Cullen answers 'random musings'

Finance Minister Michael Cullen responds to comments by National's John Key in yesterday's column by Fran O'Sullivan.

"John Key's random musings about the possibility of New Zealand copying the Irish economy show a startling lack of knowledge of the differences between the two economies," Cullen said.

"First, the Irish economic miracle began with and has been sustained by a tripartite deal between Government, the union movement and business. That requires a highly centralised wage bargaining process with strong unions, a possibility National destroyed with the Employment Contracts Act.

"Second, Ireland has received over the last 20 years tens of billions of dollars in subsidies from the European Union. Nobody subsidises us.

"Third, Ireland taxes dividends twice. So the low company tax rate for Irish investors is overwhelmed by being taxed again on top of that at the personal rate. In New Zealand the company tax paid is offset against personal tax, leading to one of the lowest taxes in dividends in the developed world.

"As for Mr Key's silly notion that foreign-owned companies should pay less tax than New Zealand ones, perhaps he might justify why the Australian- owned banks should pay a lower tax rate than the Taranaki Savings bank, Kiwibank and the Southland Building Society."