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

on behalf of the Minister of Revenue: I move, That the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill be now read a third time. I will provide a brief recap of the main features of this bill. The bill addresses the costs of record-keeping for businesses by allowing electronic tax return filers to retain copies in an electronic rather than a paper format, thus modernising record-keeping requirements and reducing record-keeping costs.

💬 Mike Sabin: Very good.

💬 Hon Maurice Williamson: A thoroughly modern Minister.

The bill will bring greater equity to the tax returns filing system by tightening the rules, which currently allow salary and wage earners who are not required to file a tax return to select individual advantageous years in which to square up their tax obligations—that is, the years they are entitled to a tax refund. When selecting a favourable year for a tax square-up, this bill proposes that taxpayers will be required to have their tax obligations squared up for each of the previous 4 years, as well.

💬 Mike Sabin: Very good.

Another proposal in this bill will give businesses greater certainty over the tax treatment of costs incurred on software development projects—

💬 Hon Maurice Williamson: Now you’re talking.

—that are unsuccessful, by allowing an immediate deduction for expenditure incurred in the year the development is abandoned. Changes are proposed to KiwiSaver to make the scheme more sustainable by increasing private contributions. The employer and employee contribution rates will increase from 2 percent to 3 percent from April 2013. The bill also addresses the tax treatment of profit distribution plans, proposing that shares issued under profit distribution plans be treated as a taxable dividend. This will ensure consistency of treatment with other similar arrangements, while also improving the integrity of the tax system. A number of GST-related changes, which largely deal with technical matters resulting from rules introduced last year to prevent phoenix fraud schemes, are included in the bill. These are the main features of this omnibus bill.

In addition, a Supplementary Order Paper to this bill, Supplementary Order Paper 98, made a number of amendments. These included earthquake-related measures to address issues raised by Canterbury people—Cantabrians. In particular, these issues relate to the tax treatment of damaged or destroyed assets and insurance payouts. The Supplementary Order Paper also contained a number of remedial items to ensure that the international tax rules are working as intended. In particular, changes have been made to relieve overtaxation of interests in controlled foreign companies by better aligning the tax treatment of income and related deductions.

I would like to express my grateful thanks to the many submitters to this bill, whose efforts have helped shape the bill before us. My thanks go also to the officials and drafters for their work on this bill, which will help improve the integrity of the tax system and improve fairness. Thank you also to the Finance and Expenditure Committee for its good work on this bill and for its recommendations. Thank you to the Hon Maurice Williamson and Mike Sabin for their support for this bill. Once again, I commend the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill to the House.

This bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, is one that the Labour Party will support. We are always keen to see the loopholes in the tax system plugged. We are supportive of this tinkering—it is not a bad kind of tinkering, generally—but we would prefer that, actually, the Government was taking the big choices, making the big changes, that are necessary to get our economy back on track.

Look, the Government has a problem. It has a hole to fill. It knows that the tax take has dropped by 4 percent. Its own department, the Inland Revenue Department, tells it that 1.5 percent of that can be attributed to the global financial crisis and that 2.5 percent of that can be attributed to policy changes. The Government described its 2010 tax package as broadly fiscally neutral, but that has proven not to be the case. This Government is looking to fill that revenue hole, and some of the changes we see in this bill are an attempt to do just that, but the bill will not change the fundamental outlook for our economy. It is a missed opportunity—another missed opportunity—by a National Government that has no plan.

We need pro-growth tax policy in this country. We need research and development tax credits. We need a capital gains tax that neutralises the investment signal and encourages money to go toward the productive sector. This is a Government that has abandoned our exporters. Aside from refusing to implement pro-growth tax policy, it is also refusing to give the Reserve Bank the mandate to act in the interests of jobs and employers. It is more interested in interest rates and the profits at the big end of town.

This Government has also failed in the area of KiwiSaver, although this is one area in the bill where the Government is to be commended. Having previously dropped the rates of contribution from 4 percent to 2 percent, in this bill the Government now puts them up from 2 percent to 3 percent. It is a U-turn. It is a small one, but it is one in the right direction. But again it must be said that the Government is tinkering.

When this Government does want to make those big changes, how is it going to do that? This is a hypothetical question, and if it was a Minister in the House at question time, he or she would probably refuse to answer this question, on the basis that it is hypothetical. We do not see any plan for the changes that are needed to get our economy back on track. All we see is New Zealanders leaving at a rate of a thousand a week for Australia.

However, we know that even if the Government wanted to make the big changes, and wanted to put them through in a bill like this, it could not. The Prime Minister said in February this year, on St Valentine’s Day—he made a promise to New Zealanders on St Valentine’s Day—that tax policy was being held back because the Government computer systems “can’t actually support radical changes from Government.” That is why we are being asked here to make these tinkering changes. The Prime Minister said that at that stage he did not want to make any radical changes and so on, but he has admitted that if the Government wanted to make the big changes that the economy needs, it could not make them. I will quote the Prime Minister further. He said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” That is what Mr Key said. That was 8 months ago. We still have not heard how he is going to fix the tax system, which is failing us as a country.

Voluntary compliance is dropping in New Zealand. That is part of the reason the tax take is down. These little gap-pluggers and minor changes that the Government is putting through are in the right direction broadly—we will be supporting them—but they are not going to get our economy back on track.

We need a plan from the Government as to how it is going to address the inadequacies of a tax computer system that was designed 20 years ago—before Facebook, before Google, and, in fact, before the internet as most of us know it. This is a computer system that is out of date. It is held together by sellotape, people who have worked at the Inland Revenue Department say. A huge amount of its resource goes into maintaining a computer system that cannot cope with the kinds of changes we need in our economy to get it back on track, and the Government is not addressing this issue. We are seeing more and more privacy breaches in the Inland Revenue Department, which is one of the symptoms of a department under pressure. This is a pattern across Government. Of course, we have seen it in ACC and Work and Income. It is a systemic problem that the Government is not addressing. It means that we are getting this kind of legislation that we have got here in front of us. It makes small changes that are in the right direction, but that are not going to fundamentally give us the kind of economy that we need.

I want to talk about KiwiSaver, which is directly in the bill in Part 3. Part 3 talks about how that rate is going to go from 2 percent to 3 percent. But let us remember that in 2008 National cut the minimum contribution rates for employees and employers to 2 percent, as I have just said, and then it discontinued the employer tax credit. It also capped the employer superannuation contribution. It discontinued the fee subsidy of $40. At the same time it repealed the Employment Relations Act.

The National Government is not really in favour of this increase. It is reluctantly waking up to the fact that we have a savings issue. It is beginning to address it, but it is not addressing it in a way that is going to see substantive change. We would not even be having to do this if it had not cut the rate in the first place. That is the most important thing to note. This is extra work for the Parliament that would not have had to happen if the Government had not cut that contribution rate for employees and employers in the first place.

