Key defends GST comments 

Source: NZPA

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As the Maori Party goes on the attack over plans to raise GST, evidence has emerged of the Prime Minister going back on his word.

In last year's election campaign John Key said: "National is not going to be raising GST."

However, now as Prime Minister, Key says he was responding to a specific question about whether he would raise GST to cover the deficits. And he says the answer to that remains the same - no.

But his defence doesn't wash with the Labour opposition which says he explicitly promised the nation he would not raise the tax.

And it's not only Labour applying pressure with the Maori Party considering quitting the coalition if GST goes up.

"We look at all options but in the meantime we're going to work very hard to get what our people want," says Te Tai Tonga MP Rahui Katene.

The government is promising that if GST increases, benefits, pensions and Working for Families payments would be raised to compensate and income tax would be cut for all workers.

"In the whole package there is the opportunity to ensure that people aren't worse off and of course we'd like to see a majority of people better off," says Finance Minister Bill English.

But National's sales job on the tax package has not been helped by comparisons with its election campaign stance.

Key says if National does "a half decent job of growing our economy" he is confident talk about having to raise GST and the top personal tax rate in five years won't be happening. "That's not on our agenda," he says.

The PM is adamant he hasn't broken a campaign promise and that increasing GST to fund personal tax cuts is an entirely different proposition.

"National wants to cut taxes, not raise taxes. We acknowledge the point that John Shewan (chairman of PricewaterhouseCoopers New Zealand) is making which is that there is a decade of deficits facing New Zealand unless we get it right," he says.

When Key was asked in 2008 if he would borrow more rather than pay taxes, he said governments would need to borrow in the difficult financial times.

"Shewan also floated increasing the top personal rate to 45%, I said no and I remain of that view. No to cover deficits. At that point we hadn't considered GST as part of a tax switch."

And he says National is not breaking its campaign pledge to not raise taxes. "We stand by that, we won't be raising taxes we will be overall lowering taxes."

Goff said it was clear cut case of Key going back on his word.

"Before the election he promised not to raise GST, yesterday he said he will...he has broken his promise it is as simple as that."

Goff says Key's defence is just "semantics".

Finance Minister Bill English says National has never contemplated raising GST as a revenue earning exercise.

"It's come to the fore now, a part of a comprehensive package to use a tax system to lift our economic prospects and lift people's incomes."

English says raising GST would be part of a package to inject life into an economy which is much worse than they thought it would be. He says they found themselves with a significant recession to deal with and a more lopsided economy than they had contemplated.

English says decisions on GST and other taxation measures are still on the drawing board for the May Budget.