The National Government's economic mismanagement has led to a widening budget deficit with no apparent gain in sight, the Green Party said today.
Treasury numbers out today show that the overall operating deficit for the six months to the end of December was $9.4 billion, 38 percent worse than forecast before the election. Core Crown tax revenue was $400 million lower than forecast and Treasury advise corporate tax revenue was expected to deteriorate further over the year.
The Government’s vaunted tax switch has simply left to a big hole in their books for no apparent gain.
"The National Government's centrepiece tax shift isn't delivering the kind of resilient, export-focused economy they'd promised; it's just leading to more Government debt," said Green Party Co-leader Dr Russel Norman.
"John Key's way of addressing self-inflicted falling tax revenues has been to increase Government borrowing, cut core Government services, and sell state assets.
"This is not a strategic way to run a budget or an economy. It's reactive economic management and our economy will be structurally no better off when the global recession ends.
"The Government's vaunted tax switch has simply left to a big hole in their books for no apparent gain."
Inland Revenue's Briefing to the Incoming Minister has highlighted that current Government policy was largely responsible for a dramatic 4.1 percent decline in tax revenues as a percentage of GDP. This compares to a 1.5 percent decline throughout the OECD over the same period. Inland Revenue also questioned whether decreasing the corporate tax rate had attracted new investment.
"Inland Revenue have fairly questioned the Government's race to lower corporate tax rates when there is little evidence to show that this tax cut has been matched with increased foreign investment," Dr Norman said.
"The same has happened with personal tax cuts which went mainly to those on higher incomes. Personal tax cuts did little to either stimulate the economy when it needed it or lead to increased levels of investment into productive enterprise.
"A capital gains tax and a levy on the commercial use of water are smarter alternatives to government service cuts and asset sales.
"A tax on capital gains (excluding the family home) and a water levy would move the economy onto a more productive footing while stemming widening Government deficits."
Financial Statements of the Government of New Zealand for the Six Months Ended 31 December 2011:
IRD Briefing to the Incoming Minister:
The Green Party's alternative plan for our economy: