Michael Cullen Delivers Pre-Election Budget

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

27 May 2002

New Zealand's Finance Minister, Dr Michael Cullen used his Budget Speech on Thursday to hit out at those calling for tax cuts, announcing that the government would not take a 'bold step in the wrong direction' by cutting taxes in the manner of previous administrations.

Although the opposition National Party has announced that it will lower the top corporate and personal income tax rates if successful in the forthcoming general election, Dr Cullen argued that years of tax cuts throughout the 1990s had 'failed to lift the sustainable growth rate', and condemned New Zealanders who portray the country as having high taxes, to the detriment of the nation's image overseas.

'New Zealand is highly unusual in having very little by way of social security taxes or levies on either individuals or businesses,' he explained.

The Finance Minister said on Thursday that although lower tax rates for foreign investment have been ruled out, a new body will be created to attract such investment, and the possibility of a time limited exemption on the overseas earnings of new migrants is still being considered.

However, despite Dr Cullen's impassioned defense of the relative lack of business-friendly measures in last week's budget, commentators are still far from impressed, arguing that this finance bill is aimed solely at cementing Labour's popularity in the run-up to the general election.

Analysing the 2002 budget in the New Zealand Herald last week, Colin James observed that: 'What the looming election means is that ministers are under strict orders not to frighten the horses.'

He continued: 'If there are any bold new directions, or even adjustments in a more business-friendly direction from this government, they cannot come pre-election. Next year is the time to ask the hard questions. In the meantime, sit back and watch the politics.'

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