Deferred tax cuts by National

The Government remains committed to lower personal income taxes. 

The planned second and third tranches of tax cuts, which were due to take effect on 1 April 2010 and 1 April 2011 respectively, have been deferred to avoid further increasing debt. 

Even with the other debt reduction measures in Budget 2009, the Treasury is forecasting large budget deficits for 2010 and 2011. This means the Government would have added to its already considerable debt to fund the planned second and third tranches of tax cuts.

This has been a difficult decision. But, on balance, the Government has decided to prioritise safeguarding entitlements, improving public services and reducing debt. 

Tax cuts will be assessed to consider whether they are affordable, as part of future budget processes. 

The Government's first round of tax cuts delivered on 1 April 2009 is not affected. It left around $1 billion a year in the pockets of 1.5 million New Zealand workers. These tax cuts were fully funded from other policy changes rather than through borrowing. 

By deferring the second and third tranches of the tax cuts, the Government will save around $900 million a year from 2011/12. 

The Government’s medium-term goal remains to align and reduce the top rate of personal tax, trust, and company tax rates at a maximum rate of 30 per cent. 

The decision to defer the tax cuts will be included in legislation introduced today.