Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill

Members, the House is in Committee for further consideration of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill and for consideration of the Legislation Bill, the Airports (Cost Recovery for Processing of International Travellers) Bill, and the International Finance Agreements Amendment Bill. Members, we come first to the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. When the Committee last considered the bill we had reached Part 5, and the Hon David Cunliffe had the call. He has 3 minutes and 20 seconds remaining, if he so wishes.

Thank you, Mr Chair. That is incredibly generous of you to remember back that far, and I am delighted to take up the other 3 minutes and 20 seconds. I had actually temporarily forgotten that my last soliloquy was so rudely interrupted by the clock. So let us pick it up from where we left off, which, of course, is that the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill—which Labour supports, the Chairman will be pleased to know—is part of a much broader plan that the Labour Opposition has for creating jobs by supporting our exporters to expand and to earn more, and to help Kiwis get the education and skills they need to seize the job opportunities of tomorrow. It sounds pretty good, does it not? But none of that is going to happen unless we have a tax system that works for our businesses and for our people.

It is important that we grow our jobs and businesses by investing in science and innovation, so that we can own the intellectual property rights that will help us command a premium in overseas markets, and we also want to be able to help Kiwis save for a first home. This is a long-held and long-cherished part of the Kiwi dream, that you can own your own patch of dirt, but in order to achieve that we need to have a reasonable tax system that encourages homeownership.

So how does this bill fit in? Well, in general, the picture that New Zealanders are seeing is that under National things are slipping backwards—

💬 Todd McClay: Oh, such a good speech until now.

—the member for Rotorua—that, sadly, National does not have a plan for taking us forward, that it is increasingly out of touch with ordinary Kiwis, and that it is spending its time debating things like its defence of Dotcom actions and so forth, whereas what ordinary Kiwis are saying to us is “Actually, we care more about paying the bills, you know? Yes, Labour, you’ve caught them out, but it is time you came back, Government, to what matters to us: paying the bills, putting the roof over our head, getting the kids through school, and making sure that the hospitals are there when they need them.”, and that is what we are determined to do.

This bill makes a very small contribution to a few good things. I am going to run through just a couple of them. It raises the employee contribution rate for KiwiSaver from 2 percent to 3 percent. The irony of that is, of course, that only 2 years ago National cut the KiwiSaver rate from 4 percent to 2 percent. But we are broad-minded. We are pleased to see that the Government has now admitted that it has got it wrong and it is doing a U-turn, which we are now pleased to support. It is a small U-turn. The Government went from 4 percent to 2 percent, and now it has gone from 2 percent to 3 percent, and for National that is a revolution. It is a very small revolution. It is a step in the right direction.

It is worth noting that Labour’s KiwiSaver plan, which was taken to the last election, would have increased the savings rate by four times over National’s plan—four times—and that would have been of huge benefit to savers, to the banking system, and to our businesses that wanted to access investment capital. Labour’s KiwiSaver Plus plan would have really guaranteed a good savings future.

What the chopping and changing on KiwiSaver does, though, is it undermines New Zealanders’ confidence, and it does nothing to improve our dire savings situation. So what we would recommend to the Government is that we are supporting this increase from 2 percent to 3 percent, so why do you not get with the programme and increase it to 12 percent, or 19 percent, which is what the Australians are doing through their employer contribution? That would be real change. This is just tinkering. We are supporting it just because it is going in the right direction. It is a small step.

The bill also confirms that GST applies to late payments. The Minister of Revenue claims that he is merely trying to clarify the law around GST on late payments, but tax experts say that late payment fees neither were particularly good nor were they a service, and therefore they were not supported by the first-principles approach to GST. That is complicated tax language for the fact that this confusion should never have occurred in the first place. We support the tidy-up, but it really should not have been there.

The National Government, of course, has bad form on GST. I am sorry to have to remind the House of this, but, of course, we all have emblazoned in our minds the indelible picture of John Key facing the camera and recalling that he would never raise GST. And then, in a sudden stroke of amnesia, he forgot and he raised it, and then said that he never promised he would not. It is extraordinary, that bloke’s amnesia, is it not? You know, one minute he is running a spy agency; the next minute he cannot remember where he had lunch. It is extraordinary. One minute he is promising he will never raise GST; the next minute he is raising it and then forgetting that he had promised not to. Anyway, let us let bygones be bygones. We are bigger than that. That was last election. We are preparing for the next one. We are supporting the bill. We are supporting the tidy-ups on GST, but that brings me to the next issue.

