Tax cut era is over: Govt

Bill English says that the Government must get in as much revenue without raising the tax burden on Kiwis. Photo / Mark Mitchell

The plain tax-cut era is over, Finance Minister Bill English indicated at the National Party conference in Christchurch at the weekend.

New Zealand had to get out of the tax-cut "mode" it had been in for the past five years, he said, because of the new economic conditions, which see budget deficit forecasts of up $12 billion for the next 10 years.

"There is no possibility of just cutting taxes," he said after his speech. "The Government is short of revenue. The only question is whether there is a different mix of tax.

"Over the next five years or so we will need to get in as much revenue as we can without actually raising the tax burden."

His message was that any cut in personal taxes would have to be offset by increased tax revenue from somewhere else in what could be a new mix of tax.

"The fact is tax revenue is managing to cut itself very dramatically so there isn't scope ahead for us to go around saying we are going to lower your income tax, full stop," he told delegates.

Mr English's blunt message contrasted with every party conference for at least five years where tax cuts have been a central plank of National policy.

The Government's first Budget in May has already cancelled the second and third tranche of promised tax cuts.

Mr English is attempting to soften the ground for what could be some radical ideas emerging in the next few months from the comprehensive tax review being undertaken by leading tax experts.

Australia was undertaking a "first-principle" review of its tax system, Mr English said, "and I know it is only a small chance but they might do something clever and we don't want to be caught flat-footed".

While both he and Prime Minister John Key have made it clear a capital gains tax is not favoured by National, they do not want to place any limits on what the review group comes up with.