Phil Goff is dismissing claims the consumer will suffer if farmers have to pay for Research and Development tax breaks.
The Labour Party leader announced yesterday he plans to bring back the credits which would cost $800 million over five years. They would be paid for by farmers entering the Emissions Trading Scheme (ETS) two years early.
Goff told Newstalk ZB this morning that people are paying more for dairy products because international prices are up and because they are indirectly subsidising farmers.
"It's not unreasonable for them to pay their share," Goff said.
As well as paying through power and petrol, consumers are taking a hit through farmers not being in the ETS scheme, said Goff.
Farmers are getting their highest prices in years and are "doing very well at the moment", the Labour leader said.
Every other sector pays except agriculture, he said, adding: "I need that money to get growth in the economy."
Straight swap
A new tax credit of 12.5% would cost an average $160m a year but would help get the economy moving again, Goff said in his keynote speech to the Labour Congress in Wellington yesterday.
"It's estimated that areas like health and clean technology could boost our economy by up to $22 billion a year. That kind of potential must be nurtured and encouraged," he said.
He said the cost was essentially a "straight swap" of lost revenue and income from the ETS and was an example of how Labour would pay for every promise it made.
However the move prompted the government to say prices of dairy products would be pushed up as a result.
"It's not fiscally neutral," Prime Minister John Key told TV ONE's Breakfast this morning.
"They say it will cost $800 million. On their own calculation they used going into the last budget&it actually cost $1.55 billion. So where's the other $800 million," Key queried.
Key said the consumer would probably end up paying extra.
"So what happens when the additional costs go on farmers, are they going to pay more? Not necessarily. Actually they'll just pass it on.
"The people watching this show will pay more for milk, more for meat, more for butter, more for cheese."
However Goff hit back Key's comments, saying it's the "biggest lie he's heard yet."
Meanwhile, a tax expert believes New Zealand should consider a tax credit for Research and Development as it has worked overseas.
Deloitte tax partner Aaron Thorn said most of New Zealand's trading partners do have some form of R and D tax incentive. And he said the reviews by those countries have found on a net basis their economies benefit.
Thorn said if New Zealand doesn't have a research tax credit, it is at a competitive disadvantage.
Minimum wage
Goff has also hit back at claims that Labour's plan to increase the minimum wage to $15 an hour if his party wins the election will add more young people to the dole queue.
Goff said he doesn't accept figures from National which indicate the increase would result in the loss of jobs.
He said Labour when increased the minimum wage it resulted in the lowest level of unemployment in 20 years.