This is a bill that illustrates more about what the Government is not doing than about what it is doing. The Labour Party has a plan. The Labour Party has a clear plan and has enunciated it. We need pro-growth tax reform. We need reform of our monetary policy so that the Reserve Bank has the powers that it needs to support our exporters. We need savings. We need procurement policies. Labour in Government has policies that would be transformative of the New Zealand economy and would ensure that the industries in our country are well supported, but here all we see is more red tape for business, and it is consistent with other areas. Here we see a few tinkering solutions to small tax issues.

We also see in this bill a write-off for software development. This is one of the positive things, and I do want to compliment the Government on the small positive steps that are in this legislation, because it is good to encourage the little steps forward that are in the right direction. We see in the bill software development write-offs. This is a sensible move—this is a sensible move. It will make sure that the risk is taken out of software development, so that we get more innovation in our country, and we have more successful industry in that regard. I am not sure whether it will be something that Kim Dotcom can access. That might be a question for the Minister to answer at the end of this—whether Kim Dotcom can access the software development write-offs, whether that is a possibility.

We know that what is really needed is a change in the way our tax system is structured. We could have called this bill a lot of things. We could have called it the “Tinkering While Wages Plummet Bill”. We could have called it the “National Flip-Flops on KiwiSaver Bill”. We could have called it the “Can’t Make Big Changes Because Computer Systems Aren’t Up To It Bill”. We could have made it the “Fifty-three Percent of Children of Sole Parents are in Poverty Bill” because the economy is not growing and tax settings are not right. We could call it the “Confirming the 2010 Tax Switch Rates, Which Saw 44 Percent of the Value of the Tax Cuts Go To the Top 10 Percent of Earners While Just 2 Percent of the Value of the Tax Cuts Went To the Bottom 20 Percent Bill”. We could call it the “Confirming the GST Rise That Bit into Low Earners Bill”.

We have seen the median wage drop further. We know that those tax changes that were made in 2010 have made our economy so much less fair. We have seen those who are already wealthy prosper further, and those who are struggling struggle more. That is what this bill is asking us to confirm. We know that that is something that we on this side will have to swallow as a bitter pill, because the other measures in the bill are reasonable, if somewhat moderate, but could do better.

When 90 of the 100 wealthiest New Zealanders are not on the top tax rate we know something is wrong. We need pro-growth tax reform, and we need a capital gains tax that makes sure that all New Zealanders are paying their fair share. That is what New Zealand needs. New Zealand needs big changes to help our economy grow. We need savings policies, we need monetary policy reform, we need procurement policies, and we need pro-growth tax reform.

That was an appalling speech from that last member, David Clark. It was full of doom and gloom, and that was it. Anybody would think we were back to the dark old days of the Labour Government. I was about to pick up the telephone and ring my doctor, and say to the doctor: “If I listen to David Clark speak for 10 minutes, will I live longer?”. And his answer would have been: “No, but it surely would seem like it.” It was an appalling speech.

This piece of legislation, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, is about a Government that is building a more competitive and productive economy for New Zealanders. It is about lifting economic performance. It is about creating 70,000 jobs so far, with many more to come, and boosting incomes for improving living standards for people from the very north of the North Island to the south of the South Island.

This is great stuff from a good Minister of Revenue and a good Government. It is no wonder that was an appalling speech from the last man on his feet, David Clark, because there is nothing that those members can add that would do any more or any better than what our Minister is delivering for us today.

What will this bill do? In brief, it simplifies tax filing requirements for individuals and supports businesses and the way they handle their taxes—something that Labour could have done when it was in Government for 9 years, but no, apparently Labour members think that is tinkering. They were not interested in it then. The bill brings in measures to ensure that expenditure on software development is now deductible. Those members could have done that in the 9 years of the Labour Government, but no, it was not done then. They could not be bothered with it back then, and today they say that it is tinkering. The bill also changes the thin capitalisation rules for foreign-owned banks. I bet you that this issue has not arrived just now or happened just now. I bet you this was an issue during the 9 years of the Labour Government. Did those members do anything about it then? No, and today they call it tinkering. The effect of these rules is to limit foreign-owned banks’ interest deductions against the New Zealand tax base. That is good for New Zealand taxpayers because it makes the taxes paid broader, and more people share in this, as they should do.

Two measures announced in the 2011 Budget were an increase in the KiwiSaver minimum contributions for employers and employees, and an increase in the minimum equity holding for foreign-owned banks. I want, for a moment, to speak about KiwiSaver—a very important policy that a lot of New Zealanders are involved in and enjoy. I bet you they are glad there is a National Government. We have done a lot to reinforce, strengthen, and future-protect KiwiSaver for all New Zealanders who are involved.

The Government is committed to lifting the national savings rates to reduce New Zealanders’ longstanding debt to overseas lenders, and to deepening our capital market so that businesses can access the funds they need to grow. This was not something that happened under a Labour Government over 9 years. In fact, one need only do what the Labour Opposition likes to do—ask the Parliamentary Library for some research, and come to this House to quote it and table it—and one will see that New Zealanders borrowed more and became more indebted than at almost any other time that I can remember or research in the 9 years that Labour was in Government.

So KiwiSaver is very important. There are 1.9 million New Zealanders involved in KiwiSaver. It has had about 17,500 new members a month, for each month, over the last 12 years. Under a National Government, KiwiSaver funds have grown from $9 billion to $12 billion in the past year. KiwiSaver funds are estimated to be worth $60 billion by 2025. That is our commitment to this. This is not tinkering, as the Labour Opposition would say. These are good, hard-core facts. It is a commitment on behalf of the National Government to New Zealanders.

The final point I want to raise is around Supplementary Order Paper 98, which has been brought before us to benefit quake victims—victims who are still facing real and ongoing difficulties. It is 18 months since the tragic and devastating events on 22 February, the earthquake in Christchurch, and this Supplementary Order Paper is another way the Government is supporting the people of Christchurch by providing all the practical help that we can.

This is not tinkering. This is a robust piece of legislation. It is a very big piece of legislation. I am glad that the Labour Opposition has said that it will support it. It surprises me, because anything of worth that this Government does, Labour members are not onside with. They want New Zealanders to think that things are much worse than they are. This is a good piece of legislation. I look forward to them joining us, finally, on doing something that is good for New Zealanders. Thank you.

We heard from the last speaker, Todd McClay, that New Zealand is doing well, from the far north to the far south. Well, from the north to the south people are losing jobs—from the north to Bluff. Today on the West Coast another 200 people lost their jobs. There are 160,000 people seeking jobs, and 170,000 people under this Government have left for Australia, after National’s election promise in 2008 ran on the slogan “Wave Goodbye to Higher Taxes. Not Your Loved Ones.” Since then more people have moved to Australia than is the combined population of Dunedin and Invercargill, if you want a South Island comparison, and more people than live in Hamilton, if you want a North Island comparison. Yet this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, does nothing substantial to change the economic fortunes of our country.

