Today the New Zealand Government announced that they had a record surplus of NZ$11.5 billion for the 2005 and 2006 financial year. This amount was $2.5 billion more than the government expected to get, however $1.8 billion of the surplus was because of a change to the recording of the tax take.
However the surplus is now going to put more pressure on the government to put tax cuts on the cards. Both the Labour and United Future parties are reviewing cutting business tax. But the National party says that with the big surplus they can afford to cut both business tax and personal tax.
However finance minister, Doctor Michael Cullen, said the amount of cash available for tax cuts will be clearer in December.
John Key, finance spokesman for National, said: "The surplus makes a mockery of claims made by Michael Cullen before the last election that tax cuts were unaffordable and would put at risk core primary services. When surpluses are this enormous, any veiled hope the government had that it is not overtaxing people will rapidly evaporate."
Cullen said: "The Government's "robust" financial position was a firm base for the future, but it was not an indication of how much room he had for tax cuts or spending."
Phil O'Reilly, Chief Executive of Business New Zealand said: "The business tax reduction from 33 to 30 cents planned for April 2008 could be brought forward to April 2007. The last time the business rate was cut, in 1989, business tax revenue actually went up. In the decade before 1989, revenue averaged around $1 billion a year, while in the decade after, it averaged nearly $3 billion a year - in other words, revenue nearly tripled.
"It [tax] should be put to use in a way that truly benefits New Zealand," O'Reilly added.
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New Zealand Government announces record surplus