Key signals tax cuts in election campaign

  • 16/05/2016
Prime Minister John Key
Prime Minister John Key

The Government will almost certainly go into next year's election campaign promising tax cuts if it wins a fourth term.

Prime Minister John Key says tax cuts could be in the 2017 Budget, coming into effect after the election, or they could be later than that.

"Decisions haven't been made and I can't give you a start date," he told reporters today.

"But the obvious options are potentially in the 2017 Budget, or campaign on it."

Finance Minister Bill English last week said there wouldn't be tax cuts next year and repaying debt was a more important priority.

Mr Key says anything is possible, and the Government could put tax cuts in a mini-Budget in 2018 if it wins the election.

He thinks the Government would need to have around $3 billion to spend on tax cuts, because less than that wouldn't make them worthwhile and people would probably prefer the money was spent on health and education.

He's also indicating the tax thresholds could change, which would have the same effect as a tax cut.

"I think the pressure for tax cuts will grow over time, the average wage is getting closer to the top rate," he said.

Labour says Mr Key is being reckless.

"When people are being forced to live in cars and garages, when older New Zealanders are living in pain because they can't get operations, we are a long way from being able to afford these kinds of election bribes," said finance spokesman Grant Robertson.

"The Treasury says there may be a $1 billion surplus in 2018 - a $3b tax cut puts the Government $2b back in the red."

The ACT Party, which wants tax cuts, says Mr Key lacks credibility.

"It's ridiculous that politicians can jump up and down every few years and claim to be cutting tax, when they're really just correcting for inflation pushing earnings into higher tax brackets," said leader David Seymour.

"A more credible approach would be to cut tax now, with a promise to adjust tax brackets.