Spend tax cut or give it to the needy: PM

John Key. Photo / Paul Estcourt

John Key wants people who don't need to spend their upcoming tax cuts to donate them to charity, a step he hopes will help develop an American-style culture of giving.

The next round of tax cuts, due in a fortnight, will give workers on $45,000 an extra $11.54 a week in the hand and those earning $100,000 about $24.

Speaking at a Philanthropy New Zealand conference yesterday, Mr Key said those who "can't bring themselves to spend their tax cuts" should give the money to a charity rather than save it.

The cuts are part of the Government's economic stimulus plans, aimed at increasing household spending in the recession.

Mr Key said though many people needed the tax cuts to pay debt or bills, "I am just as sure there are many who are in a position to donate some.

"I'll be reminding people that if they can't bring themselves to spend their tax cuts, there are many organisations who could benefit."

Labour leader Phil Goff said Mr Key's reasoning was deeply flawed, as were tax cuts designed to favour the wealthy. The cuts gave little to low-income workers who would have spent it, and more to those on high incomes who were less likely to spend it.

"It smacks of the old aristocracy to say 'we will make things worse for the low-income people and then, out of the generosity of my heart, I will call on other well-heeled people to donate theirs to charity'."

Mr Key, whose tax cut will be $98 a week, gives a "reasonable portion" of his $393,000 salary to charities and intends to continue doing so.

Though New Zealanders donated as much per head as comparable countries, he said there was potential to do more, especially when the recession ended. He would like to see New Zealanders become more like Americans, who give twice as much of their income to charity.

When living in America he had admired its "culture of giving". This was partly because Americans earned more, but also because of a "culture of generosity and giving ingrained in them for generations.

"That's the kind of attitude I want to foster here."

Mr Key said about 60 per cent of the population donated in some way each year without knowing they could claim some of the amount back as a rebate.

"Imagine someone who used to give $10,000 to an organisation.

"Now with the tax deductions, they get a third of that back. So they can give $15,000 and with the rebate, their net giving is the same. So there's tremendous capacity for New Zealanders to increase their giving."

Businesses who could not afford to keep up donations should be encouraged to donate time and services - the Government was working on a "gifts in kind" scheme to extend rebates to donations of goods and services.

National was continuing with changes to the tax system to make giving more worthwhile, including introducing a payroll system allowing workers to donate through their wages and get an automatic rebate.

It was also looking at "gift aid" so donors could also give their rebate to charities. Workers on the nine-day fortnight scheme should be encouraged to give that extra day to charity work.

Auckland City Missioner Diane Robertson said money not needed by the public would be gratefully accepted by charities.

The Mission was running a 'tax appeal' along similar lines - asking people to consider donating tax refunds to the City Mission.