Prebble Richard: Questions for Oral Answer — Questions to Ministers 
Prebble Richard: Questions for Oral Answer — Questions to Ministers 
[Volume:617;Page:13229] 
10.  
Hon RICHARD PREBBLE (Leader—ACT) 
 to the  
Minister of Finance 
: Does he stand by his reported comments in the  
Dominion Post 
 on Friday 21 May ruling out cuts to the top rate of personal tax rates;if so why is he ignoring advice from the Treasury report  
New Zealand Economic Growth:An Analysis of Performance and Policy 
  
April 2004 
 that found “A foundational principle for a taxation system that seeks to support economic growth is that it should be ‘broad based - low rate’ ”? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Yes New Zealand’s tax system is broad based—low rate by international comparison as John Shewan pointed out at the weekend. The Treasury report in my view is overly optimistic about the impact of tax rates on sustainable economic growth. 
Hon Richard Prebble 
: How does the Minister square his claim that New Zealand already has a broad based - low rate with the same report’s statement on page 53 that “moving to a flat tax rate for both personal and corporate tax rates is likely to have the greatest impact on economic growth as it conforms most closely to the BBLR principle.”? 
Hon Dr MICHAEL CULLEN 
: I notice that even the Treasury report admitted there was little empirical evidence for this assertion; it was mainly based on theory. If one looks around the world the United States for example has a much more steeply progressive tax rate system than New Zealand and the tax rate on dividend payments is over 70 percent. 
Clayton Cosgrove 
: Has he seen any recent comparisons of the tax burden in Australia and New Zealand? 
Hon Dr MICHAEL CULLEN 
: Yes. The same newspaper article that quoted John Shewan ran a table showing that a person on $80000 a year in Australia is liable for $8807 more in tax than someone on the same income in New Zealand. If he or she sold their house they would incur stamp duty of $40000 which does not exist in New Zealand. Nevertheless Australia has generally had a higher growth rate than New Zealand over the last 10 years. 
John Key 
: Why does the Minister rule out reductions in taxes on the basis of available cash when he knows one of two things or both things—firstly that a huge amount of the surplus available cash is actually being used to fund capital items that will have a long-term benefit to all New Zealanders and secondly the correct net worth of a country is far more accurately measured by the net debt to gross domestic product ratio not an increase in nominal growth? 
Hon Dr MICHAEL CULLEN 
: I am happy to get a briefing for the member as to why Treasury places greater stress on the gross debt figure as the anchor rather than net debt. If the member is now saying that National would borrow all the money to pay for for example new equipment for the Army Air Force and Navy; every new bit of hospital building; every new school; every other bit of capital equipment; every advance to a Crown entity; every advance to a State-owned enterprise; plus the student loan transfers; plus the Superannuation Fund then it has gone even pottier than I thought it had gone over recent times. 
Hon Richard Prebble 
: How can the Minister say to the House that there is no evidence that cutting the top personal rate of tax would help economic growth when he has received that recommendation from his own tax review in 2001 when the OECD has made the same recommendation to him in 2002 and he has now had the same recommendation given to him by his own Treasury advisers in April 2004? 
Hon Dr MICHAEL CULLEN 
: A number of the same people certainly including the OECD have recommended that a capital gains tax be introduced in New Zealand including a tax on housing. I assume that is also part of the recommendations that Opposition parties would accept. 
Hon Richard Prebble 
: Point of order Mr Speaker. 
Mr SPEAKER 
: I think the member could perhaps develop his answer. 
Hon Dr MICHAEL CULLEN 
: I am pointing out that recommendations have been made. We do not have to accept those recommendations. It is a matter of blind faith for some that lowering the top tax rate will increase growth. In 1988 we lowered it from 45 to 33 percent and the company tax rate from 48 to 33 percent. The promised nirvana did not arrive over the next 4 or 5 years. We had the lowest record of economic growth over a 5-year period that we had had since the early 1930s.