Taxation (Annual Rates, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill

This title is more reflective of the substance of the bill than are the titles of most of the bills that come before the House. At least we know that this legislation is about confirming a new taxation rate, GST, trans-Tasman imputation, and miscellaneous provisions. But I would still like to point out that the minority Labour Government could have done better with the description if it had been even more upfront and transparent, and had stated that the bill confirms the high annual income tax rate. I think we now have a halfway house. This minority Labour Government, which always says it believes in transparency, has failed to convey such an obvious factor in the title as the high annual income tax rate. I have brought that point up in this debate on the title, because it is important to highlight it. Later on, when we start to debate the various parts of the bill, we will find that the high personal income tax marginal rate—increased from 33 to 39 percent—has led to many complications, requiring adjustments to the Income Tax Act. So it has quite serious implications.

I think the Minister may like to take a call, to explain to the poor taxation petitioner and to people who file their own taxation returns why this legislation has 15 commencement dates. I ask the Minister to stand up, take a call, and explain to all accountants, and, more important, to small-business people and individuals who file their taxation returns, how they are supposed to comprehend legislation that has 15 commencement dates. There are 159 pages of this legislation—

The CHAIRPERSON (Ann Hartley): I am sorry to interrupt the member, but clause 1 is not the commencement date clause.

I will come back to the title, because we will take up the debate on the commencement dates later. The title, when I think about it—apart from the issue of the high income tax rate complicating the taxation legislation—is also complicated because of the many commencement dates, which will certainly confuse everybody. If this minority Labour Government had not instigated that high personal income tax rate, we would be debating a much simpler bill today.

Apart from that, the National Party wants to demonstrate to the public that we are constructive about the parts of the bill that relate to the GST provisions for imports, and also to the harmonisation of taxation treatment and income tax dividend imputation between us and Australia. We are in agreement with those parts of the bill.

In terms of the title, I feel that it is does a better job of reflecting the contents of and the types of issues that this bill tackles than the titles of some other bills do. It does not do too bad a job of highlighting, for the benefit of any tax petitioner or business person who wants to know what is in the bill, that it does cover the GST issue, and the issue of trans-Tasman imputation. But I think the title does a very poor job by just simply describing the annual taxation rates, without highlighting the difficulties caused by the varying personal tax rates and the high income tax rate, which cause a lot of complications, amendments, and adjustments that people have to face every year.

In speaking to the title of the Taxation (Annual Rates, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill, I guess that is a classic example of a title that tries to cover what is in the bill, but actually misses the boat quite badly. Let me point out why that is so.

The first problem with the title is the “Taxation (Annual Rates” bit, because the bill does not spell out the rates that people do have to pay. The legislation is very poor at doing that. The Minister in the chair may choose to take a call on this. There are people in this country who pay effective marginal taxation rates that are far higher than this legislation implies. It is kind of misleading to refer to what this legislation specifies in the law as being the annual rates, because they bear no relationship to the actual rates some people pay. We will get on to Part 1, which covers the annual rates, but it does not really tell us the taxation rates that people face. It spells out a statutory taxation system, if one likes. That is why the words “Annual Rates” in the title are misleading. The title implies that this legislation should tell people what they are to pay. The legislation does not do that. Some people in this country face effective marginal taxation rates of over 90 percent on a lot of the income they earn, and this title does not give any indication that that is what is going on, at all.

For this title to be a fairer title, it should specify “Taxation (Statutory Tax Rates, GST”, etc., rather than “Annual Rates”. The words “Annual Rates” imply that this legislation somehow gives people guidance as to the tax they pay, when it does not do that in any way, at all. Sooner or later the Government has to become much more upfront with people about the effective marginal taxation rates they are paying in this country. That is what is implied by annual rates, and this legislation does not do that. That is my first concern. I think that rather than the present title of the bill, the title should be “Taxation (Confirmation of Statutory Rates”, etc. There is a huge difference between the statutory taxation rates and the effective marginal taxation rates that people face in this country today, and “Annual Rates” fudges that, because it implies that that is the actual rate people pay, when it is not. This legislation simply confirms the statutory rates, and does not spell out what people face.

My second concern is this: why just pick the first four issues, and then state “and Miscellaneous Provisions)”? That seems to be what the Government has done. I recognise there has to be some limit, perhaps, to how long a title is, but there are other important issues in this bill. OK, the confirmation of the statutory taxation rates is the first issue, and there are a number of GST issues included in the bill. We have the zero rating of business-to-business supplies of financial services for GST purposes, and the reverse charge mechanism to impose GST on imported services. That is all good stuff, and it can be covered by “GST” in the title. “Trans-Tasman Imputation” is one very good thing in this bill that the National Party applauds totally, and that is identified in the title.

But there are also one or two other good measures in this bill. Although we are totally opposed to the confirmation of the current high taxation rates, the introduction of progressive rates of specified superannuation contribution withholding tax on an employer’s contribution to match the employer’s marginal taxation rate is an important measure in this bill. It is too important to be just covered by “Miscellaneous Provisions”. I think an important provision like that should be identified in the title. So there is another problem. We have a problem over the annual rates not being a proper descriptor, and a problem over the fact that the title does not cover something as important as the issue of progressive rates of specified superannuation contribution withholding tax.

Finally, I would also like to add that another important issue in this legislation is the removal of the double incidence for shortfall penalties for attributing qualifying companies and their shareholders. That is an important issue, but the title misses it out completely.