What could this bill have done? Well, this bill could have done something substantial, but, of course, you never get that from a National Government. All National Governments have ever done through history—and this National Government is no different—is trim Government expenditure. That is appropriate; we are not arguing against that. Trimming Government expenditure to get back into Budget surplus is an important thing to do. National Governments deal with labour laws in the way they think fit, which is always to reduce wages. Other than that, National Governments never, never embark upon substantial economic reform—never. They are conservatives, and conservatives around the world trim expenditure, cut back labour laws, and do nothing else. It is always the progressive side of politics around the world, whether it is in New Zealand, Australia, or Great Britain, that pulls the levers that change the economy. If you look back at the history of New Zealand when New Zealand has been in the doldrums, it has been progressive parties that have come in and made the fundamental changes that were necessary to the New Zealand economy. That was true following the Great Depression. What did the National Government do in relation to the reforms of the then Labour Government following the Great Depression? It followed them. We then got into a period of stagnation under Mr Muldoon, and it was a progressive Labour Government that made the case for change and changed New Zealand’s economy fundamentally for the better. What did National do following that? Well, what it always does: it attacked labour relations, it did not change economic settings, and it cut Government expenditure a little bit, but it did nothing substantial to alter the shape of the economy. Here we are again, with a global financial crisis and the greatest recession that the world has faced since the Great Depression in the 1930s, and what is the National Government doing? Very little.

What has happened to New Zealand? Well, slowly we are getting back towards Budget surplus. That is the Government’s part of the equation. But New Zealand is getting poorer every year because we have a balance of payments deficit that is already second worst in the developed world after Greece.

💬 Hon David Cunliffe: What?

The second worst in the developed world after Greece. Last year alone it was $10 billion. That $10 billion hole was plugged through more borrowing from overseas and the sale of assets, and what is the Government’s plan for this 3-year cycle? Its big plan for this 3-year cycle is to sell what already exists, to privatise our already profitable and successful power companies—what you do when you do not have a plan. Even that has gone amiss. What was its plan for its last 3-year term? Mining in national parks. Look where that is. What has been the big centrepiece of the Budget this year? Increasing student performance through larger class sizes. The Government is so bereft of vision, and this bill amplifies the point.

I see Dr Nick Smith there. I actually think Dr Smith has a good environmental ethic. I think he actually wants to make a difference to the environment. What is the measure that we have in New Zealand to control the growth in our emissions under this National Government? It is meant to be through pricing emissions to create an economic incentive for people to go green rather than pollute more. In this bill we have changes to emissions units law relating to forestry. The last bill we heard reduces the carbon price in New Zealand to 50c a tonne. As Brian Fallow estimated today, for a major emitter, if it has $1 million of turnover, its emissions cost would be $200—$200—a fraction of a fraction of a fraction of 1 percent. How can you rely on a price to alter behaviour if the price is meaningless?

What else could be done here? Well, the International Monetary Fund, the OECD, the New Zealand Treasury, the Reserve Bank, the Labour Party, the Greens, just about every other Western country in the world, and virtually all of the economists in New Zealand say that people should be investing in our economy on the basis of the profitability of investment, not because of a tax bias. In New Zealand at the moment we lament the fact that we have got this enormous trade deficit and current account deficit—both—and the current Government refuses to pull the levers that will fix that, including to bring forward some pro-growth tax reform, either through a research and development tax credit or through a capital gains tax. The most important of those two is a capital gains tax so that people invest on the basis of the profitability of an enterprise rather than a tax bias driving too much investment into the speculative economy. It is not just the Labour Party saying that. It is not just the history of 30 years of current account surplus because we speculate too much in houses and do not invest enough in our productive export or import substitution businesses. It is the IMF, the OECD, Treasury, and the Reserve Bank, and yet it is not in this bill, and the Government has put it off limits.

What else is not in this bill? KiwiSaver. We heard the National Party talking about KiwiSaver. Actually, it was not National’s policy; it was a Labour Party policy. I think the Budgets that introduced it were opposed by National, from memory. Everyone knows that the biggest difference economically—or I believe the biggest difference economically—between New Zealand and Australia and its increasing rate of earnings compared with New Zealand over the years is not mining. It is not mining. Those gaps in earnings arose when mining was in the doldrums. Those gaps arose because Australia invests more in its productive enterprises, whether it is in mining or in other parts of the economy, and it does that because Australians save more. Its KiwiSaver equivalent is compulsory for everyone in the workforce except for the self-employed and the occasional exception for hardship. That is what the Labour Party proposes for New Zealand. What does this bill do? As Dr David Clark says, it reverses the Government’s earlier reversal. Previously, it reduced the rate of contribution to KiwiSaver; now it is increasing it again to “3 plus 3”, but still it has not grasped the big nettle, which is making it universal. We heard the last speaker say that the average number of enrolments to KiwiSaver was so many thousand per month. What a misleading use of statistics. In just the last week it has been announced that the rate of new sign-ups to KiwiSaver is dropping—dropping very substantially. It will not increase again until we have a stronger economy under a Government led by a party other than this backward-looking National Party, and until we have a universal KiwiSaver scheme.

Let us reflect on what this tax bill also does not do. It does not reverse the increasing inequality that we have in New Zealand. Whether it is income inequality or asset inequality, it is going up under this Government. It is going up in part because 40 percent of its income tax cuts went to the top 10 percent of income earners. This bill does nothing to reverse that. The latest issue of The Economist magazine says there is a need for more progressivism in the world because of rising asset and income inequality in the world. New Zealand has had a higher rate of increase in inequality in recent years than America. We started from a better place, and therefore we are not yet as unequal as America, but we are heading in that direction because of policies brought forward from this National Government that gave 40 percent of its income tax cuts to the top 10 percent. We had the audacity of the Deputy Prime Minister, the Minister of Finance, turning up in the House this week and saying that average after-tax incomes had gone up. Well, that is true, but only if you include that top 10 percent. For more than half of all New Zealanders, real incomes are down—real incomes are down. This bill is a missed opportunity. It only tinkers.

I rise to speak on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill on behalf of the Green Party. This bill, amongst many other things, sets the annual income tax rates. The Green Party does not agree with the changes that the Government has made in income tax rates, and for that reason will be voting against the bill.

When you think about the changes that the Government made in terms of setting income tax rates, fundamentally what it did was cut income tax for high-income earners and increase the taxes paid by low-income earners, in the form of GST. That was a fundamentally inequitable change in the tax system. What it meant was that lower-income New Zealanders found themselves having to pay more for their food and groceries at the supermarket because of GST, and upper-income earners found themselves with a whole bunch of spare cash. The Government has got a plan for what it wants to do with that. It wants to give those people the assets that it wants to privatise. It wants to give them to the people whom it gave the income tax cuts to, because they are the only people in New Zealand who will be able to afford to buy the shares in the State-owned enterprises.

Of course, from a theoretical point of view, if your objective with income tax cuts was to stimulate the economy, you would do the exact opposite to what the Government did. If you want to stimulate the economy you give tax breaks to low-income earners, because they tend to just spend the money, rather than to upper-income earners. So the Government did the exact opposite to what you would do if your purpose was to assist the economy.

