Taxation Principles Reporting Act Repeal Bill

I move, That the Taxation Principles Reporting Act Repeal Bill be now read a second time.

Good tax legislation generally can improve a lot for the taxpayers in this country, either by introducing favourable tax changes, or in making tax legislation simpler and cheaper to comply with. The Taxation Principles Reporting Act 2023 does neither of these things. It also does not do what it set out to do: to provide a set of principles which would guide New Zealand to a fairer tax system. Instead, the Act contains a set of taxation principles and establishes a reporting requirement on the Internal Revenue Department (IRD).

The bill we are considering today will repeal the descriptions of those principles and the obligation on IRD to produce the reports on the performance of the tax system weighted against those principles. The Government is taking the step because those principles, to be of value, need to be reflective of the values which we can all sign up to, and not the views of the earlier Government. Those views, on what constitutes a fair tax system, cannot be allowed to stymie the tax policy aspirations of a democratically elected Government.

The honourable members of this House, whatever their political conviction, are united, I’m sure, in one fundamental objective: that we all want to see a fairer tax system. We also want to see increased transparency in the tax system, but we have differing views on what fairness looks like, and that is to be expected.

The Act we are repealing purportedly was to achieve those objectives, but in reality it simply gives the illusion of having achieved something. In fact, it actually introduced some concerning problems which have negative implications for transparency, for public understanding, and to a principled tax policy development. The right of any elected Government to devise, shape, and implement its own tax policy must be preserved. A Government is elected by the public to carry out its stated tax policies. Had the Act been consulted on, it is possible that it might have achieved consensus on what constitutes fairness in the tax system. Consultation would have also helped avoid the problematic descriptors of those principles. Repealing the Act will remove those problems.

Another problem is the core requirement of the Act: the requirement for the IRD to produce reports on the performance of the tax system as gauged against those principles. First, we don’t think the reporting needs to be legislated for. Secondly, to meet the reporting requirement, the IRD is likely to need to collect more information from taxpayers on economic income, for instance, and this could impose unnecessary compliance costs. The final thing to mention is that I previously described the Taxation Principles Act as “redundant”. Once this bill we are considering has fulfilled its objective, it too will become redundant. But rather than cluttering up the statute book with redundant Acts, the bill contains a legislative housekeeping measure, clause 3, which says that the repealing Act is itself repealed on 1 January 2025. So this bill first repeals the Taxation Principles Reporting Act with effect later this month, and then, having done its job, the repealing Act repeals itself.

There are many problems with the Taxation Principles Reporting Act. It’s good, therefore, that this Act will be repealed and allow us all to move on and have a merry Christmas. I therefore commend this bill to the House.

This is an unusual bill for this National-led coalition. It’s an unusual bill because it’s got a regulatory impact statement. Famously, they said a couple of weeks ago that they weren’t going to have regulatory impact statements for matters that were being repealed under urgency, but this bill has one, so a little bit of consistency from the National-led coalition Government would be quite nice.

However, setting aside that, I suppose, minor point, I think I do want to draw something out of it, which is that having worked with the officials at Inland Revenue myself in recent years, having in past times been one of those officials at Inland Revenue Department, I have a very, very high regard for their integrity and professionalism, for their intellectual commitment to an excellent tax system in New Zealand, and for the work they do to preserve it. I think it’s a mark of their integrity and their professionalism that despite that Government’s rush to do away with regulatory impact statements, the hard-working and able officials at Inland Revenue nevertheless produced one.

I understand that perhaps a draft regulatory impact statement was prepared for one of the bills that—which bill was it that there was a draft one?

Hon Barbara Edmonds: EVs—Clean Car Discount.

Hon Dr DEBORAH RUSSELL: Yeah, right, OK; the one repealing the electric vehicle discount scheme. There was a draft regulatory impact statement for that, but it wasn’t brought to this House—they didn’t want to see that one in the House. We’ll be requesting it under the Official Information Act, of course. But this one has at least got into the House, so I’m grateful for that.

I just wish to repeat back some words which members of the Government have said in respect of our tax system. So, first of all, welcome to Nancy Lu. I believe that might have been the first time that Nancy was speaking in this House. She brought to the table her previous experience in the tax system, which of course, having come from that that space myself, is always valuable to have in this House. Nancy Lu said quite correctly that what New Zealanders want—and indeed this is what I know Inland Revenue works toward and the tax community works toward—is a fair, simple, easy, and transparent tax system. Of course! Of course that’s what we all want. And Simon Watts, the Minister of Revenue, said that we all want to see a fairer tax system and we want transparency. Those were words coming from members of the National-led coalition. Of course we all want that. The point is: how would we know? How could we assess whether that is the case?

