7 Dec 2011

Taxing rich not answer to closing wage gap - English

2:56 pm on 7 December 2011

Finance Minister Bill English says taxing the rich more heavily is not the answer to closing the gap between rich and poor in New Zealand.

A report from the Paris-based Organisation for Economic Co-operation and Development (OECD) says that among developed countries, New Zealand experienced one of the fastest increases in the gap between rich and poor from 1985 to 2008.


The OECD says increases in the goods and services tax (GST) and decreases in the top tax rate and benefit entitlements are to blame for the widening gap.

Spokesperson Ana Llena-Nozal says inequality in New Zealand was below the OECD average in the mid-1980s, but is now slightly above average.

Bill English told Radio New Zealand's Morning Report programme on Wednesday the Government now has the tax balance right, especially since it has closed loopholes in statutory tax.

Mr English said the focus now is on getting people off benefits and into jobs.

"We want a sound and comprehensive tax system - that's what we've got. No one in New Zealand is proposing significant changes to that in the long run. A focus on opportunity, educational achievement and economic growth is the best thing we can do to reduce inequality."

ACT MP John Banks also believes raising tax rates is not the answer to reducing the income gap, while United Future leader Peter Dunne also brushed off suggestions that taxes should be increased.

Labour leader Phil Goff told the programme the wealth gap had widened while National has been in government.

"We're seeing more unemployment, many more people on benefits. We're seeing tax cuts that have given hundreds of dollars a week - sometimes thousands of dollars a week - to the very wealthy, while people on low and middle-incomes have actually missed out."

Mr Goff says the gap and had begun to close under Labour previously.

Economists' view

Economist Gareth Morgan says New Zealand needs to examine whether it really is an egalitarian society and whether it is prepared to set a minimum level of income and wealth that people cannot fall below.

Mr Morgan told Morning Report the OECD report only looks at income and not at the disparity between those who own a home and those who do not.

Council of Trade Unions economist Bill Rosenberg says the report marks a turnaround from the sort of advice the organisation previously gave.