Key defends tax cuts for wealthy

Greens co-leader Metiria Turei said the increase in GST hit poorest people the hardest. Photo / Mark Mitchell

Prime Minister John Key yesterday defended bigger tax cuts for the wealthy, arguing that they already paid a big portion of tax.

He described tomorrow's Budget as "solid and sensible" and said it should be looked at in its totality.

He was attacked by the Greens in Parliament for suggesting on Monday that people should not be envious of tax cuts for the wealthy and for its plans to increase GST.

He said it was worth mentioning that the top 10 per cent of income earners paid 44 per cent of all personal income tax in New Zealand.

"Interestingly enough, if Working for Families and other benefits are taken into account, the 10 per cent of taxpayers in New Zealand who are the top earners actually pay 76 per cent of all net personal tax."

On Monday he said tax cuts at the top end meant that doctors, scientists and entrepreneurs stayed in the country.

"We can be envious about these things but without those people in our economy all the rest of us will either have less people paying tax or fundamentally less services that they provide."

All personal taxpayers are expected to receive a tax cut in the Budget in a so-called tax switch. GST will be increased from 12.5 per cent to 15 per cent.

Property investors will have some of their tax breaks cut.

It was a Budget that was fair, he told reporters, and said half of the people on the "Rich List" did not pay the top personal rate last year.

"But by definition if you change tax rates, those who earn more will get a bigger tax cut but I think we've got a package that is fair."

After tomorrow's Budget "they will have their liability increased and they will be paying their fair share".

Greens co-leader Metiria Turei said it was "grossly insulting" to suggest that people who cared about reducing inequalities were guilty of envy. The Greens and Labour oppose lifting GST on the basis that more low-income earners pay a greater percentage of their income in GST.

Mrs Turei said the top 10 per cent of income earners paid only 4 per cent of their income in GST and the lowest 10 per cent paid 14 per cent "making the increase in GST hit poorest people the hardest".

Mr Key said Treasury's advice was that the progressive nature of GST was about the same as personal income tax - "in other words, those who earn more pay more".

Labour finance spokesman David Cunliffe teased Finance Minister Bill English after revealing he had acquired a series of oral questions to be asked by Tukituki MP Craig Foss and all the answers.

Mr Cunliffe was able to answer the questions verbatim as Mr English read them out.