Members will recall the tax switch. That was the much-heralded idea, and one of really only two ideas that the Government has had in the economic area since coming into office, that it would swap increasing GST on everybody for cutting the top tax rate for rich people—very rich people—and that that would cause the economy to bloom and it would not lose money, because it would be fiscally neutral. Bad idea for everybody except the top few percent, because the economy did not grow and it was not tax-neutral. The taxpayer was out of pocket to the tune of $1.1 billion over 4 years. That was one of two bright ideas National brought to the table as a new Government. The other one was selling State-owned assets. Neither has made a blind bit of difference to an economy struggling to get out of the mire.

National’s tax switch was, therefore, really a tax swindle. Hard-working Kiwi families ended up paying more than they needed to, and they saw little in the way of tax cuts. The current Government has got more problems, because, as we have long suggested, the Inland Revenue Department’s computer system is on the brink of falling over. What that—

The CHAIRPERSON (Eric Roy): Order! Part 5—I am just struggling to find the part of Part 5 that the member is referring to.

It applies to KiwiSaver, and this tax system is required to implement KiwiSaver.

💬 Maggie Barry: Drawing a long bow.

We specialise in long bows. I will come back to Part 5. We have been on a little, what we might call, derivative tour through macroeconomics. We went from KiwiSaver to the savings rate. We went then to the tax system and the fiscal balance, which, of course, is impacted by the savings, and so back to KiwiSaver, of course, which is referred to in Part 5.

💬 Michael Woodhouse: That is a long bow.

It is a long bow but it is relevant, because what we are doing is actually cutting through the fine print to what is really important to New Zealand households, and that is being able to pay the bills, put a few cents away for the rainy day, and make sure that they have left something for their own retirement and something for their kids.

New Zealand needs KiwiSaver and it needs it to be bigger, it needs it to be better, and it needs it to be stronger, and National’s record in this regard is not flash. It cut the contribution rate from 4 percent to 2 percent. In this bill it is lifting it from 2 percent to 3 percent. We think it is a good idea. We are prepared to support the bill, but do not let anybody out there in listener land get the wrong impression that it is a full solution.

I am very happy to take a call on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. We are on Part 5, which deals with, among other things, changes to the KiwiSaver Act of 2006. I have to say I am surprised to be here debating a bill, a measure, put forward by the National Government to increase the KiwiSaver contributions to 3 percent. This is a special moment for me, because one of the very first speeches I gave in this House—I think it might even have been before my maiden speech—was opposing the newly elected National Government’s decision to cut KiwiSaver contributions from 4 percent to 2 percent. I said at the time—I had only just arrived here—that I thought it was a very short-sighted measure and that 4 percent probably was not enough. Here we are, and I am pleased the Government is increasing the contributions to 3 percent. In fact, I think they should go back to 4 percent, and potentially go higher than that. So I am very pleased to have this opportunity to talk about this decision.

I think that moving back to 3 percent is a very sensible move. I think it was an unwise decision to drop the contribution in the first place. I am not entirely sure what the motivation behind the National Government proposing that at the time was, given that the uptake of KiwiSaver was so high. I think KiwiSaver, when it was first created in 2006, exceeded the then Labour Government’s expectations manyfold. I do not think it was possible to anticipate that so many people would sign up for KiwiSaver. It was hugely popular, and I remember watching Michael Cullen continuously ticking off milestones in the KiwiSaver scheme. I think that was really fantastic. I think it was, therefore, confusing when the incoming National Government decided to cut it in half, without any real justification for doing so, because it was clear that 4 percent did not provide a barrier to people wanting to sign up for KiwiSaver. They were already signing up for KiwiSaver in large numbers at 4 percent, and so the argument that more people would sign up for it if we dropped the contribution rate to 2 percent was in fact a little bit of a folly. So I am very pleased to see that it is going up to 3 percent now.