I think it is also illustrative to compare what the Government is doing around carbon taxing and income taxes. I think an interesting comparison is what has happened in Australia. In Australia what they did was they brought in a carbon tax of A$23 a tonne. It is applied to the largest emitters, particularly coal-fired electricity, which is one of the critical areas, and they used the revenue they gained through a carbon tax to increase the tax-free threshold from A$6,000 to A$18,200. I think that that is the alternative proposal that we could have had in front of us.

When you look at the overall tax system, the Government has made a choice to have an emissions trading scheme that basically means that taxpayers are subsidising pollution. It is a very expensive scheme from the point of view of the taxpayers, because they have to pay a lot of money to subsidise pollution. At the same time the Government has given big tax cuts to upper-income earners, and basically lower-income earners are faced with an increased GST. That produces an outcome that is highly unequal, but it is also an outcome that subsidises and encourages greenhouse gas pollution because it is heavily subsidised in the New Zealand system.

Compare that with the Australian system where they introduced a real price on carbon, A$23 a tonne, and then used the revenue to increase the tax-free threshold. Tax-free thresholds, by their nature, benefit those who are on lower incomes, because everybody gets the same tax break, the same quantity of money, if you like, in the form of a tax break when you introduce a tax-free threshold. So that was the alternative model, which we have not gone down the path of. The model in Australia was put in place because of the influence of Greens working with the Australian Labor Party, and I congratulate the Greens over there on that.

The reality here from the point of view of a business that is efficient in the way it uses carbon is that that business has to pay higher tax rates in order to pay the cost of the emissions trading scheme so that it can subsidise those businesses that are inefficient in the use of carbon. I think it is very important to get this through—there is no free lunch around the emissions trading scheme. Someone has to pay the taxes to pay for the subsidies for pollution. That means that a business that is doing the right thing by becoming more efficient and reducing its greenhouse gas emissions per dollar of output—doing exactly what we need them to do—effectively has to pay higher taxes in order to subsidise the business that is producing more pollution, because this money has to come from somewhere; it does not come from nowhere.

If we had a system where the polluters actually paid, then it would mean that we would have a signal to the business that is highly polluting that it should reduce its pollution. Instead, under our system, a signal goes to the efficient carbon producer, the business that we should be encouraging. We say to them: “No, you have to pay higher taxes because the subsidies through the emissions trading scheme are very expensive, many billions of dollars, and so we have to have higher taxes to pay for that.” That is the path we have gone down.

We have gone down a path of a highly inequitable tax system in which there is no tax-free threshold, effectively, at the bottom, and at the same time we have cut the top rate. So we have lower rates at the top compared with the Australian system, for example, and then that runs in parallel with the carbon pricing where, effectively, we are subsidising carbon pollution rather than putting a price on it. It is the exact opposite to what you would do if you wanted to use the tax system to produce more equitable outcomes. It is the exact opposite to what you would do if you wanted to use the tax system to encourage behaviour that would reduce carbon pollution. That is what this bill is making sure carries on by setting the annual rates. That is what this bill is putting in place to carry forward a tax system that not only makes our society more unequal but encourages greenhouse gas pollution. I just think it is amazing that the Government thinks that that is a sensible approach—that we should be subsidising pollution.

The other part of this tax bill that is really missing, I think, is a crackdown on the foreign tax trusts. I must confess that until a couple of months ago I did not really understand the way foreign tax trusts work. I understood the domestic trust system. The way a foreign tax trust works is that if you are a foreigner from outside New Zealand you can set up a trust here, and as long as all the income comes from outside New Zealand, then you can have that trust here. Your identity is not known to anybody except the New Zealand - based trustees. Your income is completely tax-free inside New Zealand because the income comes from outside New Zealand. So there is no New Zealand tax on your foreign trust, and that money and those assets are completely hidden.

When you register a foreign trust in New Zealand, you have to register only the names of the New Zealand trustees of the trust. Nobody knows who the actual beneficiaries—the people who really own, and benefit from, the assets—are. That matters because there is an international problem of tax avoidance by very wealthy individuals. Internationally, nobody is quite sure of the size of this problem. It is trillions of dollars. The way these people avoid paying tax is by using things like the New Zealand foreign trust regime.

There is no way that, say, the Government of Mexico knows that one of its citizens is hiding their assets in New Zealand, because there are no identifiers on the New Zealand foreign trust. There is no way for the Mexican Government to know that one of its citizens has parked a billion dollars in a foreign trust in New Zealand and is paying no tax on any of that. When the Minister of Revenue was asked about this, he said it was a legitimate tax-avoidance. He said that this is legitimate tax-avoidance. I guess it is lawful in New Zealand, but whether it is lawful internationally is a different question.

We have responsibilities to other countries to try to reduce international tax-avoidance, because if we do not do it, then there is nothing to stop very wealthy New Zealanders using other structures in other countries to avoid paying their tax in New Zealand. What that means is that middle-class and working New Zealanders who pay PAYE tax have to pay more tax to cover the hospitals, the schools, and everything else that tax pays for. Working people end up paying more tax because the ultra-rich are avoiding paying their tax by hiding it in structures like the New Zealand foreign trust regime.

Because we have, under our legislation, established a foreign trust regime that enables foreigners to avoid paying tax in their domestic countries—they can avoid it by hiding it in New Zealand—we are helping with international tax-avoidance by the ultra-rich. That means that ordinary workers—people who pay PAYE tax—have to pay more tax to cover the tax that is not being paid by those at the top end who are using things like these foreign trusts as instruments to avoid paying their fair share. That situation has not been addressed by this bill.

When the Minister of Revenue and the Prime Minister were asked about it, they said it was legitimate tax-avoidance. It is not legitimate tax-avoidance. It is completely immoral and wrong, and the fact that the Government is not addressing it is immoral and wrong. We need to crack down on tax avoidance so that ordinary working people do not have to carry the full burden and the ultra-rich are made to actually pay their share of tax as well.

This bill sets the tax rates for the next year. They are highly inequitable, and for that reason we will not be supporting this bill.

It is my pleasure to speak on this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. I was pleased to receive and listen to David Parker’s history lesson on tax a couple of speeches ago. He talked about the great contribution that the Labour Party made in the 1940s and 1950s to New Zealand. Back then, of course, Labour bequeathed top tax rates in the high 70 percent range—78 percent, I think it was. Company tax was also up around that region. That really is what David Parker, I think, wants and would hope for—

💬 Hon Clayton Cosgrove: Remember Muldoon?

—and so does Clayton Cosgrove. Why do they not come out and scream it, and say: “Let us go back to those limits.”, like our friend the French President is trying to reassert today? That is what they stand for, and I am sure the Greens would support that as well—getting it back up into the 70 percent range. That is what we need to get the economy going again!

