Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill

I am pleased to be here to speak to the Committee stage of the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill. Part 1 is likely to be the part that generates the most discussion this evening. It is the part that confirms the annual rates of tax. It is worth noting in relation to this part that the Committee has before it a Supplementary Order Paper from United Future that seeks to index income tax thresholds from $38,000 to $43,000 and from $60,000 to $68,000. I need to inform the Committee that that Supplementary Order Paper has attracted a financial veto on the basis of an unbudgeted fiscal cost of $900 million per annum. This is, of course, particularly important, given that the projected cash surplus is limited to some $520 million per annum.

The other parts of the bill are largely taxpayer friendly and are likely to attract somewhat less debate, I suspect. They reflect the main themes of the Government’s tax policy work programme: promoting growth and innovation; simplifying tax especially for small businesses; reducing tax-related compliance costs; and protecting the revenue base. The rest of the bill, which we will discuss later, removes some tax obstacles and closes a couple of loopholes.

One has to get up early in the morning to get past the Hon David Cunliffe, but even he could spot that the aim of the Opposition’s attack tonight would be this Government—a Government that just loves to tax ordinary New Zealanders. It loves to tax hard-working New Zealanders, businesses, and people up and down the country.

Dr the Hon Lockwood Smith: Gouge the tax out!

It loves to gouge their eyes out. Dr Smith is absolutely correct. The Government loves to take money off hard-working New Zealanders and waste it on absolutely anything it can point a stick at. “How big is that spending?”, one might sit back and ask. It is $34 billion worth of additional taxes brought in by this Government—$34 billion in the last 5 years, and the Minister of Finance had the gall to come before the Finance and Expenditure Committee and tell it that there is no room for tax cuts going forward. He had the gall to tell the people of New Zealand that they have paid $34 billion—something like 18 additional taxes, bringing in money from every part of the economy—and that there is no room for tax cuts. But he did even better than that. When he was before the Finance and Expenditure Committee and we asked him about the petrol tax, the extra 5c a litre—yet another tax Labour is bringing in—and the amount of roading that will be built on the back of that $200 million, he said code for: “I’m not going to bring in the tax before the election, because I’m very unpopular with the amount of taxes I’m collecting. But what I will do is to put on hold all the additional new road construction that would have been done by this Government because, fiscally, we can’t afford it.” The Government has a $7.4 billion operating surplus and a $6.6 billion operating balance, excluding revaluations and accounting charges. It is funding its entire capital programme out of cash, and it still has available spending to repay debt—but it cannot afford it!

The United Future party came up with a Supplementary Order Paper. Parts of it are not necessarily what we would do in tax policy, but we support it. The Government will not support it. The Government will not support its own partner—a partner that it has a confidence and supply relationship with. There must have been great negotiations around the Cabinet table when United Future came in and said: “Well, we didn’t get a place at the Cabinet table, but we decided we’d support you through thick and thin on confidence and supply. But, by the way, we’re going to veto your tax bill because it will give $700 million to $900 million worth of relief to hard-working New Zealanders. But we’ll tell you what: we’ll go out and spend the money for you, better.” How will they spend it? Well, their track record, frankly, is abysmal. There are billions of dollars more for health in this country, yet fewer operations are being done.

💬 Steve Chadwick: Oh, rubbish!

That is right. Fewer operations are happening throughout the country. Poor New Zealanders are not on waiting lists, because Labour has got rid of waiting lists. It has redefined them with some other PC flaky term. Basically, unless a person cannot see, cannot hear, cannot walk, cannot talk, or cannot do anything, then he or she is not allowed to be on a waiting list—because that is embarrassing when a Government is spending billions of dollars more of taxpayers’ dollars. Then we had the debacle around Steve Maharey’s ministry, where people at all sorts of polytechs around the country were charging the Government for courses they were supposedly undertaking but really were not doing at all, or for courses that had not provided any value at all. That is the idea of this Government; it simply wants to raise taxes—$34 billion additional taxation.

