Grant Robertson defends Labour's new top tax plan

Finance Minister Grant Robertson says next week's June quarter GDP release will be "bad". Photo / NZ Herald

Finance Minister Grant Robertson has defended Labour's plan to increase the top tax rate, saying it would raise $2 billion over the forecast four-year budget period, and said June-quarter GDP data out next week would be "bad".

Labour yesterday said it would lift the top tax rate from 33 per cent to 39 per cent for people earning more than $180,000 a year, if it was returned to power at the October 17 general election.

Newstalk ZB's Mike Hosking, in an interview with the minister, asked if the $500m a year expected to be raised by the tax increase was "miserly" and "not worth the bother".

"I actually think that $2 billion across the four-year budget period - to spend on things like health and education and to help keep a lid on debt - is actually important," Robertson said.

"Obviously we will get criticisms on this policy - it's coming from all directions - which means that we have probably got the balance about right," Robertson said.

Former IRD deputy commissioner Robin Oliver, who left the department in 2011, had suggested high-salaried earners would turn themselves into companies so that they can be taxed on the lower company rate rather than the top individual tax rate.

"No I don't accept that," Robertson said. "I have a lot of respect for Robin but I think the IRD, since the time that he has been there, has got a lot better at making sure that people do pay their tax," he said.

"There is already a gap between the top tax rate and the company rate, so I don't think that that will affect the amount of money that we bring in," he said.

Hosking raised the issue of next Thursday's June-quarter release of gross domestic product data, and asked why it was likely to be worse than Australia's 7 per cent quarterly decline, which was its poorest performance on record.

"Obviously this will be a very bad quarter for New Zealand because in that quarter we were dealing with a one-in-100-year shock, and we had a level 4 lockdown," Robertson said. "We will rebound from it, but this will be a tough quarter."

"This is not a game of rugby [with Australia]," Robertson said. "We have got different economies and our economy is weighted more towards the external-serve sector, which was affected more as a part of this."

"I actually think that our rebound in the September quarter is going to be very solid compared to the rest of the world because we were able to operate at level 1 for an extended period of 100-odd days," he said.

ASB Bank this week predicted that GDP would contract by 11 per cent over the June quarter, slightly better than its previous forecast of minus 13 per cent.