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Source: Taxpayers Union

The New Zealand Taxpayers’ Union is calling on the Government to follow advice from the International Monetary Fund (IMF) and temporarily cut Goods and Services Tax (GST).Taxpayers’ Union Economic Advisor Karan Menon says, “Last year, the IMF warned that with interest rates nearing zero, any shock to the economy would need to be addressed with fiscal – rather than monetary – intervention.”“Specifically, they pointed out that a temporary reduction of GST would very quickly raise disposable incomes, especially for low-income, credit-constrained households.”“The economic shock the IMF warned about has now well and truly arrived.”On Monday, the Taxpayers’ Union released a briefing paper which examined the case for a temporary GST reduction in New Zealand, drawing from the United Kingdom’s similar policy implemented during the Global Financial Crisis.“We concluded that higher spending is not the best way to stimulate the economy. Wealth transfers and interventions like the Government’s interest-free business loans are wasteful and distortionary.”“Instead, we can spur spending by taxing less – at least for a while. A reduced GST rate wouldn’t just leave more money in people’s pockets to spend – it would encourage them to bring forward future spending in anticipation of the GST rate going back up again, exactly what we need with the RBNZ having almost nothing in the tank to loosen monetary policy.”The Taxpayers’ Union’s briefing paper is available at