Prebble Richard: Questions for Oral Answer — Questions to Ministers 
Prebble Richard: Questions for Oral Answer — Questions to Ministers 
[Volume:617;Page:12759] 
5.  
Hon RICHARD PREBBLE (Leader—ACT) 
 to the  
Minister of Finance 
: What would be the estimated revenue reduction if the rate of income tax including company tax was cut to a top rate of 20c and how does that estimate compare to the expected operating surplus? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 The estimated cost given in written answer 5540 to the member’s colleague Rodney Hide was about $5.5 billion a year. This is a very similar size to the projected operating surplus for the current year but that of course does not make provision for large elements of capital expenditure. 
Hon Richard Prebble 
: Is it not a fact that the Minister is actually saying to the House that he could reduce the rate of income tax and company tax for everyone in the country to $5.48 billion and that as the operating surplus is $7.4 billion there would be a $2 billion surplus; surely the Minister can see that there is no better way of helping working New Zealanders or small business than to reduce income tax in the Budget to 20c immediately? 
Hon Dr MICHAEL CULLEN 
: Now I know who wrote the  
New Zealand Herald 
 editorial a couple of days ago. The final operating surplus will not be $7.4 billion. As the member well knows we have passed the provisional tax payments so tax revenue is high at this point compared with final revenue versus expenditure. Secondly if the member’s policy were followed the Government would be running a cash deficit this year of over $5 billion. Within 5 to 6 years that would lead to a doubling of the gross debt to gross domestic product (GDP) ratio and all that he did from 1984 onwards would become totally stupid because we would be back where we started. 
Clayton Cosgrove 
: Is it possible to provide for current Government expenditure with a tax cut proposed of that size? 
Hon Dr MICHAEL CULLEN 
: No. As I said it required borrowing something over $5 billion this year or equivalent cuts to spending on health education law and order or other Government services. There is no fiscal free lunch. 
John Key 
: Does the Minister think New Zealand businesses would prefer a cut in the company tax rate or more corporate welfare of the sort handed out by Jim Anderton and Jim Sutton yesterday? 
Hon Dr MICHAEL CULLEN 
: It depends which ones they were—the ones who got the corporate tax-rate cut or the ones who got the assistance to expand. What is clear is that the taxation of the New Zealand corporate sector as a whole is significantly lower both as a proportion of revenue to the companies and as a proportion of GDP than in nearly all other Western countries. That is because we do not have a capital gains tax we do not have a classical system on corporate taxation and we do not have payroll taxes. 
Rodney Hide 
: In light of the Minister justifying putting up the top rate of tax to 39c to raise an extra $400 million that he said his Government needed in view of an operating surplus of $6 billion or $7 billion why will he at least not drop the top rate of tax down from 39c to 33c—or is this just another tax to spite the rich? 
Hon Dr MICHAEL CULLEN 
: No but the member’s bid for a tax cut of nearly $60 a week will be overtaken by a Budget package that will give the couple in Waihi mentioned in the  
Sunday Star-Times 
 a great deal more than that.