| | |
Homepage | login or create an account

Tax Cuts From Tomorrow, But What Will National Offer?

Fuseworks Media
Fuseworks Media

By Ian Llewellyn of NZPA

Wellington, Sept 30 NZPA - Workers will be better off by between $12 and $28 a week due to much debated tax cuts coming into effect from tomorrow.

The first tax cuts in a decade come as the world economy is thrown into turmoil with the Unites States Government grappling with the credit crisis.

The local economy is also struggling with confirmation last week that New Zealand had been suffering a mild recession through the first half of the year.

Labour is hoping the cuts tomorrow will stimulate the economy and help it start growing again in early 2009.

Labour has legislated for tax cuts again in 2010 and 2011 which will eventually increase take-home pay by between $22 and $55 a week.

National has yet to unveil its tax cut package but has promised more tax cuts in April next year.

How much will be on offer and how the cuts will be designed is expected to be revealed in the first week of the formal election campaign, though some have speculated it could be as early as next week after the Government opens the books on Monday.

National leader John Key has indicated the cuts will be in the region of $50, at least doubling Labour's offering.

Political debate in the past few years has centred over what is affordable.

National has accused Finance Minister Michael Cullen of not cutting taxes when they were more affordable and only moving due to political pressure.

They point to Dr Cullen reneging on his pre-2005 election promise to index inflation tax thresholds in 2008 as evidence of his reluctance to cut taxes.

National's finance spokesman Bill English said today the cancellation of the so-called chewing gum taxes came when the economic weather was less stormy than it is now.

Mr English says Labour's inability to rein in spending means Dr Cullen is likely to follow his past record and cancel tax cuts again if re-elected.

Labour has legislated for the tax cuts already and it is difficult to imagine a future Parliament cancelling them.

Dr Cullen in turn has accused National of being irresponsible and says its tax cuts plans are likely to lead to either increasing government debt or cuts to social spending.

Tomorrow's tax cuts will give some mild relief to households who have been struggling to meet higher food, power and petrol costs.

Those workers with children will get an additional boost from a 5 percent increase in the Working for Families package.

This had been due to come into effect next April, but was brought forward due to the recent economic turmoil and increasing prices.

There has also been some assistance for those with mortgages with the Reserve Bank cutting interest rates.

Further cuts this year are looking increasingly likely as the fallout from the international credit crisis widens.

However, the crisis also means the fall in interest rates due to the Reserve Bank's actions is likely to be dampened as banks find it more expensive to borrow money themselves.

NZPA PAR il gt

About : money

Find the latest money news and 'how to' guides on Guide2Money.

Ask our researchers your personal finance questions.

Your Questions. Independent Answers.