There is another interesting aspect to this, which is that we want to encourage retirement savings generally. Dropping the KiwiSaver contribution from 4 percent to 2 percent created some inequities in the system, whereas the Government had previously provided other superannuation schemes that were more generous than 2 percent but less generous than 4 percent. For example, when I was a public sector employee, I was a member of the State Sector Retirement Savings Scheme and that has a contribution rate of 3 percent. When KiwiSaver was introduced, future public servants were prevented from signing up to be members of that scheme on the basis that everyone could sign up for KiwiSaver. It was more generous, there was a bigger contribution, and therefore they were better off doing that. When the Government cut that to 2 percent, it created some real unfairness because it meant that newer people signing up to be public servants—and we want people to sign up to work in the public service and serve New Zealanders—were being penalised and they were being disadvantaged, because they could no longer get the 3 percent employer contribution that they might have been able to get before KiwiSaver was introduced and before membership to the State Sector Retirement Savings Scheme was cut off. So this bill now brings KiwiSaver back up to that rate. I think that is very good, and I am sure it will be welcomed by the people who would otherwise have missed out on that extra 1 percent employer contribution.

There is an interesting provision in new section 112B, inserted by clause 157B, about non-deduction notices. I have not had a chance to study this in great detail with reference back to the principal Act, and, of course, when you are reading an amendment bill without making reference to the principal Act, sometimes things are not always as clear as they might otherwise be. But by my reading of this matter, people can, whenever they want to, issue a non-deduction notice to their employer and stop their KiwiSaver contributions, and the employer contributions would also cease at that point. Previously, you needed the approval, I believe, of the Commissioner of Inland Revenue or his or her delegated agent in order to cease your contributions to the KiwiSaver scheme. What I am wondering is whether these non-deduction notices remove that requirement. Can anybody just opt out of KiwiSaver whenever they feel like it, or will they still need that waiver, if you like, from the Commissioner of Inland Revenue? Certainly, read on its own, that is what that section would suggest, but, as I say, I have not got the principal Act in front of me to refer back to, and it may well be that there are sections in the principal Act that I have missed that might actually cover that issue.

There are some other interesting provisions in Part 5, in particular the provision relating to unsuccessful software development in new section DB 31B, inserted by clause 163. Section DB 31B(1) states: “This section applies when a person incurs expenditure in the development of software for use in the person’s business if—(b) the development of the software is abandoned before the software is fit to be used in the person’s business;”. I think it is really important to note that Government software development does not come in under this category here, because, as we have seen in recent days and weeks, the Government is not doing particularly well when it comes to software development and how it manages information within departments. I think maybe we do need to look at how we could incentivise the Government to up its game here. Obviously, a tax deduction is a bit pointless because the money would go back to the Government in the first place, but there is merit in discussing how we could get the Government’s software development and IT project development sharpened up a little bit in light of recent announcements and recent debates that have taken place in this House.

There are some other interesting provisions in this part, such as clause 166, “Spreading forward of deductions for repairs to fishing boats”. I have to say that is an interesting topic. I am sure the owners of the fishing boats will be very, very pleased with these amendments. So on that note, I would finally say that the Labour Party is supporting this bill because it contains many measures that we do support, and particularly I am pleased—

💬 Dr David Clark: What about cabbage boats?

What about cabbage boats? That is a good point actually. I have just thought of another 5 minutes! Will this amendment to the repairs of fishing boats apply to cabbage boats that Mr Banks might be wanting to come into the country on? That is a very good question. I do not know, because the definition of a fishing boat—from just glancing through it—is defined under the Fisheries Act 1983. I do not know what the definition of a fishing boat is. I am not sure whether John Banks’ cabbage boats would necessarily come in under that, but I am sure that one of the other members of the Opposition, or the Minister in the chair, the Minister of Consumer Affairs, might be able to clear that up for us. He is nodding his head, so I am feeling very optimistic. I think he is misleading me, though, because I get the sense that he is not going to take the next call and answer all my questions. I am going to be bitterly, bitterly disappointed by that, because I think there are many issues to be cleared up, particularly this new revelation that has just arisen a few moments ago that in fact John Banks’ cabbage boat could be covered by this exemption or these requirements around certain repairs to fishing boats. That is a very interesting development, and one that I think it would be interesting to hear the Minister’s feedback on.

