Revenue Minister Peter Dunne says the Government will be forced to look at how it can tighten the tax system if the global economy deteriorates further.
For the first time yesterday, Prime Minister John Key conceded he might have to drop plans to return the Government’s books to the black by 2014-15.
In his first major speech for the year, he said the slowing global economy and the European debt crisis had forced Treasury to cut the expected surplus to less than $500 million from the $1.5 billion tipped before the election.
If the outlook worsened before the May Budget, more may have to be done to return the books to surplus or the target dropped altogether.
Dunne this morning said a global recession would force the Government to look at plugging tax loopholes, clamp down on tax avoidance and ensure the system was coherent and consistent.
How things change. Just a month before the election Treasury openly scoffed at the naysayers doubting their insanely optimistic growth projections. And when Labour insisted they could raise revenue by cracking down on tax avoidance, the National government just laughed.
The [Labour] party believes it can raise $300 million a year in additional tax with new anti-avoidance measures, a forecast greeted sceptically in a number of quarters, including the Beehive.
Finance Minister Bill English said that figure was very optimistic. National had already pursued “the low-hanging fruit”, he said, by giving the Inland Revenue Department money to enforce tax rules on property investment which were expected to return $800 million a year.
With that done, “there isn’t a whole lot of easy revenue gains left there”, Mr English said.
Some people have complained that there wasn’t enough emphasis on policy during the election campaign – it was sidelined by the RWC and the teapot tape scandal. Given that the policies of the parties were costed predicated on Treasury’s economic forecasts – which discounted the possibility of a European debt crisis, an event that has been regarded as inevitable for roughly eighteen months prior to the election – it’s a damn good thing we didn’t all focus on ‘the policies’, because with the exception of asset sales, capital gains et al, they were impossible fantasies.