I suppose tax is an important thing. It is a big part of politics. Taking money off some people in order to give it to other people is nine-tenths of what politics is about, and there are a lot of moral hazards in the process of taking from one to give to the other. It all comes down to perceptions of fairness. What is fair? On the other side, they tend to concentrate on fairness being about smoothing out incomes in order to help the poor. There is a strong element of redistribution in our tax system reflecting that view. On the other hand, it is also fair to reward effort. I am sure the people over there will understand that if they were doing a good job as a caucus member, they would expect to be rewarded with promotion, and that leads to all sorts of arguments.

It is also a question of whether it is fair to debase the currency by printing money, for example, which would dilute savings. I do not think it is. Is it fair to tax capital gains, as Labour and the Greens want to do so much, when half of capital gain is purely inflation? Why should you be taxed for that? That does not seem very fair to me.

It was also interesting, I thought, to hear Russel Norman talking about the signals that the tax system sends through the emissions trading scheme, and all that. He understands the logic that if you do not want something, you tax it, and if you are trying to steer people away from something, you tax it, but, again, he does not seem to accept that same logic when it comes to high income tax rates, which he always advocates for. He does not accept that if you have high income tax rates, you may undermine people’s incentive to work, which is a pretty strong signal to send through the tax system.

So by way of those broader comments, I want to draw a little bit closer to the bill itself. This bill is really the latest piece of tax legislation aimed at making the tax system simpler and fairer for people and businesses. It comes after some very substantial changes to the tax system that this Government brought through a few years ago, and continues with maintaining and keeping the tax system fit and healthy.

It also responds to circumstances. Supplementary Order Paper 98, which relates to benefiting quake victims, is an important part of this legislation. It has been nearly 18 months since that earthquake, and this Supplementary Order Paper brings in the whole issue of tax depreciation, roll-over rules, changing the year in which income or expenditure is recognised in some circumstances because of the earthquake, and extending roll-over relief for properties held on revenue account that have not been demolished. I think these are all important things to be introduced. I support this third reading, and the sooner this legislation becomes law, the better for the country. Thank you.

I take a call on behalf of New Zealand First for the third reading of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. As I have said in the House in the two previous readings, perhaps we would not be tinkering around the edges with these tax matters had the National Government not provided the several billions of dollars of tax deductions and reductions to the wealthy individuals in this country 2 years ago—the very wealthy individuals like the head of Telecom, who got $5,000 a week back in his pay packet in tax reductions, the Prime Minister, who got $1,000 a week back in tax reductions a couple of years ago, and many, many other very well-heeled individuals in New Zealand who got many thousands of dollars per week back from their PAYE—in terms of National giving the incentives to its mates. As a result of giving those billions of dollars away 2 years ago—and we continue to feel the pinch across New Zealand in many areas—the Government now, of course, is having to look at every last cent in the tax take to try to balance the books, including, as we saw just a few months ago, picking the pockets of the young schoolboys and schoolgirls in this country delivering newspapers and leaflets, to get $14 million in tax revenue back from those young children in order to try to cover the Government’s other imbalances.

This bill is about more than just some of that tinkering of the taxes. The main thing I see in this is actually a concession from the Government that it was wrong on the KiwiSaver scheme. Two years ago it reduced employer contributions from 4 percent to 2 percent; it is now admitting that that was a huge error on its part. This bill moves those employer contributions back up to 3 percent—not all the way back to where they were several years ago, but it is a big improvement to get them back up to 3 percent. I was just looking at some comparisons today, and I note that in Australia employer contributions are 9 percent. We do wonder at times why they are doing so much better in Australia. Why are they saving far more money in Australia? Why are people generally better off in Australia? Why are those who retire in Australia on a higher average standard of living and seem to be that much more comfortable?

💬 John Hayes: No, they’re not.

Well, they are. They certainly are, and that is why more New Zealanders are going to Australia as well—to try to get on to the Australian bandwagon. You can understand why, when the Australian Government sees fit to have its laws such that employers contribute 9 percent to its scheme, while this Government 2 years ago was so miserable as to reduce our employers’ contributions from 4 percent to 2 percent.

Again, what did it do that for? It did it to help out its mates. There would have been pressure from Business New Zealand—you know, its old mates at Business New Zealand—from the chambers of commerce, from the Employers and Manufacturers Association, and from all its usual mates, who would have said: “Oh! We need some help here, guys. We helped get you into Government. We helped put you on to the Treasury benches. We helped put you there. We helped give you the BMW limousines. So it’s time for you to give us something back.” So the Government did. Two years ago it gave those employers the opportunity to reduce their contributions to the future of New Zealanders’ savings from 4 percent to 2 percent. And now it admits in this House today—and the third reading finally confirms it—that it was wrong, and employer contributions are going to go back up to 3 percent. Not all the way, because National can never ever admit that it is fully wrong, but it has to admit and concede in this case that it got it wrong on that occasion. That was an own goal in terms of that.

Other aspects of this bill include changing the tax deductions in respect of software that goes wrong. I guess the Government is probably doing that for its mates, as well, because there are bound to be people such as Dotcom and Hollywood people and all sorts of people who will benefit. If the Government invests in software—and software is very much part of the IT economy, much of which is involved in Hollywood movies, and in doing things in terms of Megaupload and all sorts of other things—I am sure that, again, it will be helping its mates to ensure that if something goes wrong with their software it will be tax deductible. It will be tax deductible, so they will not have to go down. I guess somebody in that industry has got into the Prime Minister’s ear, or Bill English’s ear, or somebody’s ear, and said: “Hey, give us a hand. You helped the employers 2 years ago when you knocked back the KiwiSaver employer contributions. How about giving us a hand in the software industry, as well?” So there is another thing—and do not worry, because the paper boys and the paper girls in this country have helped with their $14 million to help subsidise those IT companies to do that.

But there are lots of other little things in this bill that basically do not mean a lot. There are things such as conferring charitable status on a few charities. Well, that is great, but again it is just tinkering around the edges. The bill prevents liquidators and receivers from switching the basis on which they account for clients’ GST obligations. It also means that things like Working for Families entitlements are removed from having to file a tax return. It also requires taxpayers who choose to file a tax return to file in all the 4 previous years. They cannot just cherry-pick the particular years when they want a tax rebate and not other years when they are owing tax.

New Zealand First will support this bill, because in the main there are things in this that are required to help sort out our tax system. It does not go far enough. New Zealand First still believes that our whole tax system does need a complete review and it does need an overhaul. It needs an overhaul in terms of what will benefit all New Zealanders—every one of us, not just the mates of the National Government. So New Zealand First will be supporting this bill in this third reading.

I wish to make only a brief contribution on this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. It contains very sensible measures around software, around supporting those businesses that have been affected by the earthquakes in Canterbury, around making sure that our banks pay a fair share of tax, and also around lifting the KiwiSaver contributions.

Just in response to that contribution from New Zealand First, it was absolutely sensible for this Government, at the peak of the global financial crisis, to pull back on those KiwiSaver contributions in 2009 and 2010. The costs that they would have imposed on business would only have driven up unemployment at the worst time. As the economy is now recovering, it is time for us to lift those contributions.

