MEDIA RELEASE: PREFU Shows Now's Not Time for Tax Cuts

The time's not right for tax cuts - that's clear from Treasury's Pre-Election Economic and Fiscal Update (PREFU) out today - says the Better taxes for a Better Future campaign.

PREFU figures show the Government's tax take down on forecasts, falling $2.9 billion short of expectations, caused by a slowing economy and increased unemployment.

"Now is not the time for tax cuts, because it's irresponsible to further weaken the government’s financial position if revenue is already deteriorating," says Better taxes for a Better Future spokesperson Glenn Barclay.

"Tax cuts also run the risk of fuelling inflation if not managed properly."

Glenn Barclay says that, given lower-income people will be facing increased hardship as a result of an economic downturn, it will be essential to maintain public services - which rely on a consistent source of revenue.

"Some of the tax cuts being proposed by political parties are likely to have a devastating effect on public services. At a time of reduced revenue, our low debt - at around 20% of GDP - would enable us to borrow to help maintain services."

Glenn Barclay notes that while it might not be the best time for tax increases generally, if we had a greater range of taxes available to us than we do currently, then government revenue might be better protected.

For example, a land tax would not be as susceptible to economic fluctuations as GST or company tax - and a targeted tax, such as an excess profits tax, could enable the government to tax particular companies who are making unusually large profits, despite the economic situation - or because of it.

"We know that some companies have been doing unusually well - even in the current, difficult environment and recent reports suggest that company profits have been contributing to inflation, so an excess profits tax could be a legitimate tool to introduce at a time of inflation," Glenn Barclay says.