Brash wants to phase in tax cuts

Don Brash

National leader Don Brash is acting to dampen expectations that his party will promise large tax cuts, saying yesterday they will "initially be moderate".

He said his policy would set out a phased tax relief programme to take effect within National's first three years in government.

"The reality is we do not want to slash healthcare spending, education spending or indeed any other important programme" Dr Brash said after National's conference in Wellington. "Therefore the tax reductions need to be moderate and phased in as we get government spending under control."

Finance spokesman John Key said National would use a portion of growth in tax revenue to fund "an on-going campaign of lowering taxes".

The policy, to be announced closer to the election, is expected to include a promise to lower the company tax rate from 33c to 30c.

Dr Brash accused Labour of trying to raise false expectations that National would promise "gazillions" in people's pockets the day after an election in order to invite a sense of failure when it did not happen.

"It is going to be initially moderate but gradually increased over time," he said.

In his Conference speech Dr Brash sought to counter Labour's claims that tax cuts would be at the expense of education and health.

He said there was no bigger threat to the quality of the healthcare and education in 10 years' time than a tax regime that strangled initiative and hard work and a culture of enterprise today.

National would go into the campaign promising lower taxes because it cared about having properly-funded healthcare and world-class schools staffed by well-paid teachers.

He acknowledged that those on low incomes would not get much relief.

"Clearly, people who are not paying much tax, by definition can't get much tax relief. But we would hope most New Zealanders would see the tax reductions as meaningful right across the spectrum."

Mr Key gave particular emphasis in his speech to lowering company tax.

Later he said his approach as Finance Minister would be more linked to expenditure.

"If I can make sure that expenditure is, broadly speaking, growing at no greater than the inflation rate and population growth, then any additional revenue will be recycled into an an-going programme of lowering taxes."

Citing Ireland's experience, he said it wanted to grow three green-field industries - pharmaceuticals, software development and financial services - which were given a concession tax rate of 10 per cent.

The Irish Government told the business community it wanted to achieve a certain amount of corporate tax a year, and as its revenue increased, it lowered the overall company tax rate. In the end, everyone else was lowered to 12.5 per cent.