But my challenge is to the next Labour speaker. I have listened in this Parliament over the last 12 months and heard Labour members saying that they are going to increase paid parental leave, costing hundreds of millions of dollars, and that they are going to have more welfare spending—nearly $2 billion providing for the in-work tax credit to be made available for beneficiaries. I have heard that in health, I have heard that in education, and I have heard that in so many areas Labour is going to spend more. Well, I have got a question for those members. Are you going to tax more?

I ask that question because every single Labour Government has put taxes up—every single Labour Government. There are really only two choices for members opposite. Either they are going to borrow more, or they are going to tax more. Those are the only ways in which they can fund their extravagant spending promises. My simple challenge to the next Labour member, in voting on the tax rates that are going to be set, is to say by how much a left-wing, motley coalition opposite would put taxes up and ruin the recovery that New Zealand is now experiencing. I hope the next Labour speaker will give an answer to that important question.

The answer to that question is that more and more New Zealanders are disappointed with the performance of this Government. It was in the last 2 weeks that something historic in the life of every Government happened. The right track, wrong track polling crossed over. More New Zealanders now believe New Zealand is on the wrong track than think it is on the right track, and that was confirmed in a TV3 poll this week, which showed that 49 percent think the Government does not have a plan for jobs or growth, and only 46 percent think it does. Fifty-eight percent think the Government is ruining education, and 40-odd percent think it is doing OK. That is a very important sea change in New Zealand’s politics.

For the first time since 2008 New Zealanders are saying that they are losing confidence in this Government. The reason is very obvious: the economy is going backwards. It is going backwards, in any number of dimensions, and I am going to mention a few of them. Firstly, unemployment is back up to 6.8 percent and 162,000 New Zealanders are currently employed. Over 40,000 jobs have been lost in manufacturing since 2008. If someone does not have a job, not only do they not have an income that they can be proud of but they do not have dignity. It is very, very difficult for New Zealanders who have lost their jobs to maintain hope. That is why they are amongst the many New Zealanders who are saying to the National Government: “You have disappointed us. You have not lived up to expectations.”

This bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill—and, Mr Deputy Speaker, I appreciate your allowing a pretty broad remit in the way we approach it—is an enormous non-entity. The only thing Dr Nick Smith could say about it was that it tweaked the KiwiSaver contribution rate. It tweaked the rate down from 4 percent to 2 percent, and tweaked it back up again to 3 percent. How visionary is that?

💬 Hon Clayton Cosgrove: Inflation hadn’t kicked in, though.

Maybe it was that, Mr Cosgrove. Compare that with Labour’s KiwiSaver plan, which would have made KiwiSaver universal by now. It would have increased the savings rate four times faster than National’s plan. Under Labour, the burden of KiwiSaver contributions would shift to a more employer-based scheme, the rate would increase gradually over time, at a rate that businesses and workers could afford, and we would have an enormous pool of capital available for investment in New Zealand businesses. That is one of the reasons the Australian economy is doing better than New Zealand’s.

When John Key was running for office he told New Zealanders: “Kiss goodbye to higher taxes, not your loved ones.” What happened? They got higher GST, the richest 10 percent got 40 percent of the tax remission, the gap between rich and poor went up, and we added $1.1 billion to the fiscal deficit because National was spending more than it was taking.

In answer to Dr Smith’s last question about fiscal management, National has nothing to be proud of. When National took office, expenditure as a share of GDP was around 30 percent. By last year it had grown to 34 percent, partly because the economy was stagnant, while revenue had declined from 30 percent to 26 percent, and it is forecasting raising it to only 28 percent. Why is it that revenue went down so fast? Well, partly because the economy tanked, and partly because those who could afford to pay more got a one-off Christmas gift from their mates in the National Party. Jobs are down, inequality has grown, the fiscal position has worsened, and so many of our regions are doing worse—East Coast, Northland. The Deputy Speaker is nodding at me to get back to tax matters, and I will. But can I just add into this that you can tax what people are getting only by way of income, and the median income in New Zealand, for all New Zealanders, has fallen by $18 a week. That is down 3.7 percent over the last 3 years. So New Zealanders are, in real terms, poorer now than they were 3 years ago. It is no wonder they are feeling disappointed—no wonder they are feeling disappointed—and it is no wonder it is harder to make ends meet. It is no wonder they are getting sick and tired of smug MPs like those opposite who say: “Hey, tough it out. She’s OK. It’s worse in countries overseas.” Well, where is it worse? New Zealand has the second-highest current account deficit in the entire OECD, predicted by the IMF to be the single worst current account deficit in the OECD by next year. What does that mean? It means we are not paying our way in the world. We are building up foreign debt every year, at a rate faster than any other country, including Greece, Spain, Portugal, and the so-called southern European basket cases, by next year. What a record of shame.

So what role does tax policy play? The first issue is courage. The Labour Party has shown time and time again that when New Zealand is in need of change, we can deliver it. We did it in the 1930s, we did it in the war years, we did it in the Kirk Government of 1972-75, we did it in the Lange Government of 1984-90—we might not agree with everything today, but that was still a Government of change—and we did it under the Clark-Cullen Government as well. The country is going to call upon the Labour-led Opposition once more to offer progressive and pragmatic change for a better future. What will that mean in terms of tax? It will mean pro-growth tax reform. It will mean a capital gains tax system that rewards investment, work, and productive business, not capital gains or farming for capital gains. It is not right that the only way you can get wealthy in New Zealand is just to invest in property, because it does not make anything. It does not export anything. It does not enrich our country. It is just a Ponzi scheme where one person is betting off another. The tax system needs to change.

We need to reward innovation and investment in innovation. That is why we are looking at accelerated depreciation for short-life investments. That is why we are looking at research and development tax incentives—very popular with the private sector, which is resentful and disappointed that it has been replaced by National putting them through the bureaucratic hoops of a grant-based scheme. National cannot understand it. When we go around the private sector and we are talking to it about innovation, people are saying: “Well, goodness me, why was it that National was the one that made the bureaucrats the masters of our investment decisions? Why couldn’t we just have an R and D tax credit so that we could make the business decisions about what is best for the growth of our companies, and we could get a little bit of help, a little bit of remission from the taxpayer in terms of recognising the risks of R and D?”. That is fair enough.

We need pro-growth tax reform, capital gains tax, research and development tax incentive, and short-life depreciations. KiwiSaver needs to go on steroids. Labour’s scheme would have four times the rate of savings growth as the one under National’s KiwiSaver amendments. And it is disappointing that the only practical measure in this bill that Dr Smith could refer to was the tweaking of National’s KiwiSaver incentive from 4 percent to 2 percent, and back up to 3 percent.

