Taxation (Tax Administration and Remedial Matters) Bill

Tēnā tātou. I give greetings to those people who have just celebrated the successful passage of the legislation dealing with that scourge otherwise known as smoking, and related cancer.

I rise, along with my colleagues, to oppose this bill, but in expressing opposition there are one or three things that can be found to be less disagreeable about it. First, the bill does not enable the indiscriminate sharing of information between the Inland Revenue Department and a host of other agencies. The Inland Revenue Department is the repository or, dare I say, the steward of very important information, and we on the Finance and Expenditure Committee felt there was not a suitable level of confidence that such information should be shared, certainly with private sector agencies. On that small matter, we actually find ourselves in agreement with our colleagues on the other side of the House.

It has been a very taxing day. This legislation deals with tax, but perhaps one of the most taxing elements was watching the Speaker’s patience being taxed. Unfortunately, that has led to a level of coverage that I fear might eclipse the announcement of the day, which is to do with tax reform policy that is not unrelated to this bill. Today’s announcement builds upon the reasons why Labour does not support this legislation, which abolishes gift duty. We feel that it is likely to have the effect of calcifying the current distribution of assets and resources, and that we should pay attention to those submitters who did not support the notion that it be stripped. For those reasons we will not support the bill.

However, we do support the announcements that have been made today. Those announcements are directed at improving the distribution of resources and adjusting the structure of our economy. Fiscal policy, and in particular tax policy, has a key role in influencing the way in which investment decisions, financial conduct, and economic bets are placed, to advance either an individual’s interests, a firm’s interests, or indeed the overall well-being of society. For those reasons, it has come as something of a surprise to us, in all honesty, to hear the rather shrill voice of the current Minister of Transport talking about economic vandalism, etc., and, surprisingly to me, to hear the very mercurial Judith Collins finding every which way to demonstrate new levels of hysteria. It is unusual that tax policy, or tax decisions, should elicit those kinds of responses from politicians.

This day, which is not disconnected from this bill, also represents a clear demarcation of where we will be going over the next 16 to 18 weeks. We have not feared making a very difficult but challenging—and ultimately rewarding, we believe—call about why the tax burden should not fall exclusively on labour. It ought to be shared between those who have only their labour to sell and those who enjoy the fruits of their capital stewardship. For those reasons it will be very exciting, although in itself that is an incongruous statement—that anything about tax could be exciting—except to people like Robin Oliver, Rob McLeod perhaps, or some of those other hacks who quietly contribute to our colleagues on the other side of the House. For those reasons, although this is not particularly colourful legislation, a great deal of colourful language has been emitted from the other side of the House. As a consequence of the overdue statements and policy directions that were adopted today, we will have a relatively modest impost of 15 percent—an improvement, and an invitation for those New Zealanders who earn well beyond $150,000 to make a contribution to issues such as the Christchurch earthquake. Of course, their contributions will be indexed.

We have a host of other challenges, not the least of which is how we would deal with Māori land, because gifts have a great deal to do with Māori land, and in particular with what we call in te reo Māori whenua tuku iho, or multiple-owned Māori land. Fortunately for those worry-warts on the other side of the House, a panel of experts will be dragooned into action. In fact, names come to mind while I am on my feet, but, for fear of them being ensnarled in the debate and debacle of Hone Harawira today, I will put their names to the side. Experts will take a very, very close and judicious eye to the implementation of these historic announcements today, not the least of which will be to ensure that assets transferred through the Treaty of Waitangi process are not disproportionately impacted in a negative way, in particular the Māori land in Te Ture Whenua Maori Act, which is a bit of a challenge because, if we were to ask 12 lawyers what it means, they would be likely to give us 12 different answers. Perhaps they are not unlike tax lawyers. That is why a group of experts will be empanelled. They will look at these matters, and in good time they will come back to a select committee and provide the public with a host of opportunities to finesse the ideas and the concepts that we have announced today.

I will come back briefly to the bill. Part of the reason why we were not supportive of the abolition of gift duty was that although we saw that it would provide an opportunity for ongoing activities that were bedevilling the tax department, we feared that changes of this nature would not have a desirable impact in terms of how we want to see generations of New Zealanders enjoy the opportunity to amass wealth and develop resources, rather than play second fiddle to a calcified cast of economic players that we can guarantee will be the primary beneficiaries. Small though they may be in number, those players will be the primary beneficiaries once the current Government moves on its foul plans, etc., to privatise State-owned enterprises for a narrow cast of economic beneficiaries.