On Monday of this week we released some data that I think the Government would be well-advised to look at. It showed that the increase in real, nominal, after-tax wages in New Zealand has been about 3 percent over the last 5 years. So New Zealanders’ average after-tax wages have gone up by about 3 percent over the last 5 years, which is less than 1 percent a year. Mr Cunliffe smiles with embarrassment, like a Cheshire cat that has caught something, and Dr Cullen is hiding somewhere within the precincts of the building, I am sure, because he is embarrassed that, at exactly the same time, the Government’s revenue has gone up by 25 percent in real terms. In nominal terms it has gone up 40 percent—$34 billion—but in real terms it has gone up 25 percent. To put it another way—and to put it simply so the Minister can understand it—for every $7 of value that this economy has produced, $6 has stayed with the Government. Is that fair?

The ACT party opposes this bill—particularly this part that sets the annual rates. We stand here as the only party that says the move of Helen Clark and Michael Cullen to increase the top rate of tax from 33c to 39c was wrong. We say that the 39c rate should be dropped immediately. Unlike our National Party cousins—we know that John Key would like to have a policy that said: “Let’s drop the 39c to 33c.”, but he has not managed to persuade his caucus—the ACT party stands firm.

💬 Simon Power: Oh!

Well, he might have persuaded Mr Power, but that is not enough. The ACT party says that the top tax rate should not be 33c in the dollar but that we should go to a top rate of tax of 20c in the dollar and that we should do so immediately. [Interruption] I hear Steve Chadwick calling out. Here is a Government that expects everyone else to pay a 39c or a 33c rate of tax, but she stands to defend a Minister who pays—how much tax? Was it 39c, was it 33c, was it 20c? No! It was none. Steve Chadwick believes that she can look voters and taxpayers in the eye and say: “Yes, you pay 39c, and you pay 33c.”, but here is John Tamihere who received a golden handshake of $195,000 that he said he would not take—and I am coming to precisely the point of the annual tax rates. If one receives a payment of $195,000, and one is a member of Parliament, can someone please tell me, under this legislation, and the legislation it replaces, or the legislation before that, what the tax rate should be? It is 39c, is it not? But what did the Cabinet colleague of Steve Chadwick, Rick Barker, and—what is the name of the fella in the chair?—David Cunliffe pay on that amount? None! So what are we doing in this Parliament passing law when Labour Party Cabinet Ministers just ignore it? John Tamihere voted for the legislation. He goes around small businesses telling them they have to pay their taxes, but what does he do? He pays none. That is a disgrace, and I do not see David Cunliffe getting up now to defend his Cabinet colleague. And what does Helen Clark say? She says: “Oh, naughty boy! You didn’t pay your tax as set out in the annual rates of income tax for 2000-01.”

💬 Lianne Dalziel: Now you are stretching it.

Well, I can see why Lianne Dalziel is bitter. She paid her tax and she got fired. John Tamihere did not pay his tax, but he did not get fired. He was sent on a holiday to west Auckland.

💬 Simon Power: At least she had honour.

She had some honour. She went—[Interruption] Oh, I know. David Benson-Pope is calling out. He is saying that there is no honour with John Tamihere, and I agree with him. If we are going to pass this legislation that sets the top rate of tax at 39c, I expect MPs to pay it. I expect Ministers to pay it, but I say to Lianne Dalziel that it is very clear—

💬 Lianne Dalziel: Who pays your money, Rodney?

Oh, here we go again!. Are they not great?

💬 Lianne Dalziel: We know all about it.

Oh, yes. They know all about it. Let us hear about it, then. They could get up and give a speech and tell us the story. Here we have a Labour Government with high taxes for everyone—and wasted money. Labour’s own Cabinet Minister does not pay his tax, and Helen Clark says that is OK. David Cunliffe says that is OK.

💬 Lianne Dalziel: How much did you get paid?

The wicked witch from Christchurch can go on all she likes. The fact of the matter is that people see through it. John Tamihere said he would not take that $195,000, but he did. Then he said he was not going to pay any tax on it because he had to feed the kids and pay the mortgage.

💬 Lianne Dalziel: The truth will come out.

Oh, the truth will come out! Well, I am pleased that it will, because it takes the Opposition on this side of the Chamber to bring the truth out. Lianne Dalziel did not know about the golden handshake. She said that she did not know about the tax not being paid, but she will go back to her constituents and say that they have to pay their 33c, or their 39c—but John Tamihere does not.

