Cullen kills hopes of large tax cut

By Paula Oliver

Finance Minister Michael Cullen has again warned of the "folly" of sizeable tax cuts, just days ahead of the release of the eagerly awaited review of business tax.

In a move which suggests that any flow-on effects to personal tax from the review are likely to be limited, Dr Cullen yesterday used a speech to the Nelson Chamber of Commerce to again argue against big tax cuts.

Tax cuts in the 1990s "did not stimulate economic growth, and they did not stop the flow of New Zealanders across the Tasman", his speech notes said.

Dr Cullen and Revenue Minister Peter Dunne are to shortly release a discussion document detailing a range of options for changes to business tax.

There had been indications that the document would come out next week, but there is now some doubt. Prime Minister Helen Clark's trip overseas due to a family illness is believed to have delayed its signing, meaning it may not be released until the week after next.

Both Dr Cullen and Mr Dunne had previously indicated that there could be flow-on effects for personal tax rates or thresholds from the business tax review.

Dr Cullen did not mention that in yesterday's speech notes, but did say the discussion document would assess a range of "innovative options to deal with the challenge of improving competitiveness with our chief rival Australia and raising productivity".

There is widespread expectation that a cut to the 33 per cent corporate tax rate will be among options in the document.

Australia's lower 30 per cent rate is viewed by some as hampering New Zealand's competitiveness, but Mr Dunne says a move to match Australia could easily be trumped if that country lowered its rate further in response.

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