Cosgrove Clayton: Questions for Oral Answer — Questions to Ministers 
Cosgrove Clayton: Questions for Oral Answer — Questions to Ministers 
[Volume:616;Page:11711] 
5.  
CLAYTON COSGROVE (Labour—Waimakariri) 
 to the  
Minister of Finance 
: What reports has he received about the impact of a cut in the corporate tax rate to 30c? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Apart from a rough fiscal cost of $500 million I am advised that the principal beneficiaries will be offshore investors for whom company tax is the final tax paid as opposed to local shareholders and businesses for whom it is in effect a withholding tax. 
Clayton Cosgrove 
: What would be the effect of cutting the corporate rate to 30c while retaining a top personal rate of 39c? 
Hon Dr MICHAEL CULLEN 
: It has often been said that the primary effect of creating a large gap between the two rates would be to create “a big incentive for people to register companies to run their business rather than trading in their own name and that significantly increases compliance costs.” My source for that advice is Dr Brash’s interview with  
The Australian  
only last month. 
Dr Don Brash 
: How does the Minister reconcile that answer—and indeed his released statement today that if he cut the corporate tax rate “the entire benefit would end up in foreign hands”—with the OECD’s advice that cutting the corporate tax rate for foreign and domestic investors would be advantageous for the New Zealand economy? 
Hon Dr MICHAEL CULLEN 
: I can do so a great deal easier than I can the member’s own statement today that the priority is to cut the corporate tax rate and that for low to middle income families when only a year ago he said that we should cut the top personal tax rate only. 
Mr SPEAKER 
: I am getting sick of this yelling and shouting. The Minister can give an answer. There is plenty of time for more supplementary questions and the Minister will address the question. 
Gerry Brownlee 
: I raise a point of order Mr Speaker. I think that some of the frustration on this side of the House comes about because Ministers and not just this Minister can make highly controversial statements that are of a completely political nature attack-wise—I expect that all comments in this House are of a political nature—before there is any intervention from the Chair. For the Minister to say that he could reconcile his answer to the question a great deal better than the member who asked it and go on to talk about Dr Brash’s comments is completely unacceptable and will lead to disorder. 
Mr SPEAKER 
: It will not lead to disorder because people will leave if they start saying things like that. The member did not make a point of order at all. If we take politics out of this Parliament I really wonder what is left in it. 
Hon Dr MICHAEL CULLEN 
: The Government does not regard the OECD as the repository of all wisdom on these matters. The fact is that in an imputation system such as New Zealand has when one cuts the corporate tax rate the benefit goes very largely to foreign owners of shares and to foreign owners of New Zealand businesses. 
Gordon Copeland 
: Does the Minister agree that a cut in the corporate tax rate will provide both an incentive for shareholders to retain and build the capital of their companies by allowing the after-tax returns to go to shareholders and encourage both New Zealand and overseas investment in our companies? 
Hon Dr MICHAEL CULLEN 
: No I do not because one of the features of New Zealand’s economy is that there is a large payout of post-tax dividends as opposed to retained earnings. All that would do therefore is increase the earnings that go overseas and reduce the amount of imputation credits available for the payment of subsequent personal tax. 
Rodney Hide 
: In light of the Minister’s answer that it is better to keep the company rate and the top personal rate of income tax the same does he now regret opening up a gap by lifting the top rate of personal tax to 39c and does he not agree that the best policy would be to drop the company rate of tax and the top rate of personal income tax to 30c so that the economy will prosper? 
Hon Dr MICHAEL CULLEN 
: The member has totally misquoted what I said in answer to the first part of the question. The point I was making was that Dr Brash said only a month ago that there should not be a large gap and today he announced a policy to widen it. 
Rodney Hide 
: I raise a point of order Mr Speaker. There seems to be two rules because whenever Opposition members get up to make a point of order or to ask a question we get shouted down and you do not seem to do anything. 
Mr SPEAKER 
: Please be seated. I will not have that sort of comment made in this House. The member will give his point of order and that is it. It will be heard in silence. 
Rodney Hide 
: The Minister in no way addressed the question I put which was whether he regrets lifting the top personal tax rate. I assume by his silence that he must do but I would much prefer to hear it from his own mouth. 
Hon Dr MICHAEL CULLEN 
: That part of the question depended on the first part of the question which was factually inaccurate. 
Rodney Hide 
: I raise a point of order Mr Speaker. I made a point of order and I would like you to rule on whether Dr Cullen addressed it because in my view he came nowhere close to it. 
Mr SPEAKER 
: The Minister took issue with the basis of the member’s question. If members put facts into their questions they invite that. 
Hon Ken Shirley 
: I raise a point of order Mr Speaker. It is a matter of public record that Michael Cullen as Minister of Finance put the top personal tax rate up to 39c in the dollar. He is now trying to hide from that fact and not answer the question. 
Mr SPEAKER 
: No he is not and there is a general debate after question time during which any comment like that can be made. I say once again—be seated while I am on my feet—that the Minister took issue with the basis of the member’s question. If members put facts into their questions they invite that. The Minister is entitled to do that. 
Rodney Hide 
: I raise a point of order Mr Speaker. The ACT party does not have a slot in the general debate. I ask you then for some guidance. I will put the question directly: does he now regret putting it up to the top rate of 39c? 
Mr SPEAKER 
: Occasionally parties do not have a slot in the general debate but that is not the issue here. If the member wants to ask that question as a further supplementary he can. There is the ability to do that within the allocation that that party has been given. If the member wants to ask that he can but the Minister addressed the previous question.