19 May 2010

Key clarifies: the rich will pay more tax, not less

8:15 pm on 19 May 2010

The Prime Minister has signalled that the rich will end up paying more tax, not less, after tomorrow's Budget.

John Key was responding to Opposition criticism during Parliament's question time - criticism levelled at him because he had said that the wealthy would do best out of tax cuts expected in the Budget and that people should not be envious of them for that.

Mr Key now says that he was referring to skilled people, such as engineers, doctors, scientists and others - who all pay the top marginal rate - and that the Budget WILL target the very wealthy, who will end up paying more tax.

Earlier, the Green Party accused the Government of going soft on tax avoidance so that it could justify cutting the top rate of tax for the wealthy.

Co-leader Russel Norman said plans to cut the top rate would simply reward those who avoid paying their tax.

And Labour Party leader Phil Goff said low-income New Zealanders were not jealous of those who earn more, they just wanted a fair go for all.

Overall package 'will make system fairer'

Mr Key rejected those accusations, saying that tax avoidance would be dealt with in the Budget. The most likely way this will happen is through changes to the way property investments are taxed.

The overall tax package would make the system fairer, Mr Key said, and was also intended to help lift New Zealand's economic performance. He defended the expected cut in the top income tax rate, saying it was a way of trying to keep skilled people in the country.

The Government is expected to cut the top rate of tax from 38% to 33%, as well as cutting tax rates for lower-income earners. GST is also expected to be raised from 12.5% to 15%.