This is exactly what the Taxation Principles Reporting Act sets out to do. It sets out to give us a way of assessing the fairness and simplicity, the easiness, the transparency of the tax system. It sets up some principles. It sets up some ways that they are to be measured. And then it sets up a reporting requirement for Inland Revenue so that those of us—and I take it that we’ve got broad agreement across the House on this, that we want to have a tax system that is fairly simple, easy, and transparent. It sets up a way that we can actually get some information about that as to whether our tax system really is fair, whether it really is simple, whether it really is easy, whether it really is transparent. That is exactly what the Taxation Principles Reporting Act was enabling us to do.

By doing away with this Act, the National-led coalition Government is working against us understanding the fairness, the simplicity, the easiness, the transparency of the tax system. What a shame—what a shame. As my colleague James Shaw rightly pointed out, we’re pretty sure that the hard-working Inland Revenue Department officials, hard-working people of great integrity, have almost certainly already prepared the very first interim report on the tax principles. And yet, nevertheless, we’re not even going to get that interim report. What a shame. So two things: doing away with the reporting requirement and doing away with the work that has already been done to assess the fairness, simplicity, and easiness and transparency of the tax system.

Mr Watts went on to talk about a democratically elected Government. Indeed, in the broad sense, we are all part of the governance of New Zealand. We are all part of this democracy. But democracies thrive on transparency. They thrive when citizens understand what is happening. They thrive when people can participate meaningfully in democratic processes. They thrive when people have the information to do this. Now, as someone who has worked in the tax system, I know that tax is not easy. Look, when I was a tax lecturer, one of my first tasks every year was to stop my students being scared of tax. A lot of them found it quite confronting and hard to deal with. My first task was always—always—to help them to understand how tax worked and to get them to be familiar with it so that even if it wasn’t easy, they could at least get under way with working on it.

Now, if it was hard for students who had already done some basic accountancy, if it was hard for people who wanted to know about the tax system, how much harder for the rest of the country? Some of us in this House have specialised knowledge about taxation and we can bring that knowledge to bear in debates in this House, but what proportion of New Zealand actually understands our tax system? I’m going to say it’s probably not a very high proportion. That’s a shame, because tax really matters.

It matters because democratically elected Government quite rightly asks their citizens to contribute to the running of the country. And how much they ask from each citizen is a matter for debate constantly, and especially in elections. But how much better that debate would be, how much better our democracy would be, if we had the information we need about our tax system, rather than just the very, very basic level that people mostly have. So that is why this Taxation Principles Reporting Act would have added to our democracy.

I wish I had had time in this speech to go through each of the principles and to talk about why each of the principles is important. Actually, this is one of the things that would have been examined and, in fact, was examined in a select committee process. [Interruption]

ASSISTANT SPEAKER (Maureen Pugh): I’m sorry to interrupt the member. Can I just ask for these conversations to be taken outside the House, thank you. Apologies.

Hon Dr DEBORAH RUSSELL: Thank you, Madam Speaker. There was a select committee process where, as always happens in select committee processes—

Chlöe Swarbrick: Great report.

Hon Dr DEBORAH RUSSELL: Great report. The wording of the bill at that time was changed in order to meet the concerns of submitters. Now, of course not everything went the way that some submitters wanted, but nevertheless there was an ongoing discussion about the content of those tax principles and about which tax principles should be in the bill and which ones should be measured. In fact it came off the back of a standard consultation process. It’s one of the correct things about the IRD’s policy process, the generic tax policy process. It is an extensive process of consultation, of exposure drafts, and so on. So the principles in the ACT were extensively consulted on. Nevertheless, all that work is going to go to waste. What a shame.

I’m hoping that my colleagues on this side of the House will perhaps pick up some of the challenges that were issued by the Minister of Revenue. He said that we don’t even agree on what fairness is in a tax system. That’s simply not the case. Actually, we do have a fairly good grasp on what people think is fairness in a tax system. We do know from survey, research, and so on that most New Zealanders think that we should have a progressive tax system, that those who earn more should contribute more to the wellbeing of the country. Now, there might be disagreement about how much, there might be disagreement about how that is calculated and so on, but most New Zealanders buy into the basic principle of a progressive tax system.

