Phil Goff, Labour Party leader, announced on February 22nd that a two week protest bus-tour will be launched on February 28th to fight the possibility of a the GST rate being raised to 15 percent. He claimed that the tour’s aim was to visit New Zealand communities and “to show them just how unfair John Key’s plans to hike GST are.” The protest plan also includes several visits to local community groups like Grey Power, Citizen’s Advice Bureau, and any local budgeting services.

While introducing his protest-bus idea, Phil Goff claimed that the National Party had not campaigned with the promise that it would raise GST, and the “…Labour [Party] is going to campaign against it.” He went on to say that a GST increase is unfair and would hurt middle and low income earners across the country, while not delivering for families.

Opposition party members have already commented on the proposed bus tour, noting that while Phil Goff is protesting the GST rise he has not yet stated that his party would lower it if it came to power in the next election. New Zealand Prime Minister has stated that he is not concerned with the tour, and believes that most New Zealanders are reserving their opinions on the increase until they see the entire tax reform package in May.

Photo by Policy Network

Bill English put a blunt message forward to New Zealand, the time of tax cuts has passed. On the 2nd of August at National Party conference in Christchurch, Bill English stated that “There is no possibility of just cutting taxes.”

Bill English said that the government is projecting deficits of up to NZ$12 million, which leaves no room for tax cuts. There has already been an effective cancellation of the National Party’s promised personal tax cuts.

Further, Bill English commented on the upcoming “first-principals” review of the Australian tax system, and not wanting to be caught out with previous tax engagements by some possible innovative change that might be made. Some speculated that these blunt tax statements might just be preparation for some radical tax announcements in coming months.

The move to counter the effects of the tax cut inflicted deficit on the Government budget will be made in the form of a suggestion by the National Party to the Remuneration Authority.

Ironically John Key’s wealth has been valued at over NZD$50 million. His current Prime Minister salary is at $393,000. He is reputed to donate a significant portion of this to charity.

On the 10th of December parliamentary debate ended with the Taxation (Urgent Measures and Annual Rates) Bill passing, with 68 votes for and 52 votes against. Along with confirming in law changes to personal taxation levels and income brackets for the next three years, the Bill alters the way in which KiwiSaver contributions are made.

Under the newly passed laws KiwiSaver contributions are cut from an option of 4% or 8% to 2% of an employees weekly wages. Further changes include the employers contribution now being set at 2%, and the concept of an employers tax credit for the contribution being removed.

Further confirmed changes include the scrapping of the $40 fee subsidy to each contributors account. Originally aimed at alleviating the effect of scheme provider fees on savings, the scrapping of the concept may result in balances on low-activity accounts lowering when fees are higher than input.

A dollar-for-dollar credit has been passed for low-income earners who contribute less than the government’s $20 subsidy each week, meaning that low income earners will receive a the full $1040 subsidy entitlement regardless of pay.

KiwiSaver’s $1000 kickstart incentive, mortgage diversion and first-home withdrawal provision are still intact.

As it stands at this moment in time, the proposed retail-banking guarantee scheme does not extend to funds attained from international wholesale markets. According to Michael Cullen the government has been looking at the possibility of making this a reality, although since the New Zealand banking system was not undergoing any sort of crisis at the moment, they have to time to properly create and implement appropriate measures.

Concerns arise with the proposed scheme whereby it would seem that it would give virtual monetary guarantees to offshore stakeholders, effectively transferring the benefit out of New Zealand. While he acknowledged the difficulties, Michael Cullen also did make the point that there is a necessity for the New Zealand government to implement some measures to protect the New Zealand financial sector.

Jeanette Fitzsimons, leader of the Green Party, confirmed her party’s support of the scheme the following. She also claimed to want to see a higher collaboration between parties within Parliament in the support of this scheme. Though she did mirror the concerns of Michael Cullen, with the possibility of such a large benefit being exercised exclusively by overseas bodies.

National Party leader, John Key also supports the proposal, although with much less trepidation and more enthusiasm than Jeanette Fitzsimons. His reasoning, according to statements issued on the morning of the 20th of October, being that countries like Australia who are already implementing similar systems will find it proportionately easier to access money.

Since the announcement of their tax plan, the National Party has been receiving a lot of criticism from both the public and groups like the New Zealand Manufacturers and Exporters Association, along with business relying on their research and development tax credit.

Paul Hutchinson, in a talk in Palmerton North, said that the research funded by the tax credit is not always of the highest standard, and that in the end, the tax credit has a “variable effect” and that firms would often reassign some of their previously followed activities as “R&D” to attain a credit. He went on to say that National plans to make sure that investment in science is of the highest level. The National Party plans to achieve this by putting $315 million in funding to universities and Crown Research.

Paul Hutchinson also revealed that National plans to abolish the current Fast Forward Fund for agricultural research and replace it with incentives for agricultural innovation.

Since the announcement of their tax plan, the National Party has been receiving a lot of criticism from both the public and groups like the New Zealand Manufacturers and Exporters Association, along with business relying on their research and development tax credit.

Paul Hutchinson, in a talk in Palmerton North, said that the research funded by the tax credit is not always of the highest standard, and that in the end, the tax credit has a “variable effect” and that firms would often reassign some of their previously followed activities as “R&D” to attain a credit. He went on to say that National plans to make sure that investment in science is of the highest level. The National Party plans to achieve this by putting $315 million in funding to universities and Crown Research.

Paul Hutchinson also revealed that National plans to abolish the current Fast Forward Fund for agricultural research and replace it with incentives for agricultural innovation.

The National Party’s tax cut proposal is underpinned with two main points, one being that it is much more beneficial for some income bands, and the other is that it is somewhat easier on the New Zealand budget than that of the Labour Party.

The savings in the New Zealand budget, while still maintaining tax cuts is possible due to National’s decision to scale back the required Kiwisaver contribution from 4% to 2%. While this enables employees to take more of their pay cheque home, it also frees up the Government’s mandatory contribution. Similarly the mandatory employer contribution is scaled to 2%. The National Party Tax Cut plan is also doing away with the current Government’s 15% tax credit for business doing research and development.

The National Part proposes to have three rounds of tax cuts, each on the 1st of April, in 2009, 2010 and 2011. For $0 to $14,000 earners, the rate will stay at 12.5% throughout. $14,001 – $50,000 earners will see a rate of 21% in 2009, 2010 and a drop to 20% in 2011. The $50,001 – $70,000 band will see 33% throughout the three periods. Lastly, the $70,001 and over earners will be at 38% post the 2009 cuts and at 37% post 2010 and 2011.

Those on a salary of over $24,000 who are not receiving any other benefit will now be eligible for a new tax rebate, entitled the Independent Earners rebate. Between $24,000 and $44,00 will receive a rebate of $10 per week until the 2010 cut date, where it will rise to $15. Each dollar of income above $44,000 will see a decrease of 13 cents from the rebate, effectively cutting it off at $48,000 and later at $50,000 in 2010.