I have to agree with the previous speaker. Mr Tamihere did have an obligation to pay tax at those rates on the income. Every taxpayer is responsible, ultimately, for his or her own liability, and Mr Tamihere is responsible for his. Of course, he will be voting for this legislation, even though he has been away.

The big issue here about these rates is really quite simple. There is no doubt that the Government is collecting billions more in tax than it ever expected, and that has allowed Dr Cullen to do two things. Firstly, because of the surplus, he can claim he is a fiscal conservative and, secondly, he can spray money all over the place. He can spend up faster, larger, quicker, and at lower quality than any Minister of Finance in my adult lifetime—he has had so much money coming in. In fact, he has so much money now that he is paying for his long-term investments out of cash. Who else is doing that? How many of us would love to be able to buy our houses out of this year’s surplus income?

💬 John Key: Out of petty cash.

Out of petty cash. That is what Dr Cullen is doing. Why does that matter? It matters for two reasons. The first is simply that—

💬 Rodney Hide: He’s got so much money, Cabinet Ministers don’t have to pay tax.

That’s right, but I can tell members that what they pay the Queen’s Counsel to find out that he is not paying tax will more than make up for the tax that was not paid.

This is a double hit for the Government’s fiscal outlook. There are two reasons. The first is that the people who are doing overtime to pay off their mortgages are simply paying more tax than they need to pay. The Government does not actually need the money, but because it has the money coming in, it comes up with all sorts of wild and woolly ways of spending it.

I can quickly tot up $60 million, $80 million, $90 million that is pure political puffery on the part of Mr Maharey and Mr Mallard, who are spending a bit, and then there will be an announcement next week, and before they know it, they have spent $100 million.

💬 Rodney Hide: What about the CDs?

There was $15 million worth of CDs that no one looked at. There is another reason we should be opposing these rates, and it is simply that they are unfair. They are unfair because we have now had strong economic growth for 7 years, which is of benefit to everybody. These are the best economic conditions in a generation, but the working people that the Government pretends to represent have not had their fair share of it. The Government’s revenue and surplus have risen dramatically faster than after-tax wages.

💬 John Key: Seven times faster.

They have risen seven times faster. The Government has simply taken much more than its fair share of the economic boom, which should have belonged to the working people who took so many hits during the restructuring of this economy. They took the knocks and now Dr Cullen is taking the gold that is flowing. The people took the hits; he is taking the cash. That is unfair and it is what these rates are doing.

If Parliament passes these rates, then it is building in, reconfirming, and continuing the basic unfairness. The civil service and the Labour Government are taking much more than their fair share of the economic boom, and the real pity of it is that those working families will, by this time next year, be paying significantly higher interest rates on their mortgages. They will be seeing that economic growth has slowed down, and they will be feeling less secure—and the Government will still be sitting on a mountain of surplus because of these tax rates. For the next couple of years the Government’s books will be in brilliant shape, but the working people will have missed out on the best opportunity in a generation for higher net incomes, which is, after all, what really matters to them.

I will speak to Part 1, which confirms the annual rates of income tax for the 2004-05 income year. I want to speak about tax rates, which will have to be addressed at some time or other and which some other members of Parliament have been speaking about tonight. When I speak about tax rates I am not talking just about income tax, although I am including income tax specifically because we are talking about that in this part of the bill. I am also talking about taxes in general—the amount of tax that this Government has raised on petrol and a whole raft of things.

The Government would have us believe that we have an economic boom in this country, whilst it is taxing individuals up to 39c income tax. That is a 39c tax rate for people who are earning around $60,000 a year, because they are considered to be rich by this Government. In this country a wealthy person, according to this Government, is somebody who earns $60,000 a year. Members of this House know that $60,000 a year is not a lot to live on these days. People are struggling, on $60,000 a year, to have a couple of kids, a mortgage, and at least one car. For a lot of people it is impossible.

This Government says that there is an economic boom. The New Zealand dollar is at 70c against the US dollar, and we are not even offering any tax concessions for our exporters in order to grow our export sector. There is not the economic boom that this Government would have us believe. The Minister of Finance gets up to speak, day in, day out, along with other Ministers, like the Minister in the chair, David Cunliffe. I heard Parekura Horomia talking today on the Ngati Tuwharetoa (Bay of Plenty) Claims Settlement Bill. He said how great the farmers and exporters are getting on, but we have a trade deficit in this country. As I said, people who are earning over $60,000 a year are being taxed at 39c in the dollar and we do not even have a Government with enough vision or positive outlook to say that the export sector needs, at least, to be given a fair run for its money and given some tax concessions.