So that’s a vertical equity. Most New Zealanders buy into the notion of horizontal equity, and I’m hoping that my colleagues on this side of the House will talk about these principles a little bit more. But there is actually fairly widespread agreement about what a tax system should look like, and it’s agreement within New Zealand—quibbling around the edges, some detail and nuance, but some broad agreement there. There’s broad agreement in the tax literature about what a good tax system should look like. The only thing is we actually need to measure how it’s working in this country, and that National-led Government will not allow that to happen.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. There’s been a lot made of the fact that as I’ve stood up here representing the Greens in opposition to this legislation, I’ve exerted some level of frustration. And that’s true, I am deeply frustrated about the fact that we are sitting under urgency without due process for this legislation through a select committee process, which, ironically, the National-led Government is saying they think should have occurred to a greater extent when it came to the imposition of this legislation in the first place, but also the fact that I have not heard yet one coherent or consistent argument from members of the Government on the need to repeal this legislation. So if I may, Madam Speaker, given that this is the only scrutiny that we’ll have on this repeal legislation, I think it is really important to put these points on record again and again.

As, actually, members of the Government themselves have stated, this legislation as it currently sits on our statute book doesn’t fix our broken tax system. So let’s dig into what it is that the Greens are talking about when we’re talking about our broken tax system. Well, actually, arguably, some would say it’s by design that it is inequitable and unfair, as reflected in that report from the beginning of this year from the IRD, with subsidiary papers from Treasury, which showed us that the wealthiest 311 families in this country pay an effective tax rate of less than half of that of the average New Zealander. What that kind of rubbed up against is the general sentiment and sense out there that many New Zealanders have that the tax system is unfair. But that tax system is a result of either intentional decisions that have been made by Government after Government after Government, or by intentional neglect. That is the point of this reporting legislation, to require that for the first time, God forbid, in this country, we have consistent reporting against consistent measures so that we can measure the efficacy of our tax system against principles.

So to dig through those principles—because I think it is a really, really important point that I actually haven’t heard any contention from members of the Government in opposition to any of the seven principles within the legislation. So let’s talk about those seven principles; the first is the notion of horizontal equity—and this is a bingo card so folks can play along at home, or those on the Government benches if they’d like to actually address the substance of the legislation that they’re appealing under urgency this morning.

Horizontal equity—first up. That is, basically, the notion, and I quote, “The extent to which people with similar levels of economic income pay similar amounts of tax”. It seems like a pretty fair metric that we should be measuring against. The second principle is efficiency, something that I often hear members of the Government railing in support for. Efficiency, and I quote, “is the extent to which tax revenue is raised in ways that minimise costs to the economy, including distortions.” The third principle is that of vertical equity, and here I quote, “Tax is progressive if people with higher levels of economic income pay a higher proportion of that income in tax.” That is a principle that’s been baked into our tax system since time immemorial. The fourth principle is of revenue integrity, and that is, and I quote, “[coherent and] sustainable over time and minimises opportunities for tax avoidance and tax evasion.”

I’ll never forget the point at which we were debating another piece of tax legislation a few years ago when the Hon Andrew Bayly said, “There is such a thing as legitimate tax avoidance.” And he really said the quiet part out loud there, in talking about how our tax system enables those with power and wealth to squirrel away that wealth in such a way to avoid payment of taxation. It’s totally legal and totally legitimate. Is it ethical? Is it fair? Well, that’s exactly what this principle would have allowed us to report against.

The fifth principle is one of compliance and administrative costs—again, something I would have thought that this Government, who is really opposed to waste, would have been in support of. It is, and I quote, “the extent to which compliance and administrative costs for taxpayers and the Government are reasonable.” The sixth is certainty and predictability—and here I thought that we loved a “certain” investment environment—that is, and I quote, “the extent to which the tax system is … transparent and taxpayers are able to determine their tax obligations before they are due.” Is that not a really important principle that all of us in this House should abide by or seek to uphold? The seventh is the principle of flexibility and adaptability; here it says, I quote, “the extent to which the tax system keeps pace with changes in society, in particular technological and commercial developments, and changes in inequality or comparative wellbeing.”

The reason that I thought it was really, really important to put that on the record is because I’ve reflected on a number of the speeches, especially from new members, and it appears as though they’re not quite aware of the extent of the process that we had undertaken at the Finance and Expenditure Committee to put really, really serious scrutiny on these principles and the operation of this legislation. And here I would just refer those members back to the points—not made by the Government, not even made by IRD advisers, or by officials, or even by submitters, but by the independent adviser that members of the ACT Party and the National Party agreed to appointing to our Finance and Expenditure Committee on the basis of those principles and his ability to offer us meaningful insight into them. This is, again, the substantial document of the Finance and Expenditure Committee’s scrutiny on the taxation reporting legislation, and this is Sir Rob McLeod—you can google him if you’re not aware of how extensive his experience and his reputation is in this space. He was actually arguing for the removal of the definition of these principles because he thought that they were so well understood. So just to put this on the record again, he says, and I quote, “I would omit the descriptors because the meaning of each design principle is sufficiently well understood on their own.”

