$500m extra for transport thanks to windfall

The Government will plough $500 million into transport projects thanks to a windfall tax take understood to be from foreign-owned banks.

The surprise announcement was downplayed in the sixth paragraph of a statement from Finance Minister Michael Cullen yesterday, and caught Auckland leaders and Transit NZ on the hop.

Dr Cullen said new data showed the tax take for the 11 months to the end of May was running $544 million ahead of forecasts and company tax was the main driver, accounting for $368 million.

He said the one-off windfall came as the "financial industry responds to new tax law". This is understood to refer to legislation passed last week imposing new rules on foreign-owned banks after concerns they were not paying enough tax on their New Zealand businesses.

Dr Cullen said the extra revenue this year was likely to be one-off rather than an ongoing increase in the tax base, and sensible fiscal policy dictated it should fund one-off initiatives.

Spokesmen for Westpac and BNZ denied last night making any special tax payments.

ANZ-National said the banks did not comment on tax matters but pointed out any such payment would have to be notified to the stock exchange, and no disclosure had been made. ASB could not be contacted.

The announcement comes after a recent row with the Employers and Manufacturers Association northern branch over the business group's planned election-time campaign highlighting Auckland's traffic woes.

Asked if he was responding to the campaign, Dr Cullen acknowledged there was sensitivity around the issue because the situation in Auckland was bad.

However, he said Auckland was not the only part of the country with roading issues.

Transit would decide where the money should be spent but it would go on projects nationwide and allow a more aggressive construction programme over the next three or four years, he said. Transit was caught flat-footed. Communications manager Deborah Willett said she knew about it only when Dr Cullen issued the statement.

"Apart from the fact that we are delighted, we are still trying to find out some more detail."

National finance spokesman John Key said the announcement was downplayed because it was a "blatant election-year bribe and the electorate's more sophisticated than that".

"It's certainly a convenient way for Michael Cullen to disguise the fact that he's bungled the numbers again and collected a lot more tax than he was expecting."

Auckland Mayor Dick Hubbard said he was surprised and delighted by the news. It was clear the $1.6 billion Auckland transport package announced 18 months ago was being eaten up by inflation.

Auckland Chamber of Commerce chief executive Michael Barnett was also surprised but said the problem was translating the money into more projects being started earlier.

AA public affairs director George Fairbairn congratulated the Government and praised the decision to invest the windfall in transport as "extremely wise".