Video: Taxation (Business Tax Measures) Bill—Fiscal cost of initiatives

Parliamentary Question Time February 12, 2009 6. Hon DAVID CUNLIFFE (Labour"”New Lynn) to the Minister of Finance: What is the fiscal cost of those initiatives in the Taxation (Business Tax Measures) Bill, which were not part of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill introduced by the last Government? Hon BILL ENGLISH (Minister of Finance) : The fiscal cost of the new initiatives in the Taxation (Business Tax Measures) Bill that the member refers to over the remaining 2008-09 year and the 2009-10 year is $355 million, and the fiscal cost over the next 4¼years is $69 million. Hon David Cunliffe: Is the Minister aware that under the Labour Government policy, use-of-money interest rates would have reduced to a reciprocal 4.66 percent by now, under half what he is planning to charge; and why does he continue to punish small businesses in the current economic conditions? Hon BILL ENGLISH: That is another one of the fairy tales that Labour was telling during the campaign. That was an announcement made during the campaign, but for which there was no funding. If we added up all the promises that the Labour Government made against the Budget allocation that it said it would stick to, they would have blown the lid off it. Peseta Sam Lotu-Iiga: What is the fiscal cost of the tax initiatives announced as part of the small-business relief package? Hon BILL ENGLISH: The fiscal cost of the whole package is $484 million over the next 4¼ years. The main measures in it are a reduction of use-of-money interest, which has a cost of about $70 million, and removing the uplift on provisional tax payments that are due in May this year, which means that about $0.25 billion will stay in the bank accounts of small and medium enterprises. Of course, over the next 2 or 3 years that will be recovered by the Government. Hon David Cunliffe: What, according to the current formula, would the use-of-money interest rate be as of April this year if the Minister had not announced his plan to move the rate to 9.73 percent? Hon BILL ENGLISH: I cannot tell the member that off the top of my head, but I can say his naive belief that because Labour said it would do something there was actually any money or any plans to do it, is nonsense, and that applies to about a hundred things it announced in the last 12 months. Peseta Sam Lotu-Iiga: How does the small-business relief package benefit the economy? Hon BILL ENGLISH: I am pleased the member asked that question. It will benefit the economy in two ways. First, it will provide some short-term stimulus to businesses by, for instance, leaving $0.25 billion of provisional tax cash in their bank accounts. Second, it also achieves longer-term gains, as the Government is succeeding in doing with regard to many of its decisions, in that it reduces compliance costs and will help to build business confidence, so that as this economy comes out of recession businesses will invest and employ. That is how we will replace the jobs that are lost over the next few months.