The Government has continued to spout the line that its tax ‘switch’ in 2010 was ‘broadly revenue neutral’.
This is an outrageous claim. It was nowhere near revenue neutral.
According to the IRD’s 2011 Briefing to the Incoming Minister (BIM), Government tax-take dropped from 35.1% of GDP to 31% of GDP during National’s first term. In a time of high borrowing, and a projected $12 Billion deficit, a drop in the tax base of more than 10% is plain irresponsible. Falling revenue means we don’t have the funds to support our schools and hospitals. Either that, or we have to borrow to fund them. This ain’t good.
The ‘broadly revenue neutral’ claim has been relegated to the status of a bad joke by the honesty of the Government’s own tax officials. In their 2011 BIM, officials made clear that only about 1.5% could be blamed on the Global Financial Crisis. About 2.5 percentage points of its 4% revenue drop can be directly explained by Government policy changes (ie the 2010 tax package).
To use the phrase ‘broadly revenue neutral’ in this context beggars belief. It is an abuse of the English language.
How ‘broad’ can ‘broad’ get before it the Finance Minister will admit it is simply *not* revenue neutral?
Blaming the hole in the accounts on the Canterbury earthquakes or the Global Financial Crisis is no longer a credible excuse for the $12 billion deficit.
Though not widely reported, this drop in tax-take is big stuff. It is likely to have wider consequences. Sadly, it fits with the picture of a government bereft of a credible plan for managing our economy.