In what is widely viewed as an attempt to swing public opinion before the upcoming election, the government delivered their long-awaited personal tax cut package Wednesday.
Full time workers will receive an extra $12 to $28 in their pay packet each week, alleviating some of the stress and strain caused by the huge hikes in commodities over the last year. Grocery prices have skyrocketed up 13.1 percent for the year to August, while fruit and vegetables rose 19.1 percent.
The personal tax cuts are to be delivered in three phases, the first taking effect October 1, and further cuts are scheduled for April 2010 and April 2011. At full implementation, approximately a quarter of the tax will be cut for those at the current full-time minimum wage, by one sixth at the average full-time wage, and by about one eighth at $80,000 a year.
Cameron Brewer, head of the Newmarket Business Association is doubtful the cuts will make any real impact.
“The cash registers will hardly be ringing long and loud given the tax cuts are worth between $1.71 and $4 per day for each New Zealand employee,” he said in a release.
“I don’t think shopkeepers across the country will be bracing themselves with anticipation. While the tax cuts are a help to households, I don’t think we'll see any demonstrable spending changes. Any wage and salary gains will be quickly absorbed when you consider recent inflation on the likes of food.”
There is some speculation that the proposed tax-cuts may be a repeat of the tax cuts that were promised before the 2005 election but never materialized.
“The three phase tax cut package is locked into place by law,” Finance Minister Dr. Michael Cullen said in a press release.
Although the tax cuts are welcomed by many New Zealanders it has brought up the question whether the country can afford additional spending during the current international turmoil.
“I am confident that the Government of the United States will soon reach an agreement to restore more confidence in global credit markets. It is vital to the world economy, and to New Zealand’s economic outlook, that confidence be restored,” Dr. Cullen said.
National Party and opposition leader, John Key, said New Zealanders had been over-taxed, and should receive tax cuts yearly. National will be announcing its own tax-cut program next week.