💬 Hon Maurice Williamson: Buy back Telecom!

That is a very good idea. Mr Williamson has tried to steal another New Zealand First idea by saying “Buy back Telecom”. I am sorry, but we own that idea and he will not pinch it off us. New Zealand is continually sliding down the OECD rankings. The average Australian earns $120 a week more than the average Kiwi.

Dr the Hon Lockwood Smith: It is $175.

It is probably more. I stand corrected. Dr Lockwood Smith says that Australians earn $175 more per week, per person than Kiwis. We say, and this has every relevance to Part 1, that if the average New Zealander earns $120 or $175 less than the average Australian, the Government and individuals here in New Zealand are worse off. We say that when it comes to taxation we need to think outside the square. That is what New Zealand First is saying. We are firm advocates for all Ministers and MPs paying their taxes.

I will also say, and I mentioned this briefly in the second reading, that New Zealand First would have supported the notion that to preserve the present tax thresholds in purchasing-power terms, the present bands should be adjusted from $9,500 to $10,750, from $38,000 to $43,000, and from $60,000 to $68,000, at least. We would have supported that.

I will speak briefly on Part 1.

💬 John Key: Does Ahmed Zaoui pay tax?

Poor Mr Zaoui—and I thank Mr Key for raising this, as it is very kind of him to notice—is incarcerated in prison, despite the fact that he has refugee status in New Zealand. I look forward to him being released and able to earn a decent income—perhaps as a university lecturer, talking about clashes of cultures, or one or two other things. But perhaps he will be in the difficult position that tens of thousands, indeed hundreds of thousands, of New Zealanders are in, which is that they do not earn enough to bring up their families in decency. That is what I will talk about in this debate on Part 1, which deals with annual rates of income tax.

I will offer some amendments to the annual rates for the acting Minister to consider. I fear, however, that he will either rule them out of order or veto them. But just in case he is not so callous, and he gives Parliament the opportunity to vote on our amendments, I would like to draw to the attention of other members of the House—especially my colleagues in National, New Zealand First, ACT, and United Future—that the Green Party does support income tax cuts. But we want the cuts to be at the bottom, not at the top. I find it extraordinary that on the same day that members of Parliament received a 3 to 4 percent wage increase, the United Future party recommended that we also receive a $1,155-a-year tax cut. We are the last people in this country who need a tax cut. We are the last people in this country who need more money in their pockets.

💬 John Key: Come on!

I gather from what I read about Mr Key’s wealth that he is the last person in this Parliament who needs a tax cut. But I will leave him out of the debate and return to the people who really matter—the struggling families of this country and particularly the 30 percent of children who are growing up in poverty; a figure that this Government acknowledges is the case.

We are simply saying that the Government’s Working for Families package does not go far enough, fast enough. Unlike some other parties in this Chamber, we supported that package because we do want to lift families out of poverty. We do not want any children in this country growing up with unmet needs. We want them all to have a decent opportunity for an education, all to have a comfortable home to live in, and all to be able to experience the quality of life that most of us in this Chamber take for granted. But the Government is not bringing in its Working for Families package quickly enough. It is stretching it out over 2 years, which I think is callous, and is not giving enough relief at the bottom.

Our primary amendment would make the first $5,000 of income tax-free. Although that would benefit members of Parliament, because we too would get an extra $750 a year, the people who would benefit most are those earning under $38,000. Instead of the $75 a year that Mr Copeland from United Future was offering, we are proposing $750 a year. We intend to fund it, not from the surplus—I will come back to that in a minute; Mr Key made some points I agree with—but from a suite of eco-taxes. The first would be a carbon tax. We would also bring in a proper tax on diesel, in order to line it up with petrol. There would be other eco-taxes, as well. We are endeavouring to be fiscally responsible and are putting up where the money for our proposals would come from.

Moving beyond that to one of the valuable points that Mr Key made, this Government is in an extraordinary situation in that it is paying for capital projects out of its annual surplus. Although to some extent one would have to say that is brilliant fiscal management in the short term, we believe it is happening only because the Government is running its surplus off the backs of the poor people of this country. For as long as there is any poor child in New Zealand who is suffering because of inadequate family income, we do not believe that any fiscal surplus this Government claims is real, whether it is on paper or is cash in hand.