In addition to that reason why we will not be supporting this bill, I say that we should pay a great deal of care and attention to the regulatory impact statement. It notes that tax avoidance could increase in the absence of gift duty. When Labour was in power, we were assiduous in following to an exhaustive degree what those regulatory impact statements had to say. It is very disappointing that the current crop of Ministers and their backbench colleagues tend to have a cavalier disregard for such matters. It is almost a constitutional impropriety. It falls to me to read from the statement: “it is not possible to precisely determine the extent to which gift duty alleviates issues such as income tax minimisation, social assistance targeting and defeat of creditors.” I think that even those colleagues on the other side of the House agree on that, for that narrow range of New Zealanders who are able to rort their affairs so they can qualify for a large degree of social assistance through the welfare distribution system. That is wrong. If they are capable of standing on their own two feet, then they ought not to be allowed to manipulate their affairs in such a way that they are able to enjoy access to welfare programmes that were designed for people in “Strugglers’ Gully”, not for people living in “Parasite Drive”—

💬 Phil Twyford: Parasite?

—sorry, Paritai Drive. That means the high-tide mark. The tide is definitely lifting the wakas of Te Rōpū Reipa today. [Interruption] Why do we have that shrill denunciation from the other side of the House? It is because those members cannot agree on what it is they dislike about this particular tax policy, other than the fact that they cannot find any reasonable or credible companies to bolster their arguments. For those reasons, the electorate has a clear view about what is being offered—contributing in a fair system by everyone, or hocking off the assets and watching foreigners and a narrow cast of economic players amass wealth, and maintain it, amongst a narrower and narrower group of people. That is not the vision for Aotearoa. It is akin to spending a great deal of money on a road going nowhere, and not having the money to maintain the road, which is something the current Minister of Transport is an expert at.

Labour will not be supporting this bill. Assistant Speaker Robertson’s body language and the way he is moving his hands are encouraging me to be focused; being unfocused is quite unlike me on ordinary occasions. No one should be in any doubt that we will not be supporting this bill. We think that it is ill-placed, and that the real tax issue of the day is the announcement offered by the Leader of the Opposition, our tumuaki. Kia ora tātou katoa.

It is always an honour and a privilege to follow the member who has just resumed his seat, Shane Jones. I remember when he had a future, and I remember when he had an idea that he might be the leader of the Labour Party. We have just heard from Mr Jones that he has no idea about the Taxation (Tax Administration and Remedial Matters) Bill, Labour’s tax policy, or anything else—great orator and user of flowery language though he may be.

Today some amazing stuff was put forward by the Labour Party, and I want to take a little time to talk about it. The bill before us is about simplifying the tax system so that it works more efficiently and operates in a way that reduces compliance costs for New Zealanders. It takes away $70 million of compliance costs that apply to mums and dads up and down the country. But today we heard the Labour Party put forward the absolute opposite.

We heard the Shane Jones talk about simplifying the tax system, but what has been announced today is a boon for tax accountants and lawyers up and down the country. Thousands of tax accountants up and down the country will be looking at Labour’s announcements and rubbing their hands with glee. They will think that although they are losing $70 million in fees with the removal of gift duty, one side will give back to them what the other side has taken. Labour has put in place a policy that tax accountants up and down the country will be rubbing their hands with glee about.

Labour has announced a system so complicated, convoluted, and ridiculous that I do not think even Labour members understand it—and we heard that in the speech made by Mr Jones. Mr Jones outlined some things, yet he did not even understand what the existing bill is trying to do. It is pretty clear that whatever the situation is, Labour’s numbers do not add up.

Last night we heard Mr Huo talk on this bill. He said that any bill that takes about $70 million in costs and raises half a million dollars in net revenue is not a good idea. We heard Mr Parker talk on this bill last night. He talked about his fetishes with Filipino brides and made a reference to incest, and he said this bill would enhance those things. I was outraged, as were a number of my colleagues. It was completely irrelevant to what was under way, and I encourage people to go and listen to it.

