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How the new Government can accomplish tax cuts as NZ First clamps down preferred option

Publish Date
Tue, 14 Nov 2023, 8:30am
Photo \ Edward Swift
Photo \ Edward Swift

How the new Government can accomplish tax cuts as NZ First clamps down preferred option

Publish Date
Tue, 14 Nov 2023, 8:30am

The incoming Government faces three key approaches to achieve the tax cuts that newly elected Prime Minister Christopher Luxon has promised the nation will definitely happen, according to an independent tax expert.

The National Party had placed tax cuts at the centre of its winning campaign and initially promised to fund them through the Foreign Buyers' Tax on overseas investors snatching up multi-million dollar homes.

It's a tactic that grew increasingly less possible as the election results were finalised and NZ First was required as an additional coalition partner, a party that opposed National's idea of achieving the cuts from the start.

Talking to the Mike Hosking Breakfast today, tax expert Geof Nightingale answered the question of how National would accomplish its central election promise and keep its coalition partner happy.

"Well, you've only got three choices - one is extra taxes, which looks like it's being ruled out, the second is reducing expenditure and the third is to borrow, it's really that simple," he said.

Nightingale said the incoming Government had room to borrow and that the National Party's campaign fought pretty hard on improving fiscal management and getting the national debt under control.

He believed the savings were achievable.

He explained the latest Government budget aimed to collect $130 billion in revenue and spend $143b.

"So, there's your deficit there," he said.

"In 143b there is room to make savings, but that means there will be judgments about which programmes and services are cut, which is always difficult," he said.

Nightingale said the complications around rapidly adjusting costings to deliver the tax cuts would result in a good tax policy.

"Fiscal drag has been costing New Zealanders about a billion dollars a year for a decade - and more in the next four years," he said.

"It's the middle-income New Zealand that it changes - so it's good policy, but it's got to be funded. They gave us a fully funded package, which is now unravelling."

Hosking asked if National had its numbers right from the start when it came to the tax plan, which experts claimed didn't add up correctly.

Nightingale believed some of National's initial plan would have worked fine, but the party "overcooked" the revenue aspects.

"[It had] two problems - one is they have international treaty problems which would limit the countries we could apply [the Foreign Buyers’ Tax] to, and the first-year estimate wouldn't repeat in later years," he said.

"Buyer behaviour changes so, yeah, I think they overcooked it a bit."

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