Govt rules out further increase in GST

Finance Minister Bill English. Photo / Mark Mitchell

Finance Minister Bill English says he has no intention of increasing GST again.

He was responding to a question in Parliament yesterday from Labour's finance spokesman, David Cunliffe, which referred to background papers from tax officials released last Friday by the savings working group, chaired by Kerry McDonald.

One of the options they consider is a further revenue-neutral shift away from income tax and towards GST, as in this year's Budget.

Their modelling found that increasing the GST rate from 15 to 20 per cent, offset by a cut in the top personal tax rate from 33 to 29.2 per cent, would be revenue neutral, and would increase private savings by 5 per cent and national savings by a similar amount.

It would be a less radical change in the structure of the current tax system than some of the other options they consider, "while reducing the deleterious effects of taxation on the level and allocation of savings".

It is the one option officials see fewest problems with, but they at least imply that it may be a different story for the public and politicians.

"The major concern would be its effect on the distribution of taxation," they said, officialese for "it is likely to shift the burden of taxation in ways that benefit some but disadvantage others".

Cunliffe's question to English was: "Has he seen the papers released by the savings working group relating to GST and, if so, does he have any intention of increasing GST further?"

English's reply was: "Yes, I have seen the papers, and no."