Treasury largely in line with Ministers, says Cullen

The Treasury paper which suggested tax cuts is mostly in line with Government policy, Finance Minister Michael Cullen said today.

Treasury's briefing to the incoming government called for a reduction in the 33 per cent and 39 per cent personal tax rates, the 33 per cent company tax rate and high effective marginal tax rates.

The briefing said high personal and company tax rates were likely to have a negative impact on growth.

Dr Cullen has rejected the call as an "ideological burp" but said that, other than the advice on tax cuts, the briefing was largely in line with Government policy.

"We also, of course, have a review under way on corporate taxation. I think the issue there is do we scrimp and save around the edges and have very marginal changes or do we look at broader restructuring in the area of corporate taxes," he told National Radio.

"If (cutting) the corporate tax rate is really what will drive stronger growth, then changing by one or two or three cents is not going to make a difference given where we're situated in the world."

Dr Cullen said that when pushed on how it would meet its "ambitions", Treasury suggested such things as cutting superannuation and making students pay more for their education.

"Well those aren't the policies that we got elected on, and nobody elected Treasury," he said.

Tax was a key election issue and the National Party yesterday said Treasury's advice vindicated its push for tax cuts.

Asked whether he felt Treasury officials might have written the paper thinking National finance spokesman John Key would be finance minister after the election, Dr Cullen said he had told officials he thought there were two versions "and they'd given me the wrong one".

Mr Key today said Dr Cullen was proving he was out of his depth.

"I think it's embarrassing, actually, for the Government to be getting up there and arguing their number one objective is to get into the top half of the OECD, arguing year after year that they're committed to a high-growth economy," he said.

"Let's actually have a look at what they done ... in six years they've added billions of dollars worth of taxes, they're taxed absolutely everything and despite all the best advice, which Treasury backs up with international evidence, the number one thing they're saying is 'no tax cuts'."

- NZPA