I was winding up before, and David Clark kindly gave me some new material to work from, but finally I just want to summarise by saying that the Labour Party supports this bill. We are very pleased with the KiwiSaver amendments in particular. We do not think that the Government did the right thing in cutting KiwiSaver contributions from 4 percent to 2 percent, particularly at a time when the Government was saying it wanted New Zealanders to save more money, and its decisions around KiwiSaver certainly went in the opposite direction. So we are very pleased to see it going back to 3 percent, and the Labour Party will be supporting this piece of legislation.

I move, That the question be now put.

I am taking a call on behalf of New Zealand First on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. We also will be supporting this bill, and now that we are on to Part 5 of the bill we certainly also support the whole new structure in terms of the employer contributions for KiwiSaver returning to 3 percent from 2 percent, having been reduced from 4 percent a year or two ago by the National Government. It is somewhat ironic that, having halved them, the Government is now increasing them by 1 percent back up to 3 percent, and one wonders why it dabbled with the KiwiSaver scheme in the first place when it was working so well.

There is a little bit, at the moment, of a feeling of rearranging of the deckchairs on the Titanic when it comes to this Government at the present time. There seems to be an awful lot of tinkering around the edges when it comes to some of these taxation things, as we have heard earlier in the evening on other taxation matters where the Government seems to be intent on just tinkering with the trivial in taxation while leaving the big-picture stuff aside.

In that respect I have already spoken in the House tonight about the several billion dollars in tax deductions for the wealthy in this country that resulted in us in an earlier bill having to look at the CPI adjustments to do with the cigarette excise, and here we are looking at putting up the percentages again. Again, there is an awful lot of tinkering without solid results. In fact, here is a situation where the Government is having to basically concede that it was wrong on the KiwiSaver deductions. So, hopefully, this will help increase the savings of Kiwis, with the contributions from employers increasing to 3 percent, and it will help the ongoing savings of New Zealanders for their retirement in the future.

But it is interesting looking at some of the other clauses in this bill. The previous Labour speaker, Chris Hipkins, also mentioned about the software deductions and that if you have failed software, then you can have the appropriate tax deductions. Presumably this will not apply to the likes of Work and Income and to other Government departments that have had some colossal software failures, obviously, in recent weeks under this Government and where there have been some huge, huge holes found in the software and in the access of our computer systems in some of the Government departments. So it is somewhat ironic that if you have failed software, you will be able to get deductions under this new taxation. Perhaps they could foresee that there were going to be some of these problems with some of these Government departments.

But it is also interesting, when it comes to clause 172(1) under “Fees”, that in terms of departmental consultation the fees are going to be increased from $50 to $150 in terms of deductions for consultants such as valuers, engineers, and architects in obtaining advice as to the estimated useful life or estimated residual value of the property to which the application relates. And is it not interesting that we have a Government that often complains about the rising cost, for instance, of charges by local government, and that local government has been exceeding its charges exorbitantly, according to some of the National Party members, and increasing the charges colossally. And here this Government is increasing the fees in relation to this regulation from $50 threefold to $150. That is a pretty jolly good increase by anyone’s standard, to put forward a threefold—300 percent—increase in fees. So again it is a little bit like the bull in the china shop or throwing stones in glasshouses. This Government is quite happy to put up fees by three times, but then criticises other parts of local government and other parts of all sorts of things that simply are doing their job, and this Government sees no problem at all.

So New Zealand First will be supporting this bill but it is very mindful of the fact that once again a lot of this is overdue, a lot of it is tinkering, a lot of it should never have happened in the first place, in the case of the KiwiSaver changes. Basically, as I said before, the deckchairs of the Titanic continue to be rearranged. We hope that finally one day this Government will get things on an even course so we do not have to have these sorts of bills coming to the House.

I move, That the question be now put.

Motion agreed to.

The question was put that the amendments set out on Supplementary Order Paper 98 in the name of the Hon Peter Dunne to Part 5 be agreed to.