We invite other parties in the Chamber to support our amendment, if the Minister, Michael Cullen, lets us away with it. We encourage the Government to put some of that massive surplus into helping those who are struggling, rather than investing it, for example, in the offshore sharemarket through its superannuation fund. Instead, the Government should be putting more money into the sustainable infrastructure that New Zealand desperately needs.

I am delighted to take a call on the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill. I want to concentrate my speech on the issue of taxation with regard to the funding for roading.

I suggest to members of the Committee who have not been here for too long—and I notice a number of members from the Green Party and United Future who were not around in the mid-1990s—that they take a look at Hansard and check what happened. Winston Peters was then a bit of a lone voice. I think he and Tau Hēnare were the only two members in the House from New Zealand First before the coalition—this was in 1995. Winston Peters put up a member’s bill proposing that because there was plenty of taxation already, all the money that went to the consolidated account from petrol tax—and at that stage it was about 24c or 25c per litre—really should go to roading. That is what Winston Peters proposed in this House. He said that all of the 24c should be moved from the consolidated account and go to roading.

I want members to refresh their memory. They should have a look at Hansard if they want to see what happened. The Labour Party, headed by Helen Clark and deputy leader Michael Cullen, voted for that. They said in the House that it was wrong to be bleeding that money off road users when there was a desperate need for money for roading. Michael Cullen—it is in Hansard, members should go and check it—voted for the entire 24c to go across.

💬 John Key: That’s surprising.

I know it is surprising. That has stopped a lot of people in their tracks.

💬 John Key: I’m shocked.

That is true. They voted for Winston Peters’ bill. Fortunately the bill was defeated, by only a couple of votes, but Helen Clark, Michael Cullen, and all the other Labour members voted that the whole 24c be moved across. Lianne Dalziel, who is in the Chamber tonight, voted for that measure, and it will be in Hansard that Damien O’Connor voted for it. Now what do we face? We face a Government that, next April, will stick another 5c per litre tax—

💬 John Key: What?

That is right, it will stick another 5c per litre tax on petrol for ordinary motorists. That is at a time when petrol prices have gone through the ceiling because of geopolitical matters, the Iraq war, and a whole range of other issues.

I say to the Minister in the chair, Michael Cullen, that if the Government needs the 5c for extra roading—he says it does, and I accept that roading desperately needs to be better funded—why on earth could he not take it from the huge surplus of $7.4 billion, or whatever the number is, that he is already running? The surplus actually grows by the day; every time I look at Treasury’s website it has changed. If Dr Cullen thinks that taking 5c from that is wrong, how come he voted in the House to take all 24c and move it to the road fund?

💬 John Key: He was in the Opposition.

My colleague John Key has given me the answer. He was in Opposition then, so it was good to vote for moving the whole sham shooting-box over, but now he does not want even 5c transferred from a surplus unseen, unparalleled, and unheard of in this country’s history.

If members think the money is not needed for roading, then let me correct another error made by the Minister of Transport, Pete Hodgson, in this House only a few weeks ago. He said that Peter Brown—I think that is who he was having a smack at—was not right about the amount of money spent on roads as a percentage of GDP, and that it had increased under this Government. That is what he said. So I put some written questions. Again, I ask members to check questions for written answer. I asked how much money was spent on roads, and what percentage of the GDP that was in each of the years 1998, 1999, 2000, and so on. Lo and behold, it is interesting that in the 1998-1999 year, which was the last full year of a National Government, the money was the highest it had ever been. Every year since then, Labour’s spending on roads has been less, as a percentage of GDP, than what National spent in its last year. That is not what Pete Hodgson said.

So I understand why Michael Cullen wants to spend some more on roads. He is embarrassed about how little spending has gone on. Why smack the motorist around with 5c more at the pump, when the cost of petrol is already beyond our wildest expectations compared with where we were only a year ago? Do members remember a year ago when the price of super was under $1 and 91 octane was under 90c?

💬 Hon Damien O'Connor: It was not.

