: Yes. A number of tax changes begin today that make it simpler and less expensive for small to medium sized businesses to pay tax. These tax changes are worth $484 million to small to medium sized enterprises over the next 4 years. They include changes to GST PAYE and fringe benefit tax thresholds and the temporary removal of the 5 percent uplift rate that businesses pay in advance on provisional tax instalments throughout the year. I have to say there has been overwhelming support from the business community and small to medium sized enterprises which are welcoming the tax changes the reduction in compliance costs and frankly the National Government. 
Hon Dr Michael Cullen 
: Can the Prime Minister confirm in the light of the last answer that a business that employs a person on the mean average wage who is in KiwiSaver today will have to pay another $960 a year in tax? 
Hon JOHN KEY 
: Well it will pay more but one of the—[ 
Interruption 
] No the business will pay more at one level and the reason for that is it will actually pay less overall because it is not having to increase its KiwiSaver payments to 4 percent.