At least Rob Muldoon said: “Think big.” This lot say: “Think small.”—when they think at all. Actually, what New Zealand needs right now is a few big ideas. We need a bit of guts. We need a bit of courage. We need to be unafraid to say this is not good enough. Why is it that our colleagues on this side of the House get up every morning and come to work? You know why it is? It is because we refuse to accept decline. We refuse to accept that our best days are over. We refuse to accept that New Zealand will be managed into statehood of Australia. We refuse to accept that the best thing you can do in a tax bill is to tweak some minute KiwiSaver incentive rather than showing a visionary path to pro-growth tax reform.

There are 160,000 people out of work and Mr Bennett thinks it is a joke. Mr Bennett thinks it is a joke, and Mr Bridges spent most of question time today insulting the Green Party to boost his run for Cabinet. How shallow was that? How shallow was that? So where is National’s economic dream team in this debate? Is Mr English taking a call? Hark—not so. Is Mr Joyce taking a call? “Mr Mobie”—is he here? I could not possibly comment on that, but I have not heard him take a call, and I can comment on that. Where is National’s commerce dream team? You know, the redoubtable Craig Foss—has he taken a call? No, no, National members have left it to the brilliance of Nick Smith, the man they themselves sacked from Cabinet, to lead their debate. They do not even trust Simon Bridges with a call. I think it is a bit harsh. He may be a little smarmy, but I actually think he would be worth a shot. He has got to be better than the other lot. But no, they are not trusting even him with a call. What about some of their thrusting young blood, like Jonathan Young—

💬 Mr DEPUTY SPEAKER: Order! The member’s time has expired.

I would like to rise and say a few words on this excellent piece of legislation, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. It has been interesting, as I have sat here in the House this week, watching that last speaker, David Cunliffe, and his colleague Clayton Cosgrove doing the numbers. What are they doing the numbers for? Because they are going to have a go at Mr Shearer. They know that with their present leader, they are not going to get across the line, and they will not be able to implement this tax legislation, bring in their capital gains tax, and hammer the people.

Did you notice what that last speaker did? He invented the word “smug”; he lives the life of “smug”. What did he do? He forgot to talk about that wonderful leader. Yes, he mentioned Lange, he mentioned Kirk, and he mentioned Clark—his mate Clark—but did he mention Nordmeyer? This country knows about Labour Party tax policies, and you forgot to mention—

💬 Mr DEPUTY SPEAKER: Order!

—that un-smug man Mr Nordmeyer. The changes in this bill are in addition to the biggest tax reforms in 25 years, which are helping families to get ahead. They are boosting growth, they are creating jobs, they are lifting incomes, and they are encouraging savings. You know, we lived through 9 years of that Government—9 long years of a Labour Government—and what was it doing? It was encouraging us to spend $1.10 or $1.11 for every $1 we earned. Suddenly we hit the wall, and this Government has had to restructure the economy so that now we are in a situation where we are spending 97c or 98c of every $1 we earn.

You have got to restructure the economy. Of course people are going to lose jobs. There are some businesses that are sunset industries, and we need to get people into other industries, like the IT industry, like the film industry, like the energy industry—

💬 Kris Faafoi: Speaking of energy—

—speaking of energy—and like lots of other businesses that are being developed in my electorate. That is where jobs are being created. And they are being created because we have built a competitive tax system. It is lifting the economy away from the borrowing and spending of the 9 years we had with those people and towards saving and investment.

It is a simple, fair tax system. It is going to reward hard work. It is going to protect the vulnerable. Across-the-board tax cuts are delivering more money to working New Zealanders. About three-quarters of earners are paying no more than 17.5 percent personal income tax. We cut company tax to 28 percent, ensuring New Zealand businesses remain competitive. A husband and a wife with two children can earn up to $50,000 a year and effectively pay no tax.

After-tax wages are increasing faster than prices under this National Government. If Labour were to be returned to power under the wonderful leadership of either Clayton Cosgrove or David Cunliffe, the first thing we would see in this country is a capital gains tax on all businesses and farms, which would penalise our productive industry. We would see a more than doubling of employer KiwiSaver costs. In fact, I thought I heard Mr David Cunliffe say in the House this afternoon that Labour would actually increase KiwiSaver contributions by four times and we would see a big gap between the company rate and the top personal rate, which would encourage tax avoidance.

I absolutely support this bill. It is a good piece of legislation, and we should vote on it immediately. Thank you.

This is a split call. The Hon Clayton Cosgrove.

Well, we know after that contribution that John Hayes was never a paper boy—never a paper boy. We know after that contribution that Simon Bridges, I am told, recently made a speech in Tauranga and got mistaken for a paper boy.

Let us do some analysis based on John Hayes’ speech. John Hayes painted this rosy, bizarre view of the New Zealand economy that exists in his little world—or probably big world, actually—but does not exist here in New Zealand. He talked about employment. Well, here are a couple of figures for Mr Hayes as he sort of—I think the word is—shuffles to the corner of the House. They are 84,000 young people not in work or training—that is a great legacy for Mr Hayes—an unemployment rate of 162,000, of course, and 40,000 manufacturing jobs lost. What a wonderful legacy this Government provides! There was a tax switch—which, of course, was actually a tax swindle—which they in Government say was fair, where the top 10 percent got 40 to 44 percent of the tax cut. What do we know—I think Russel Norman referred to it in a different way—that people at the top generally do if they get a windfall tax cut, because they have got enough discretionary income anyway? They either pay off debt or put it in the bank. It is not spent, generally, it is not recycled, and it does not provide the blood into the body of the economy that we need. And, by the way, more important, it is not fair.

A few of those people over there benefited, and I think, given our incomes in this place, we are probably in the top 5 percent or top 10 percent. We all in this House benefited, given our salaries. The top 10 percent got 44 percent of the tax cuts, and the rest of New Zealand languished. Then the Government whipped up GST. And guess who that hit? It was not its mates, of course—not those on the top 10 percent. Yes, they paid the increase in GST, but, of course, if you are on incomes like ours in this House, and above, you have a bit of discretionary income and a bit of an income cushion, unlike those at the bottom.

Then you look at this Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, which is, as others have said, all about simple tinkering. The paper boy tax is not in this bill, of course, but that was the great reform, the big economic and taxation hit. This was a great reforming, visionary Government—put the boot into the old paper boy or paper girl. It cut the contribution to KiwiSaver, and then its great reform was to put it back up again—all over the show. What does that do? As in Muldoon’s time, back in the 1970s, when the Muldoon Government bribed people with their own money—and that is the truth; that is the truth—it bribes people with their own money in superannuation. All that does is undermine confidence in KiwiSaver, when, actually, I would have thought that across the House what we wanted was to bolster the numbers in KiwiSaver and give people the confidence to enter that scheme and contribute. But they are not going to get that from a Government that tinkers, slashes, burns, reinstates, and messes around with that particular policy.

What a great legacy this crowd leaves! They have a thousand people a week going to Australia—a thousand people a week. We know that 17,000 tradespeople—people whom, apparently, and they are right, we need in this country—in my province of Canterbury, for instance, technically trained, highly skilled New Zealanders, are heading across the Ditch because this crowd will not train anybody. They say they are going to bring people in from overseas. Of course eventually we are going to need people from overseas, but we need them now because this crowd refused to train anyone. You cannot expect a business person to take on an unemployed person with no skills, without training.

