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Home / Business / Economy

<i>Brian Fallow:</i> Little force in Key's speech

Brian Fallow
By Brian Fallow
Columnist·NZ Herald·
9 Feb, 2010 01:30 AM2 mins to read

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Brian Fallow

Brian Fallow

Brian Fallow
Opinion by Brian Fallow
Brian Fallow is a former economics editor of The New Zealand Herald
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Tax, the prime minister proclaims, is a powerful lever for the Government to boost the economy's performance.

It's a pity then that instead of grasping that lever he is proposing to just crook his little finger around it.

He endorses the tax working group's analysis of the problems: we tax
all the wrong things from the standpoint of growth, the system is riddled with unfairness, there is a hole in the tax base around property and the system's longer-term sustainability is at risk.

But he then goes on to rule out most of the options the working group put up for addressing these shortcomings by expanding the tax base and lowering rates: No land tax, no wealth tax on investment properties, no capital gains tax.

Some changes will nonetheless be made to the way property is taxed. On what these might be, John Key was silent. But of the options considered by the tax working group scrapping the depreciation deduction for buildings appears to be the only one left on the table.

There is no mention of even the desirability of aligning tax rates. And no mention of company tax at all.

An increase in GST remains under consideration but would require compensating cuts to income tax across the board, always an expensive option.

And the Government will not raise GST, he said, unless it "saw the vast bulk of New Zealanders better off".

It will be interesting to see how it proposes to do that when about 40 per cent of us pay no tax, net of transfer payments, and no major changes to Working for Families are proposed either.

Business is unlikely to be blown away by the boldness of the vision outlined in today's agenda-setting speech.

Indeed the average thistledown would not be blown away.

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