Damien O’Connor says it was not. On the West Coast they probably pay $3.50 for super, but I tell him that that is not what people pay in Auckland. He should get real and get to understand what Auckland prices are compared with what people pay on the West Coast. Now the Minister of Finance says that he needs that money, so he is going to stick an extra 5c on the backs of the working class. Where are the Greens with regard to the working class on this? The Minister says he needs that tax, when he has a $7.4 billion surplus. Bill Birch would have gone to heaven on the idea of a $7.4 billion surplus. Bill Birch’s total surpluses cumulated did not come to what this Minister is running in one year. The Minister has come to this Chamber and cannot keep a straight face because he wants more.

I move, That the question be now put.

In speaking to Part 1 of the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill, I remind listeners that that is what we are debating, because they may have gotten a little confused. Part 1 is about this Labour Government wanting to confirm the annual income tax rates.

It is an incredible paradox that this Government seeks tonight to confirm income tax rates in this country, when it seems to be Helen Clark’s policy that Cabinet Ministers may or may not have to pay income tax. To me that is an extraordinary paradox. The Minister John Tamihere has not been sacked, so it seems to be OK to Helen Clark that he does not pay income tax. What are we debating Part 1 for, if Cabinet Ministers do not have to pay income tax? As the Minister in the chair, the Hon David Cunliffe, knows, it is the responsibility of every citizen to pay—

💬 Hon Damien O'Connor: Of the employer.

Dr the Hon LOCKWOOD SMITH: No, it is not. The Hon Damien O’Connor suggests that it is the employer’s responsibility. It is the responsibility of every citizen to pay his or her taxes. It is the responsibility of every citizen to make sure he or she has paid the correct amount of tax, because employers do not know what other income individuals have. It is up to individuals to make sure, except that Helen Clark’s Labour Government sets new standards. Working people of New Zealand pay income tax, as spelt out in Part 1, but not her Labour Cabinet Ministers.

I want to raise a couple of other serious issues. This Labour Government is confirming these high rates of tax when it has increased the tax take by 25 percent in real terms. According to the OECD, we are now paying 35 percent of GDP in tax. What is worrying about that is that in the last year for which the OECD has data—that is, 2001-02—the amount of tax as a percentage of GDP went up from 33.3 percent to 35 percent. What is quite clear is that Labour is trying to get back to where it was in 1989, when it was last in office, when the tax burden was 38.3 percent of GDP. Labour is trying to head back up there.

If the Government was spending the money on worthwhile projects—such as the desperate need to build some roading infrastructure instead of just setting up more committees—there might be some support for this level of taxation. But what is troubling me hugely is that Helen Clark and her Treasurer are now starting to spend money to buy votes. They are going to tax working New Zealanders—Part 1 confirms the high burden of tax on working New Zealanders—and spend the money to buy votes in next year’s election. The most recent occurrence was $20 million of ordinary working New Zealanders’ taxes going to buy the votes of the 20,000 Niueans living in New Zealand. It is a disgraceful performance by a Government to tax working New Zealanders far more than they have ever been taxed before. This Government has taken $34 billion more from working New Zealanders and is spending it on buying votes for the election next year.

In my 20 years in this place I have never seen such blatant vote buying as we are now seeing from this Labour Government. It is a disgrace twice over that we confirm these tax rates in Part 1. It is a disgrace because, firstly, under Helen Clark’s Labour Government it seems that Ministers do not actually have to pay their income tax. It is quite clear that the Hon John Tamihere did not fulfil his taxation responsibilities under this law, and the Prime Minister has not sacked him. Secondly, it is a disgrace when taxpayers’ hard-earned dollars are used to buy votes blatantly.

It might assist the House’s consideration if we test the credibility of the member who has just resumed his seat, Dr the Hon Lockwood Smith. He quoted OECD reports and suggested that New Zealand’s tax burden was higher than the OECD average. In 2001—

Dr the Hon Lockwood Smith: Don’t tell lies!

💬 Hon Rick Barker: I raise a point of order, Mr Chairperson. That member is saying something that is completely and utterly unparliamentary. I ask him to withdraw and apologise.

The CHAIRPERSON (Hon Clem Simich): I thank the member for raising that. Dr Smith, please withdraw and apologise.

Dr the Hon Lockwood Smith: I withdraw and apologise.