I take pleasure in speaking on behalf of New Zealand First on the title of this bill, which is a bit of a mouthful. In speaking to the title clause, I want to briefly come up with some different names that could be used in relation to this bill.

We could call this bill the “Predominantly Sensible Taxation (Annual Rates, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill”. I have two reasons for suggesting that as a new name. The first reason is that this bill changes the imputation laws to address the problem of triangular taxation, which involves the double-taxation of certain trans-Tasman investments, and it allows Australian companies to allocate imputation credits for New Zealand tax paid to their shareholders in proportion to their ownership of the company. I note that that arrangement is reciprocal and requires both countries to pass the relevant legislation. The necessary legislation was introduced in Australia—to recap a little on why we are doing this—on 29 May as the Taxation Laws Amendment Bill (No 6). The bill also seeks to mitigate a problem that imputation credits cannot pass through companies resident in neither Australia nor New Zealand, by introducing a new form of grouping for imputation purposes that Australian companies may also join.

Secondly, I suggest “Predominantly Sensible” be added to the beginning of the title “Taxation (Annual Rates, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill” because of the annual income tax rates. This legislation confirms the annual income tax rates for the 2003-04 year. In light of that issue, we could even call this bill the “Taxation (Misuse of Taxpayers’ Money, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill”. New Zealand First believes that this Government should reprioritise its social spending, so as to place greater focus on the real needs of New Zealanders. It should do that rather than spend its income from taxpayers on its politically correct agenda, which includes, as I mentioned earlier on in the second reading, prostitution reform and abolishing the Privy Council. Those are both examples of that agenda.

Another title that we could use, which relates to the annual taxation part of the bill—and, as I said in the second reading, New Zealand First supports all the other parts of this bill—could be the “Taxation (Lack of Vision for Taxes, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill”. I say that because I feel very strongly that there is a lack of vision on the Government’s behalf in the way it addresses taxation. In the run-up to the general election in 2002 we in New Zealand First talked about how we could make and produce a stronger economy by addressing the taxation area—not so much by addressing the annual income tax rates but by addressing taxation incentives for exporters, for research and development, and so on to really produce a strong economy.

It is not often that I agree with Dr Lockwood Smith, but on this occasion I entirely concur with his point of view that the Government should have included in the title of this bill the section on specified superannuation contribution withholding tax. That is one part of this bill for which I believe there is universal support around this Chamber. It is a part that I would have thought the Government would be making a big deal about. The Government is finally doing the right thing for those New Zealand workers earning less than $38,000 a year who are trying to save for their retirement through a subsidised employer superannuation scheme. The title should have reflected that by including, before “Miscellaneous”, the phrase: “SSCWT: Removal of Tax Penalties”. That would have encapsulated what this bill is going to achieve.

This Government is making a very important step forward by removing those tax penalties, and it is a step we support, but we would have much preferred the title to include “SSCWT: Extending the Superannuation Withholding Tax Concession to All Workers”. Unfortunately, this Government has signalled that it wants to preserve a 6 percent concession or tax break for those workers earning more than $60,000 a year and receiving an employer subsidy. It wants to preserve that concession for wealthy wage and salary earners, but not extend that same 6 percent concession to heartland Labour Party voters, who are the very workers in this country who need an incentive to save for their retirement. It is disappointing that the Government is not prepared to contemplate, it would seem, amendments along those lines. I am, however, looking for support from all the other parties in the Chamber, and if those parties that support family-friendly policies can see their way to supporting my amendments, we will have the majority. Then the title of the bill could be changed to refer to extending superannuation withholding tax concessions to all workers.

Another change to the title we would like to see would be to incorporate the words “Tax Relief for Struggling Kiwi Families” after the words “Annual Rates”. That is something I think every member of this Committee would surely support, including the Minister in charge of the bill, Hon Dr Michael Cullen, who I am pleased to see is just joining us. To that end, I will be moving an amendment at the appropriate time to make the first $5,000 of income tax-free. That would have across-the-board benefits for all New Zealanders, but proportionately greater benefits for people struggling at the bottom. Whether they are beneficiaries or workers, that would put more money in their pockets, and therefore it would be important to add that to the title after the words “Annual Rates”.

Straight after that, it would also have been ideal if this bill had incorporated in the title “Carbon Taxes and Other Eco-taxes”, because that is the Green strategy to pay for the tax cuts we want to offer New Zealanders across the board. Unfortunately again, the Minister has signalled that carbon taxes are still way off in 2007, and other eco-taxes are not quite yet a twinkle in his eye, but we will continue to encourage the Minister in that regard. But in the meantime, I think this bill would have been more rounded if the Government—indeed, the Minister—had taken credit for the excellent initiative on removing the tax penalties from the specified superannuation contribution withholding tax. In an ideal world, he would have gone further and extended that as a tax concession, as well as bringing in tax relief and eco-taxes.

Clause 1 agreed to.

Clause 2 Commencement

The CHAIRPERSON (Ann Hartley): I inform members that the Government has issued two veto certificates in respect of amendments in the name of Rod Donald, set out on Supplementary Order Paper 171. The amendments are therefore out of order, and no question will be put on them. However, the certificates may be debated in the context of the debate on the provisions to which the vetoes relate. The certificates are available on the Table for inspection.