Caygill offers tax advice

Press, 18 March 1989, Page 35

Caygill offers tax advice

By PATTRICK SMELLIE in Wellington Reducing taxes to create compensating economic growth and replace lost revenue was dishonest and did not work, said the Minister of Finance, Mr Caygill, in Parliament. “You cannot cut out taxes on the basis that that reduction in tax will lead to such growth as to replace the revenue,” he said.

He was answering questions from the Opposition spokeswoman on finance, Miss Ruth Richardson. His comments are in contrast to the view of the former Minister of Finance, Mr Douglas, who advocated lower taxes as a stimulus to economic growth. Mr Douglas’s perscription, however, was also dependent on major spending reductions.

In answer to another question from Miss Richardson, Mr Caygill also said that tax flows this month were going

well. Financial market observers agreed, saying flows of provisional and terminal tax to the Government this month had so far exceeded $1.5 billion. This was the upper end of expectations, and indicated Budget targets were likely to be met, unless unexpected expenditure items appeared. The main threat to the Government’s Table No. 2 deficit projections at this stage appeared to be unforeseen large currency realignments. These are never forecast in the Budget, and have no cash impact on the Government’s accounts, representing a book entry based on the effect of exchange rate movements. This could provide public relations problems for the Government, but would have no impact on government borrowing requirements or interest rates, they said.