The situation at the moment is that 44 percent of households pay no net tax—44 percent of households. In New Zealand 17 percent of households pay 97 percent of tax—17 percent pay 97 percent of the tax. This bill goes some way to try to address that situation. It puts in place a simplification procedure, it reduces the costs by removing gift duty, and it puts in place an arrangement whereby portfolio investment entities have more flexibility to invest in things that are productive in New Zealand. It allows these entities to invest more into land—up to 20 percent. It allows the ability to put in place other simplification procedures that cover the reduction of costs to taxpayers up and down the country.

That is what our Government truly believes in—reducing the burden on taxpayers so that they can put that money into productive enterprises. When we reduce costs by $70 million with the removal of compliance costs in respect of gift duty, it does not mean that some tax accountant—who may be a former friend of mine—buys a new BMW this year. It means that that money will sit in the back pockets of Kiwi mums and dads, and they can spend it on productive, useful things.

Those are the key aspects that came out of the report of the Finance and Expenditure Committee. It was not about scaremongering and saying we could not protect assets with the removal of gift duty; it was about reducing costs for hard-working Kiwi mums and dads so that they could keep $70 million in their back pockets and invest it more wisely and productively in the things they choose to invest in.

The only shame is that if a fluke occurred in the near future and there was a change in Government, much of that $70 million would be taxed at a ridiculous level. But, given the polls we saw at the weekend, I am pleased to say that that is very unlikely. Despite what Labour members have said today and last night, I think that they truly believe it is right to incur $70 million in costs. That cost is completely unnecessary, and we do not know what purpose and benefit it is for. We believe in reducing the tax burden so that New Zealanders can get ahead, and I think that is a positive thing. It will help us to steer the way towards the brighter future that we really believe in. Thank you.

I am delighted to take a call on the Taxation (Tax Administration and Remedial Matters) Bill. As the newest member of the Finance and Expenditure Committee, I was not on the committee to hear submissions on this bill.

I will not be as hard as my colleague Mr Gilmore was on the speech of the Hon Shane Jones, because apart from his terrible quips on the use of the word “tax”, I think he had a very good point: today and yesterday are very important days for tax policy. I think I heard him say that experts will take a very close and judicious eye to Labour’s tax policy, and they probably will, but that judicious eye was already cast over New Zealand’s tax system at the end of Labour’s term in 2008, when the Tax Working Group released its report. It said that our tax system, which had previously been the least distortionary in the OECD in the late 1980s and early 1990s, had become incredibly distorted. It made some recommendations that included not tinkering with GST, which is something the good Dr Cullen, when he was the Minister of Finance, was absolutely adamant should not happen. It also said that, yes, there were some things that could be done regarding capital gains, but that included things like the removal of depreciation and the 20 percent premium. They are all things that have been done by the National Government since it came to power.

So I think that yesterday and today are very important days for tax policy. I mention yesterday because of the oral question asked by that very erudite National member of Parliament from Dunedin of the Hon Bill English about how fair our tax system was. The answer was quite remarkable. We seem to have one of the most progressive tax systems in the Western World, where 17 percent—17 percent—of income tax payers in this country pay 97 percent of the tax burden, and 43 percent of households in this country pay no effective tax because of the redistributive policies of Working for Families and other schemes. That does not include those families who might also be drawing New Zealand superannuation. We have a clear separation in terms of tax policy. We have a Government that, through this bill and previous legislation it has passed, is unhooking itself from the very distortionary and punitive tax policies of the past and heading on a low-tax simplification process on the same day that the Labour Party has announced a punitive, envious, and, frankly, unworkable tax policy, about which its previous Minister of Finance had said: “Do not go there.”

I was also mindful of Mr Parker’s comments on the removal of gift duty. I find it quite fascinating, but illuminating in respect of Labour’s theoretical commitment to a gift duty in the face of the fact that it simply did not work. Its abolition will have no effect and no fiscal impact whatsoever. I do not believe that Mr Parker was dog whistling to tax lawyers and tax accountants around the country when he suggested that the sky would fall in if the duty was changed. But there are many who do think that and who see the huge fees that lawyers earn in tax planning for trusts to avoid gift duty. They will be disappointed when this bill is passed. I certainly will not be one of them. I think it is a very, very good change, and I commend it.