30 Sep 2010

Goff believes GST will swallow tax cuts

8:28 am on 30 September 2010

Labour says higher prices from the GST rise will swallow any extra money most people will get from paying less tax.

GST will rise to 15% on Friday, at the same time as income tax cuts take effect.

Government calculations show someone earning $50,000 per year will be better off by $12 dollars per week from the changes.

Someone earning $150,000 will be better off by an extra $74 per week.

Party leader Phil Goff says tax changes won't help the New Zealanders he has met who are struggling to pay their bills.

He says the economic recovery has stalled and now is not the time to raise GST.

However, Finance Minister Bill English says three quarters of income earners will pay no more than 17.5 cents in the dollar.

He rejects criticism from the opposition that the changes are unfair to those on lower incomes.

Mr English says that although it will not be a windfall, most people will see that their after-tax pay does go up a bit.

However, he says the scope for any further income tax cuts is limited, and they would need to be self funding.

GST introduction

The Goods Services tax was originally introduced on 1 October, 1986, at 10%. PAYE rates were cut at the same time.

GST was raised to 12.5% on 1 July 1989.