John Key

Wellington, Feb 10 NZPA - Prime Minister John Key is defending his 2008 comment that he would not raise GST.

Labour leader Phil Goff today leapt on a 2008 election campaign statement that Mr Key would not raise GST to cover deficits, but Mr Key said the proposal to raise GST released yesterday was to allow for lowering taxes overall.

During the campaign Mr Key was asked to rule out raising GST to 15 percent to cover deficits.

"National is not going to be raising GST," he said.

"National wants to cut taxes, not raise taxes. We acknowledge the point that John Shewan (chairman of PricewaterhouseCoopers New Zealand) is making which is that there is a decade of deficits facing New Zealand unless we get it right."

Mr Key was asked in 2008 if he would borrow more rather than pay taxes, he said governments would need to borrow in the difficult financial times.

"He's (Mr Shewan) talking about having to raise GST and the top personal tax rate maybe in five years time and what I am saying is if we do a half decent job as a government at growing our economy I am confident that won't be happening, that's not on our agenda."

Today Mr Key said he was asked a specific question and gave a specific answer.

"He also floated increasing the top personal rate to 45 percent, I said no and I remain of that view. No to cover deficits. At that point we hadn't considered GST as part of a tax switch."

National was also not breaking its campaign pledge to not raise taxes.

"We stand by that we won't be raising taxes we will be overall lowering taxes."

Mr Goff said it was clear cut case of Mr Key going back on his word.

"Before the election he promised not to raise GST yesterday he said he will... He has broken his promise it is a simple as that."

Mr Key's defence was just "semantics".

Finance Minister Bill English said National had never contemplated raising GST as a revenue earning exercise.

"It's come to the fore now a part of a comprehensive package to use a tax system to lift our economic prospects and lift people's incomes."