Cullen defends tax levels

2.45pm

In his Budget speech this afternoon, the Finance Minster, Dr Cullen, went on the offensive against calls for tax cuts.

The National Party opposition has announced its policy of lowering the corporate tax rate to 30c in the dollar and cutting the top personal tax rate of 39c to 33c and even lower in the long-term.

But in a significant section of his Budget speech, Dr Cullen said the Government would not take a "bold step in the wrong direction" and cut taxes.

New Zealand had been through years of tax cuts under the Lange Labour Government and the Bolger National Governments of the 1990s. Yet, all "failed to lift the sustainable growth rate".

Dr Cullen said New Zealanders often wrongly compared our tax rates to those overseas and criticised "bumper sticker solutions" to complex economic issues.

"New Zealand is highly unusual in having very little by way of social security taxes or levies on either individuals or businesses."

An Economist comparison of business costs from corporate tax, social security levies, local body rates and excise duties put New Zealand well below the total burden on American businesses.

In the USA, the burden on business was 9.5 per cent of GDP but in New Zealand the comparative figure was around 7 per cent of GDP.

He said it was a sad commentary on New Zealanders that we make comparisons to detriment of our image overseas "in order to support partisan arguments domestically".

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