Douglas Roger: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
Douglas Roger: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:663;Page:11077] 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 I have recently been reported in the newspapers as giving National three out of 10 for this Budget. 
Amy Adams 
: A bit tough Roger—a bit miserly. 
Hon Sir ROGER DOUGLAS 
: Well it is slightly tough I think but in fact it was not quite what I said. I said that this Budget was being prepared against three trends. The first trend was the fact that New Zealand relative to other countries had been in decline for 40 years and I gave the Government three out of 10 in terms of whether I felt it would make the changes that were necessary. The changes that I felt were necessary were very low taxes—and the Government has gone some way towards that—and the need to introduce competition and private enterprise into the areas of health welfare and education. I knew that would not happen so I gave the Government three out of 10. 
I said on the expenditure front that frankly for 13 years successive Governments have spent way above the rate of inflation. I thought that probably the Government would get a score of six or maybe even seven. I have had to revise that score down to five I am afraid. But on the other hand in terms of the Government’s tax proposals I said that I thought the Government would get maybe four or five and I would certainly revise that up to six or seven. Just what it is overall whether it is 3½ or four I am not sure. Maybe on Tuesday when I speak in the Budget debate I will make that decision. 
If I look at this particular tax bill and at what is in it I would say that there are some good measures. But I think it could have been improved considerably from where it is. I will touch on where I believe it could have been improved. 
The first point I will make is that I do not believe there was any necessity whatsoever to increase GST. I believe that it was possible to have reduced Government expenditure by at least the net amount of revenue that GST will bring after compensating superannuitants and welfare beneficiaries. I say that for a number of reasons and I will give some examples. First of all in a paper that I put out the other day I identified about $3 billion worth of possible expenditure savings which is double what GST net will bring in. If I look at this particular Budget and at items of what I would call corporate welfare—handouts to various businesses organisations and the like—I can see that that comes to about $2.6 billion and I am sure that over the weekend I will find other costs that will take it to over $3 billion. So handouts to corporates subsidies for this and that the emissions trading scheme etc. come to over $3 billion. Again that is double what will come in in terms of the net return from GST. 
The next point I will make is that if I look at page 15 of the Minister’s executive summary in the Budget documents—and this is why I marked the Government down from seven to five—I see that Government expenditure this year rather than flat-lining as I thought it would has actually increased by 9 percent. It has gone up from $64.79 billion to over $70 billion. It has increased by just over 9 percent. I accept and I think it is being fair to the Government to say that almost 2 percent of that 9 percent increase is compensation for the GST increase but even allowing for that the increase in Government expenditure in this Budget is 3½ times the current rate of inflation. I have to say that this country cannot continue to increase Government expenditure at 3½ times the rate of inflation. At some point in time that has to stop. It has been going on for 13 years. We had a Labour Government that simply did not care and got us in a hell of a mess and we need to stop that. That is the first point I would make. I do not believe that GST needed to go up from 12.5 percent to 15 percent. 
What were the other parts of the tax package that I personally do not really agree with? I would not have reduced the 12.5 percent rate down to 10.5 percent on the first $14000 of income. The thing that impacts on people’s behaviour is the rate they pay at the margins—what they earn on their extra few hours of overtime. The rate that is paid is what determines whether a person will do overtime; that final rate is what determines whether people will invest etc. We know that those people who earn under $14000 actually come from the wealthy families of this country so when we reduce the tax rate from 12.5 percent to 10.5 percent we are not in fact helping the low-income earner; we are helping the more affluent—the person who is able to income split etc. I remember that vividly from the time I tried to put in a flat tax rate of 23c and we were concerned about lifting everyone from 15c to 23c. The fact was that 90 percent of the people who were paying simply the 15 percent came from wealthy families. They were the wives husbands or children of people who were earning high incomes. Their families had high incomes. So I would not have done that. 
The other thing that I would have tried to do—and I really do not understand why the Government did not do it—was to align tax rates. I believe that the Government should have aligned the various rates whether of personal income tax corporate tax or tax on trusts at a rate of 30c and then maybe next year it should move the rate down to 29c and move it in the following year to 28c. But at some point in time it is important that the corporate and the top personal income tax rates are aligned otherwise we are simply encouraging people to try to dodge tax payments.