During the Corporate Tax Update Forum held in Auckland this week, Parliamentary undersecretary John Wright revealed that raising the top personal tax rate to 39 per cent for people earning in excess of $60,000 will net the government a cool $270 million for the year to June 2001, which is $33 million more than first predicted.
'I appreciate that this has not been a popular measure with audiences like this one. I accept that it has generated the need for considerable buttressing legislation. But Labour had announced before the elections its intention of raising the top rate and it was a commitment,' said Mr Wright. He added that the additional monies will help to fund the abolition of interest on student loans as well as increasing the rate of superannuation from 60 to 65 per cent of an average, weekly wage.
According to Mr Wright, taxes gained from the corporate sector are also doing well as they have shown an increase of 12 per cent in the year to June 2001, bringing in $484 million. In addition, manufacturing tax increased 34 per cent totalling $931 million. The biggest growth, however, took place among the agriculture, forestry, fishing and mining industries which raised taxes to the tune of $178 million representing an increase of 96 per cent on the previous year.
In support of the higher taxes, Mr Wright claimed: 'These numbers indicate that the tax system is doing its job. It is raising the funds to support our social infrastructure. A low company tax rate is not necessarily the quick-fix panacea that some would have it to be. The reality is more complex. For a start, it is important to look at the fiscal implication of lowering the rate.' He said that a 1 per cent decrease would leave the Government about $125 million a year down. 'New Zealand would have to reap clear tangible economic benefits from forgoing this amount of revenue. The fiscal costs are very certain, but the benefits are less so.'
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