Act wants to take knife to Cullen's super fund, taxes

By VERNON SMALL deputy political editor

Act has called on the Government to dramatically loosen the fiscal purse-strings by cancelling Michael Cullen's superannuation fund, slashing the surplus to zero and pouring the cash into big tax cuts.

Leader Richard Prebble said current rate settings overtaxed working people and businesses.

Act proposed a five-point plan, costing about $4 billion a year in forgone revenue, to help workers and businesses.

As well as dumping the Finance Minister's super fund and running a balanced budget, rather than a surplus, Act would cut the top personal and corporate rates to 25 per cent and lower the bottom personal rate to 18 per cent.

The proposal was based on recommendations in the 2001 McLeod tax report.

An alternative would be a flat $50-a-week tax cut for every worker.

Mr Prebble said Dr Cullen had the best sets of financial figures ever as the May 15 Budget approached, with a projected $4 billion surplus.

But the economy was slowing, business confidence was falling and it was time to act. Cutting the company tax rate below Australia's would boost investment, jobs and prosperity.

Increased spending or tax cuts would stimulate the economy. But Dr Cullen favoured extra spending, and this was "a very bad idea".

A mix of tax cuts, lower compliance costs, welfare reform and reducing the Government's share of the economy was needed.

This year's Budget must include a significant tax cut or the economy would slow sharply, possibly into recession, Mr Prebble said.

Working families were paying more tax than ever and taking on more debt.

"It is a credit crisis waiting to happen," Mr Prebble said. Dr Cullen's hints that he would increase family support were not justified.

Act's plan did not require cuts to health, education, law and order or other Government programmes.

It applied to this year's Budget and Act retained its long-term aim of a flat tax rate in five years.

Act finance spokesman Rodney Hide said scrapping the Cullen superannuation fund would save $2 billion a year. The scheme was too risky and was giving savers a false sense of security, leading to a drop-off in the uptake of pension plans.

Mr Hide feared Dr Cullen would wait for an economic slowdown before he took remedial action, when it would be much harder to achieve.

He said the only argument against a tax cut was if it overheated the economy and that was extremely unlikely.