💬 David Bennett: The Labour Party took you on.

Oh, we did not abolish the Modern Apprenticeship Training Act—no, no, no—we introduced the Modern Apprenticeships scheme and trained thousands of people. That was that mob. In fact, it was the Hon Lockwood Smith who actually put that little doozy in. You cannot expect a business person to employ somebody for a skilled job when they are not trained. So what is going to happen is that business people will take people from overseas, because they cannot wait—and nor can earthquake victims wait—another 2 years to train a young person to become a plumber or a carpenter to build and reconstruct a house.

What a great legacy these people leave: no plan, no strategy except to flog some assets off, and the second-worst current account deficit in the OECD. Who is ahead of us on that? Greece—what a wonderful place to aspire to. And the projections from the IMF are that we will go from No. 2. We will be No. 1 in something—

Order! Your time has expired.

The Green Party rises again to address this Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill in the third reading. This bill has, essentially, run its course in this House. We have had our quota of mutual vitriol between the merits of Greece and Zimbabwe and whichever other role models we can hurl at each other in a negative way.

Just to try to put it on a constructive basis so that Mr Bennett, if he is following, can respond in a like manner—constructively—let us just recognise what this bill does. It sets the annual rates of income tax for the current year, it extends Working for Families tax credits to surviving spouses of deceased ACC claimants, it allows deductions for expenditure on unsuccessful software development, it clarifies that late payments are subject to GST, and it increases tax rates on foreign-owned banks.

Among these provisions there are a few measures in the bill that the Green Party supports. For example, the Inland Revenue Department found that the amount of tax currently paid in New Zealand by foreign-owned banks does not clearly reflect the economic reality of their banking business in New Zealand—true. But by and large the bill is symptomatic of the systemic failure of this Government’s fiscal policy.

It reflects, firstly, regressive tax cuts that will result in the promotion of further inequality in this country. Secondly, it is not succeeding in being fiscally neutral, which is what this Government trumps as one of its main objectives. Thirdly, it will push this country further into debt and into a worse fiscal position. It is for those fundamental reasons of basic fiscal policy that the Green Party will, obviously, continue to oppose and vote against this bill.

What we need—and what we will have within a few years, I think—is some green tax reform, where we broaden the tax system, bringing in a capital gains tax—

💬 David Bennett: Green tax for me!

Yes, Mr Bennett, bringing in a capital gains tax, and you will ultimately benefit. It will make it easier for income tax payers to live with less of a burden when we broaden the tax base. Secondly, we will broaden and introduce eco-tax reform, with resource rentals on the use of water. Thirdly, we will make sure that the principle “pollution pays” means something. The day will come when this country will undergo substantive, serious, and far-reaching eco-tax reform, and I know that the public are waiting for that to happen. The Green Party will oppose this bill in the third reading.

To follow on from the “Roll it, Smoke it, Print it Party” is something that is actually quite nice. It is a bit sad when the Green Party comes into this place and tries to teach us economics. This is the party whose great economic theory from a couple of weeks ago is to print money. It actually wants to go and print money and hurt New Zealand consumers by having inflation and putting prices up, so that it can invest that money overseas. That is the great Green policy of building up capital in case we have another tragedy. It wants to put that money overseas. Great economic policy! Did Russel think of that by himself, or did you guys sit around and actually talk about it? The Green Party cannot come into this House and talk about looking after New Zealanders on one hand, and then at the same time say that it wants to print money to hurt New Zealanders, to send that money overseas and invest it somewhere else. That is what your policy is, and that is a great policy!

I think members of this House have been in for a very, very special debate this afternoon. On the Labour Party side, Mr Cunliffe was asked what taxes the Labour Party would put up and by how much, and he would not answer that question. He would not answer that question. The Green Party went out there today and said that it was going to put a—

💬 Hon David Cunliffe: Capital gains tax.

—capital gains tax. We got that one, but there is more. There is more. There is income tax, as well.

💬 Hon David Cunliffe: R and D tax credits.

Income tax?

💬 Hon David Cunliffe: R and D tax credits.

Research and development tax credits. Yeah, OK. So there are two. There are two. Income tax?

💬 Hon David Cunliffe: Reducing depreciation rates on qualified investments.

Reducing depreciation is three. Income tax?

💬 Hon David Cunliffe: Or we might have a Fast Forward Fund for primary sector R and D. That’d be good, wouldn’t it?

And income tax?

💬 Hon David Cunliffe: Haven’t decided.

Have not decided. Those members will put up income tax. In the next 2 years we can go around saying that the Labour Party will put up income tax, because you have not denied it. The Labour Party has not denied it. The Labour Party has not said that it will not put up income tax. Every New Zealander out there—every New Zealander—should be worried, because the Labour Party wants to tax you more. The Labour Party will not deny in this House that it will put up your income taxes. The Labour Party will put your taxes up, because that is what it wants to do. Well, come here, David. Now is your chance. Mr Cunliffe, say that you will not do it. Say that you will not do it. Say—

💬 Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. Far be it from me to interrupt a speech, but on about nine occasions in the last 30 seconds to 1 minute you have been brought into the debate. I waited and waited and waited. I do not know whether he knows the rules, but I think you should not be brought into the debate.

💬 Mr DEPUTY SPEAKER: In the course of this debate—[Interruption] Order! In the course of this debate he is not the only offender in that regard, and I have probably showed more lenience than I should have. I just ask members to mind their pronouns.

Well, I do not have to say much more. We know that the Labour Party is going to put taxes up. The Labour Party will put New Zealand income tax up.

💬 Hon David Cunliffe: Sit down.

Mr Cunliffe wants me to sit down, because we have hit a raw nerve, I know. The reality is that New Zealanders now know what they are facing: higher income taxes under the Labour Party, in coalition with these Green taxes. Thank you, Mr Cunliffe, for telling the public what they should expect at the next election when we campaign against you, because the people do not want higher income taxes.

I raise a point of order, Mr Speaker. Under the Standing Orders of Parliament, when a member feels that they have been misrepresented, the rules are that they should not interrupt the speaker, as you know, and they should wait to take a point of order at the end of the speech. That is what I am so doing. The member is, of course, fabricating the idea—

💬 Mr DEPUTY SPEAKER: Order! So—

Mr Speaker, you have not, with respect, heard the point I am about to make, which was the source of the misrepresentation.

💬 Mr DEPUTY SPEAKER: Continue.

The member is simply making it up that Labour has—

Order! [Interruption] Order! I am on my feet. I am just looking for the relevant Standing Order, but it is where a member has been misquoted. The member has the opportunity only to correct the misquote, not to enter into another debating phase. So if the member wishes to do that, he should state where he was misquoted and tersely correct it.

I was misquoted, because although I did say that we would encourage pro-growth tax reform, including a capital gains tax, I have made it very clear that Labour has made no decisions about income tax, and our colleagues would say exactly the same thing.