Cullen Unwilling To Share Fiscal Surplus Through Tax Cuts

by Mary Swire, Tax-News.com, Hong Kong

18 October 2004

New Zealand’s Finance Minister Michael Cullen, last week ruled out using some of the government’s fiscal surplus to provide across the board tax cuts, although he indicated that “sensible” tax reforms may take place.

Acknowledging that the government’s NZ$7.4 billion surplus for the year ending June 30 gave him “some room to manoeuvre on the tax policy programme," Cullen nevertheless told the Institute of Chartered Accountants that he is “not prefiguring across-the-board tax cuts.”

"This government will not put future New Zealanders into debt by chasing some illusory nirvanas,” declared Dr Cullen.

The Finance Minister is keen however, to set about reforming the complex laws surrounding the savings industry, although he stressed that he was not interested in providing tax concessions to encourage saving.

"I am attempting to reduce distortions in the area, rather than increase them," he explained.

For Cullen, one “imperative" in this area is the removal of capital gains tax on savings through actively managed unit trusts and super schemes, as it is not levied on individual investors or passive funds.

“This seems both unfair and inefficient…because it represents an implicit tax on the use of institutional savings," he noted.

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