I raise a point of order, Mr Chairperson. It is a responsibility of members speaking in this Committee to tell the truth. The Hon David Cunliffe knows, because he just heard my contribution, that I did not say—and he can check the Hansard—what he just said, because I am very careful with the facts. What I said was that according to OECD data, the tax take as a percentage of GDP had gone up in the latest data for 2001-02 from 33.3 percent to 35 percent. I am happy to table the article I was quoting.

The CHAIRPERSON (Hon Clem Simich): That is a debating point.

Dr the Hon Lockwood Smith: I raise a point of order, Mr Chairperson. Forgive me, but it is not a debating point whether members tell the truth in this House. That is not a debating point. When I have made clear and am prepared to table what I was quoting from, the Minister cannot assert that I said something I did not say.

The CHAIRPERSON (Hon Clem Simich): That is a debating point, but the reason I asked you to withdraw and apologise was that I—and I think I was right—took what you said to be relating to the Minister. If I was wrong, we will move on.

Allow me to assist the Committee by clarifying this with some OECD data. For the year 2001, New Zealand’s average tax burden was 33.8 percent against an OECD-wide average of 36.9 percent. Of the 31 countries in the OECD, New Zealand by my calculation was the 10th lowest. So not only were we lower than the average; we were the 10th lowest. We were in the bottom third of tax rates.

There was one country that had tax rates in line with ACT policy. One country had a tax rate of 18.9 percent. Can members guess which country that was? It was Mexico. As far as I know, the country with the lowest income in the whole OECD was the only one that mimics ACT policy.

In 2002 the New Zealand average tax burden was 34.9 percent—not 35 percent as the member alleges—which is still below the OECD average of 36.3 percent. Once again, New Zealand was in the bottom half of OECD taxation by being the 14th lowest out of 31 countries. If that member is going to stand up and quote facts and figures, and pretend to table documents, he had better get his numbers right first, because this Government is in the habit of taking some care with its numbers.

When it comes to a question of credibility between Dr the Hon Lockwood Smith and the yet to be honourable David Cunliffe in full force, I am sure the public knows Dr the Hon Lockwood Smith’s track record—that of a member who is always very careful and who has credibility with his facts and numbers. He is absolutely right to say that New Zealand’s tax take relative to GDP has gone up. That is a fact, and it is not disputable.

The other thing people need to understand is that New Zealand has to be competitive in the world. We have to attract foreign investment, and we have to motivate our business people by giving them incentives to perform.

We are still talking about why the Labour Government should reconfirm these high income tax rates. Let us look at why, when Labour came to Government, it collected an additional $34 billion of tax. The question has to be asked: where has that gone?

Let us look at two areas that I am very interested in. One is education. My very hard-working colleague the Hon Bill English has consistently pointed out that throughout New Zealand, the contribution by parents, the community, and international students to the operational funding of our primary and secondary schools has gone up to nearly 40 percent. So parents have to raise a lot of money.

There is no longer a donation aspect to education. Previously in New Zealand we talked about free education. If we talk to people in schools, they say education is no longer free. Parents are being asked to mow school lawns and paint school buildings to make up for their inability to make the so-called voluntary donation.

I ask where the additional taxation this Labour Government collected has gone. Our schools are now increasingly relying on parents and international students to fund their expenditure. So what will happen next year now that the Labour Government has also ruined the international education sector? What will happen next year, and in the future, when there is a downturn in international student numbers? Will those parents be asked once again to contribute even more?

The other area I want to ask about concerns what will happen to the health system in New Zealand.

💬 Steve Chadwick: It’s very robust.

PANSY WONG:, I hope Steve Chadwick will be able to stand up in public to defend her Government. Today we read in the newspaper about evidence given to a coroner that a patient was asked to move from an intensive care department unnecessarily, and as a consequence he died. He had to make room for a patient who had died an hour previously. What is happening in New Zealand? Our people are dying unnecessarily because hospital emergency departments are no longer able to cope.

In Wellington, right now—we are debating in the capital city—the only 24-hour medical care facility has stated that it can no longer afford to open during the evening shift. Once again, pressure is going on to Wellington Hospital, and I ask whether it can cope with this additional pressure.

So why should any political party reaffirm the high tax rates? I watch with interest the United Future party, which has put forward a Supplementary Order Paper that basically has the impact of lessening some of those high tax rates. I look with interest to United Future members voting against Part 1 and the rest of the bill, because even that party, which is supporting the Government, is saying tax rates are too high.

