Greens challenge English to back up tax switch neutrality claim

The Green Party is challenging Finance Minister Bill English to produce evidence to back up his claim made last night that the 2010 tax cuts are fiscally neutral.

Five days ago, in answer to a parliamentary question, Mr English said it was not possible to calculate the fiscal impact of the 2010 tax changes. The Green Party has released new analysis, undertaken by the Parliamentary Library, that shows the Government has had to borrow approximately $2 billion dollars to fund the tax cuts.

"If Bill English has evidence that shows his signature 2010 tax cuts are fiscally neutral, then he should release it," said Green Party Co-leader Dr Russel Norman.

"I'm surprised by the Finance Minister's certainty about the fiscal neutrality of the 2010 tax cuts as five days ago, when he answered a parliamentary question, he replied that calculating the cost of the 2010 tax changes 'cannot be done'.

"It was odd that Mr English replied that it 'cannot be done' when the Government's own accounts show the net cost of the tax cuts for the first nine months of the financial year was $1.1 billion. I suspect Treasury can run the numbers and they would soon confirm that the 2010 tax changes have been fiscally negative.

"The clear, publically available evidence is that National's signature tax switch was not fiscally neutral and is now costing the Government a considerable amount of money in additional borrowing."

Parliamentary Library research shows that the cost of the tax cuts in the 2010 tax package was about $2 billion greater than the increased revenue from GST over the 18 months to the end of March 2012. Not included in the estimate was the cost of compensating people for the increased GST, which was projected in Budget 2010 to cost $1 billion to 2012. Also not included was the fiscal impact of depreciation measures as it was not known but projected in Budget 2010 to raise $1.1 billion.

"It is not sufficient for the Finance Minister to say our numbers are wrong. He must produce some evidence to back up his claim that the 2010 tax cuts for those on higher incomes have been fiscally neutral," said Dr Norman.

"I suspect the reason he isn't producing any evidence is because it would show that the tax switch was fiscally disastrous, and that all the evidence points towards a very poor and costly policy decision."

Link to Green Party Parliamentary Written Question:
http://www.greens.org.nz/misc-documents/parliamentary-written-question-2010-tax-cuts