Meitaki maata, Mr Chair. I want to actually pick up a couple of responses to questions, and, again, I thank the Minister of Revenue for responding to three of the questions we had before the dinner break. It was, in particular, a reference to his response around my questions around whether they are actively considering lowering corporate tax rates, to which the Minister responded that, yes, they accept that if you did, hypothetically, lower the corporate tax rate, that there would be a revenue loss, however, the Government’s focus on growth means that they would be looking to, as the Minister just said, grow the pie.
My question is around growing that particular pie. The Minister did reference the approved issuer levy as a potential growth policy which was in this bill. I’m a little bit perplexed as to why the approved issuer levy (AIL) would be a growth policy for this bill. If the Minister would like to just perhaps expand on why AIL is a growth measure, given that it’s something that’s currently there and it’s the difference between that and paying non-resident withholding tax.
In particular, based on Inland Revenue’s annual report—and I just want to thank Inland Revenue for their annual report, and just to assure them that people, particularly in Parliament, particularly on this side of the House, do actually read the annual reports when they come through. The last annual report for the last financial year said that Inland Revenue collected $18.7 billion worth of corporate tax.
Now, there has been some commentary around how, if you were to halve the corporate tax rate, currently at 28 percent, to, say, 14 percent or 15 percent to match, in particular, Ireland, which this Government has talked a lot about, about the growth in Ireland—never mind the fact that Ireland actually still has a capital gains tax, still has an inheritance tax, also gets eurozone subsidies, and also, because of geographics, they’re actually quite close to other countries, so hence that would, in some respects, pad some of their growth figures. Say, hypothetically, it was a $9 billion revenue loss if the Government decided to go down the pathway of Ireland with a 15 percent corporate tax rate, putting aside the economic rents argument and our concerns on this side of the House that, actually, you’d be giving tax breaks to banks, to power companies, to large sectors—good luck to the Government trying to get that particular motion through.
The question I have in particular, to the Minister, is because he said it’s about growth for the Government. As part of the Finance and Expenditure Committee, as part of the Budget Policy Statement and the Half Year Economic and Fiscal Update, we asked Treasury officials around their forecasts for growth, the forecasts which are in the Government accounts looking forward, and how much they’re expecting for annual growth, based on, basically, the Government’s forecasts.
I just want to quote it for the committee, particularly given the Minister’s comments earlier in the Chamber tonight. They said that they take into account that there has been a change between what they had estimated in the Budget Economic and Fiscal Update last year and then what was released in the half-yearly update was actually revised down, the growth figures. They said that it resulted in roughly 0.7 percent downward revision in the level of nominal GDP over four years. They said the reason why that is is because they’re taking into account not just things like lower interest rates but the lower exchange rate, recovering commodity prices, and the economy sort of returning to a stable operating level with lower inflation. That’s from the chief economist at the Treasury.
Basically, despite the Government’s narrative around going for growth, the actual accounts and the forecast looking forward actually shows that, yes, there is a small bump in recovery. Roughly, it goes up to about 3 percent in the next financial year, but then it drops back down to around 2 to 2.5 percent. When I asked the chief economist in particular, “Well, given the Government’s mandate and what they’re trying to do about going for growth, wouldn’t you have expected those forecasted growth figures to take into account fiscal decisions?”, basically, if I can quote, the chief economist said, “Yeah, we take a very wide range of evidence into account and a very wide range of literature and overseas evidence into account when we come to what our growth number is. So, yeah, the historical evidence and global trends around the world were the reason that we have slightly downgraded our longer term growth.”
Actually, what’s on the Government books is showing no matter what this Government’s mandate is around growth, the actual accounts for growth are affected more by what’s happening overseas, and it hasn’t really been taken into account in the fiscal policy by this Government. Therefore, my questions to the Minister are, working backwards from what we heard from the chief economist of Treasury, what we’ve heard from the Minister’s response tonight around that corporate tax, and how there may be a revenue loss if there was to be a cut in corporate tax: (1) where else in this particular bill do we see growth policies that will help to plug in that revenue loss; and (2) if their accounts are showing, actually, there’s not much growth to be predicted in the future, what is the Government doing in order to grow the economy in the way that we’ll have to plug potentially a $9 billion revenue loss? Again, I go back to my earlier question: is the Minister concerned around economic rents?