I move, That the question be now put.

The ACT party certainly will not be reaffirming these higher tax rates that this tax-and-spend Labour Government is promoting in Parliament tonight. There has been no justification for them. It has already been clearly mentioned in this debate that New Zealand needs a competitive environment if we are to succeed internationally. We do not just need tax rates that are as low as those of other countries; we need them to be lower. We have significant geographic disadvantages, being at the end of transport routes. As a trading nation we need to have an environment that attracts investors, if we are to have vigorous growth and prosperity in this country.

This Labour Government inherited incredible economic conditions. I do not think that, at any time in the last three or four decades, New Zealand has enjoyed such favourable conditions. The point is that not one of them has anything to do with the policies of this Government; they are largely the low fruits of the hard yards done by previous Governments in making tough decisions and bringing reforms to the economy. This Government is squandering that opportunity as it plucks the low fruits of those courageous reforms of the past.

Not only is the Government laying back and plucking the fruits; it is actually messing up the fundamentals, increasing taxation rates when it should be reducing them, and bringing in unnecessary regulations, all of which—

💬 Hon Richard Prebble: But they haven’t been paying tax.

My colleague points out the other point. The Government loves imposing higher taxes on the productive workers of New Zealand, while it tries to excuse its own Ministers for, it would appear, avoiding tax.

💬 Rodney Hide: How does that work?

I do not know how it works, quite frankly.

💬 Hon Richard Prebble: Call it a koha.

Call it koha. There are all sorts of excuses but—

💬 Rodney Hide: What’s the tax rate now for a Minister?

We would have to say it is zero. What is the tax rate for a Labour Minister? It would have to be zero, yet that Cabinet has the audacity to keep pumping taxes up and up. Let us go back to Labour’s wonderful airbrushed election pamphlet of 1999. It took us months to recognise who the dolled-up woman on the front page was; it was Helen Clark. She said: “I pledge, I promise to the country.” One of those pledges was that only 5 percent of the population would have a tax increase, and it would be those earning over $60,000.

💬 Hon Richard Prebble: And 0.1 percent would have to pay no taxes at all.

That is right. Aside from that, the Government then conveniently enjoyed the benefits of fiscal drag and inflation, and now significantly more than 5 percent of New Zealanders are in that higher tax bracket. It is another broken promise. So we have avoidance, dishonesty, and broken promises. That is what we are getting from this Government.

💬 Rodney Hide: Do we have a ministerial rate in this bill?

I should ask members to look at schedule 1. Perhaps we could have a Supplementary Order Paper to put in a ministerial rate and make it retrospective.

💬 Rodney Hide: A Harry Duynhoven clause.

Yes, the “Save Harry” clause. Labour members were quite happy to abuse the constitution of this country to save one of their own, Harry Duynhoven, who unfortunately should have been expelled from Parliament. That is the point. He breached the law. So I say to that Minister—

💬 Lianne Dalziel: Bye-bye.

Former Minister—I forgot.

💬 Hon Richard Prebble: And she paid her tax.

And she paid her tax.

💬 Rodney Hide: She didn’t tell the truth.

She did not tell the truth, but she did pay her tax. Well, maybe she did not. My question is where in schedule 1 is this special ministerial rate. We have a schedule 1—

💬 Rodney Hide: It needs amending.

Shall we draft a Supplementary Order Paper or shall we leave it to the Government?

💬 Rodney Hide: No, they’d make it retrospective for John.

They would make it retrospective for John Tamihere.

💬 Hon Richard Prebble: It’s outrageous.

It is an outrage, But what we do know is that taxation on employment is a penalty—

💬 Lianne Dalziel: That was the biggest load of fiction I have heard in my life on TV on Saturday night.

I am sorry but I cannot hear the member.

💬 Lianne Dalziel: Richard Prebble’s kitchen—the place for writing David Lange’s selection speech! What a load of nonsense!

Clearly, the former Labour Minister is trying to create a distraction in this debate—

💬 Rodney Hide: Should we be surprised?

Exactly. In fact, it is extraordinary that the Labour Government has actually allowed this bill to be on the Order Paper.

I move, That the question be now put.