Brash acts to dampen hopes over tax cuts

National is dampening expectations of an extravagant tax cut at the next election, as doubt surrounds the economy and as the party places more emphasis on public services.

In a speech to be delivered in Christchurch today, National leader Don Brash will signal that while his party is committed to lowering tax rates, the change may take many years.

Dr Brash will also emphasise that a National Government would have "other priorities" aside from tax.

The speech - to a New Zealand Institute of Chartered Accountants tax conference - comes just a year after National went into an election promising tax cuts cumulatively worth $9.4 billion over three years.

But economic conditions have worsened since then and Labour's re-election means that some of the money National had been eyeing for tax cuts has already been allocated or spent.

That means the country's purse-strings are tighter, and National is likely to have less room to move when it comes to the 2008 election.

According to Dr Brash National's precise tax policy will not be formulated until closer to the next election when the party knows what shape the economy is in.

The overall policy "remains the same" in that National is "committed to lowering tax rates over time".

"This is not to say that such reductions can or should be achieved overnight, or in one large round of tax cutting.

"A National Government would have other priorities as well, in education, health, law and order, defence and the environment, amongst others, and we believe in effective public services and strong public institutions."

National will embark on a programme of "incremental tax reform", which will reduce the tax burden "over time as we can afford it".

He will mention Australia's example where tax rates had been cut or tax thresholds raised in each of the past five years.

Before last year's election, National's hefty tax cut policy was countered by Labour's arguments that big cuts to public services would be needed to fund it.

National is clearly moving to offset that kind of criticism happening again, and Dr Brash said his party "will not be sacrificing valuable public services" to achieve its tax goals.

However, National will hold "the bureaucracy accountable for every dollar spent".

Dr Brash will use the speech to criticise Labour's handling of tax issues in recent years. He will argue that there have been many opportunities to cut rates.

National intends to make low to middle income families and company tax its top priorities in its tax policy.

Company tax needed to be lowered to "at least" 30 per cent - a change that Finance Minister Michael Cullen has hinted at in recent weeks as part of the Government's business tax review.

According to Dr Brash that review had effectively promised a Lamborghini and delivered a Lada, because nobody has any idea how much the Government is prepared to spend on changes.