"This is the most significant tax reform package in New Zealand for nearly 25 years. For ordinary New Zealanders, it will reward effort, encourage savings and help families get ahead," he said in his speech to Parliament.
The vast majority of people would be better off under the package, according to the figures provided by Mr English and Revenue Minister Peter Dunne.
The tax package would leave someone on the average wage of $50,000 about $15 a week better off and an average family on a household income of $76,000 would be about $25 a week better off, Mr English said.
The tax cuts come into effect on October 1, the same day as GST increases from 12.5% to 15%.
Mr English said that at all taxable income levels, the personal income tax cuts would more than offset the rise in GST. Low, middle and high income groups broadly received the same proportionate increase in disposable income.
As well as improving incentives to work, the package tilted the economy towards savings, investment and exports and away from unsustainable borrowing, consumption and over-investment in housing of the past decade.
That would help attract and retain skilled New Zealanders who might otherwise look for better opportunities overseas, Mr English said.
However, the Budget had its usual detractors, with Labour MPs labelling it a "swindle".
Labour finance spokesman David Cunliffe it was an "old fashioned" National Party Budget that rewarded the few at the expense of many.
"The tax cuts are unfair. A third goes to the top 5% and 15% goes to the top 1%. People in the middle and bottom will go backwards after inflation."
The upper income tax cuts were unaffordable, he said. The Government was borrowing an extra $450 million next year and more than $1 billion all up.
A tax switch was no substitute for an economic plan, he said.
The New Zealand Institute of Economic Research said the Budget ignored the "elephant in the room" of an ageing population.
"We're slowly turning the Government spending supertanker, but we've missed the boat on dealing with tough looming policy issues, such as the affordability of superannuation and healthcare," NZIER's chief executive Jean-Pierre de Raad said.
The tax package set the right course by rewarding work and enterprise instead of spending, borrowing, and tax dodging. It showed a firm resolve to constrain the growth in Government spending below the growth of the economy. That would help redirect resources to the most productive, competition-exposed sectors of the economy.
"But, ultimately, it is not a game-changing Budget. The tax-reform package will not set us on a new growth path. The Treasury forecasts the package will only add 0.9% to GDP over seven years. That is not going to be enough to catch up with Australia," he said.
Forsyth Barr savings specialist Damian Foster said the income tax reductions would encourage savings and KiwiSaver had now become central to that savings regime.
"This is a good opportunity for people to increase their KiwiSaver contribution rates from 2% to either 4% or 8%," he said.
Martin Lewington, head of Mercer in New Zealand, said the cuts would see a reduction in personal tax for all New Zealanders and simplification of the tax system.
"At present, New Zealanders need to earn more than $NZ200,000 before they pay less tax in New Zealand, compared with someone in Australia on the same income. The reductions in personal tax rates now mean the cross-over point is around $NZ45,000."
This was a significant improvement and would help New Zealand become more competitive in attracting international talent to work in this country, he said.
Deloitte Dunedin associate tax director Peter Truman said individuals earning more than $70,000 were big winners, with a $50 tax cut for every $1000 earned above $70,000.
Higher income earners were more likely to be saving a higher proportion of their income, meaning that the impact of the GST rate rise affected a lower percentage of the household budget than lower income earners.
"The Government is hoping that the reduced tax rate for higher income earners acts as a significant incentive to attract the highly skilled people to move to or stay in New Zealand. However, higher income earners will also be negatively impacted on the changes to abolish depreciation on buildings and to tighten up on the on the qualifying company rules," he said.
THE PACKAGE
- Opportunity for increasing savings.
- Aligns New Zealand closer with Australia.
- Tax cuts for high income earners called unaffordable.
