Prebble Richard: Questions for Oral Answer — Questions to Ministers 
Prebble Richard: Questions for Oral Answer — Questions to Ministers 
[Volume:617;Page:13130] 
2.  
Hon RICHARD PREBBLE (Leader—ACT) 
 to the  
Minister of Finance 
: Does he recall telling the Asia Society in Hong Kong that the Government would reduce the 33c company tax rate when “fiscal conditions permit”; if so how many billions does the surplus need to be before “fiscal conditions permit” the desired company tax cut? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Yes. However Budget forecasts will show that the Government anticipates running only a very small cash surplus this year. 
Judith Collins 
: Oh! 
Hon Dr MICHAEL CULLEN 
: I am sorry to let the member down about that! Although gross debt to gross domestic product is projected to continue to reduce slowly nominal debt will actually rise requiring a modest borrowing programme over the next 3 years. 
Hon Richard Prebble 
: When the Minister was quoted as saying that the Government plans to lower the 33c in the dollar tax rate on business when the country’s coffers are healthy enough did he also take into account that according to Treasury it would cost only $420 million to reduce the company tax rate from 33c to 30c in the dollar; and is it not a fact that he could do that except that he wants to distribute hundreds of millions of dollars to social welfare beneficiaries? 
Hon Dr MICHAEL CULLEN 
: Apart from the fact that the member typically misquoted what I actually said in the speech which is not unanticipated from the member in fact the member’s figures I think are a little under the estimate. In any case there are higher priorities for that. I emphasise that the Budget will show not billions of dollars of spare cash hanging around but in fact a modest borrowing programme for the coming 3 years. 
Hon Richard Prebble 
: The Minister has claimed that I misquoted his press statement. I seek the leave of the House to table a press statement from the  
New Zealand Herald  
of 13 April which I think will show that I quoted him absolutely accurately. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is. 
Hon Dr MICHAEL CULLEN 
: I seek leave to table the actual speech which shows exactly what I said. 
Document by leave laid on the Table of the House. 
Clayton Cosgrove 
: Is the corporate tax rate in New Zealand high by international standards? 
Hon Dr MICHAEL CULLEN 
: No at 33 percent it is just 0.7 percent above the OECD average. But New Zealand has a clean tax system by international comparison. There are no major payroll taxes and no overall capital gains tax and of course there is an imputation system so the total tax impost on companies is likely to be significantly lower than in many overseas jurisdictions including Australia. 
Hon David Carter 
: Is the Minister aware that since Labour became the Government more than two-thirds of all OECD countries have lowered their company tax rate by an average of more than 5 percent and why does he think they have done that? 
Hon Dr MICHAEL CULLEN 
: Well some have had right-wing Governments. 
Rt Hon Winston Peters 
: Having regard to the Minister’s comment that the accounts will be in such a parlous state that he will begin a nominal borrowing programme over the next 3 years is this a case of a former Prime Minister and Minister of Finance’s words coming back to him when he said: “They can’t promise anything because I’ve spent it all.”? Does he recall the aftermath of that when the next election turned up in 1972? 
Hon Dr MICHAEL CULLEN 
: That particular Prime Minister was running I think an 8 percent of GDP cash deficit in his last year as Minister of Finance. We will be running 7 percent according to Mr Jones. 
I think the member will find it is 7 percent on an accruals basis when recalculated which is an 8 percent cash deficit of GDP. We will be running a very small deficit much of which will be used to finance such things as for example student loan advances which are an asset in terms of net debt. 
Gerrard Eckhoff 
: Why should New Zealanders not believe that the real reason he cannot reduce company tax is that it is all going into his welfare Budget next week? 
Hon Dr MICHAEL CULLEN 
: The member is going to be terribly disappointed next week when he finds out how much is going to families who are in employment as opposed to those who are on welfare benefits. 
Heather Roy 
: Is the Minister aware of the January 2004 KPMG survey that said of New Zealand: “The company tax rate of 33c in the dollar is above the average for the OECD for Asia-Pacific countries and even for Europe.” and that the KPMG survey has recorded a steady decline in average corporate tax rates across the OECD in recent years from just under 37 percent in 1997 to 30 percent now and will he act to address New Zealand’s high company tax rate in next week’s Budget? 
Hon Dr MICHAEL CULLEN 
: There were two parts to the question and the answers are yes and no for a very simple reason. New Zealand has no substantial payroll tax unlike Australia. It has no general capital gains tax unlike Australia. It has an imputation system on dividends unlike the United States. In fact if the member cares to look at other developed countries she will find New Zealand has one of the lowest rates of tax in total on the corporate sector as a proportion of GDP. Even corporate tax in New Zealand as a proportion of GDP is lower than in Australia. 
Heather Roy 
: I seek the leave of the House to table the KPMG corporate tax rate survey of January 2004. 
Document by leave laid on the Table of the House.