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Tax war breaks out in Parliament

Fuseworks Media
Fuseworks Media

Wellington, Sept 21 NZPA - Another tax war broke out in Parliament today and Labour MPs shouted "rubbish" when Prime Minister John Key said the vast majority of people would be better off when the October 1 cuts come in.

The row about the impact of the cuts has been reignited by the Government's move to start a nationwide campaign to explain the tax cuts, with MPs about to travel around the country.

Labour has been arguing since the May budget that with GST going up to 15 percent, also on October 1, and numerous other cost of living increases that have already happened or are in the pipeline, most people will be worse off.

Mr Key told Parliament he stood by his previous statements that the vast majority of people would be better off "because that is what the facts clearly show".

"Raising GST will increase prices by a touch over 2 percent, but that will be more than compensated for by income tax cuts and an increase in benefits, Working for Families, and superannuation," he said.

"Therefore it is plain for everyone to see that people will be better off."

Labour leader Phil Goff said rents were going up, along with rates, ACC charges and the cost of childcare.

"When he says that the vast majority will be better off, does he not really mean that the top 10 percent of taxpayers, who get 41 percent of the tax cuts, will be a whole lot better off but the bottom 20 percent of taxpayers, who get 2 percent of the tax cuts, will be a lot worse off?" Mr Goff asked.

Mr Key repeated his assertion that the vast majority of people would be better off.

"I point out that two-thirds of the entire tax cut package was applied to the lowest two rates," he said.

Finance Minister Bill English said Treasury had today released figures which showed that even when all forecast cost of living increases for the rest of the year were taken into account, real after-tax wages were forecast to grow because of the tax cuts.

"The advice shows that real after-tax average earnings...are set to increase another 1.2 percent in the three months to December 31, 2010," he said.

"The forecast rise follows an 8.7 percent increase in real after-tax average earnings since September 2008 -- this compares with a meagre 3 percent growth in the previous nine years."

Social Development Minister Paula Bennett said superannuitants would have more disposable income.

"Once the increase in prices due to the rise in GST is taken into account, a single superannuitant living alone will be better off by about $8.50 a week or about $445 a year," she said.

"Married couples receiving superannuation will get around an extra $42 between them in their fortnightly payments."

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