So that then takes us to another point, which we’ve heard rather flippantly from the Minister and from members of the Government, that apparently this was really widely opposed. Well, unfortunately, that doesn’t really quite bear out in the facts. Again, I would invite members to go and look at the Finance and Expenditure Committee report and the departmental report from that select committee scrutiny, which shows us that, in fact, the majority of submitters were in favour of consistent reporting and data and evidence on the efficacy and operation of our tax system. In fact, even players like the Federated Farmers were in support of the basic principles as outlined in this legislation. They wanted this reporting because—you know what?—all of us benefit. All New Zealanders benefit when we have more access to information, more transparency, so that better and more informed decisions can be made by the Government but also, yeah, so that those in contention with the direction of the Government can make the argument in the opposite direction.

Here I just reflect on the statement from Jeanette Fitzsimons, who, obviously, was the founding female co-leader of the Greens, who said, “Sunlight is the best disinfectant.” We can reflect on a number of different instruments that Parliaments past have instituted in order to provide greater levels of insight into decision making, into data, into evidence such that the public can draw their own conclusion. I think about how our forebears advocated, for example, for the pecuniary interests for members of Parliament, which at the time might have been argued against on the basis that they are a massive incursion into the privacy of members of Parliament, and, you know, members of the public should just trust members of Parliament when it comes to any kind of influence that they may or may not have over their decision making. But hey, guess what? It’s now a matter of common practice and it is out there for members of the public to draw their own conclusions. It is a standard practice of transparency and accountability. Same actually goes for PAYE. When that was first instituted as an income tax proposal, there were arguments made that this was a massive incursion into the privacy of individuals to organise and arrange their own affairs, and you know, just a little “wink, wink, nudge, nudge—just trust us”. But again, obviously now this is a matter of common practice because this is how society and our economy evolves.

So let’s talk about that point of how our society and our economy has evolved. Well, it’s evolved in such a way that, as I held up before in the first reading, we have the greatest levels of wealth inequality in this country that we have ever seen on record. And you know what? It’s actually, as far as democracy goes, an OK thing that members of the Government don’t want to see that addressed. That is their prerogative. They can choose what side they want to sit on when it comes to that argument and that debate. But our contention, here in the Opposition, is that in lieu of having access to that data and that information and that consistent data set, we are robbing not only this Parliament of the opportunity to have a meaningful and informed debate and discussion but the general public’s ability to also participate in understanding precisely what is going on.

The point’s been made time and again that this work has actually already been done, because we know that the first report is due out on 31 December and the 2.5 full-time equivalents (FTEs) who have been seconded into working on this—just for the record, again, that’s 0.06 percent of all of the FTEs working within IRD—we have seen that they will have already done this work. So I’m very much looking forward to putting forth those Official Information Act requests to the Minister and seeing the advice that he so evidently has seen, which scared him so much into putting this into urgency before Christmas.

The final point is that I just really put it on the Government, who have said that they still want to see some transparency in reporting, to tell us precisely what format they’d like it to take. Because the IRD themselves, in their own regulatory impact statements, are asking for more resources to keep doing exactly that.

Thank you, Madam Speaker. I thank the member who’s just resumed her seat, Chlöe Swarbrick, for the speech she gave, although I have to say I don’t think the last nine minutes were really necessary.

I stand in support of the Taxation Principles Reporting Act Repeal Bill, and let me take an opportunity to respond to some of the things that we’ve just heard. We’ve heard time and again that the wealthiest New Zealanders pay half the tax rate of the average New Zealander. We’ve heard that time and again, repeated by people on the Opposition benches, and I wouldn’t describe it as lying because, as Chlöe Swarbrick recently found, you’re not supposed to say that. In fact, for people who want to watch on replay, you can see the high and mighty Chlöe Swarbrick, who tells us we’re all inexperienced and have no data, come into the House at midnight and apologise to the House for not knowing the most basic rules.

She also repeats continuously this untrue assertion that the wealthiest New Zealanders pay half the tax rate of the average New Zealander. Let me tell you where that comes from. It comes from a fishing expedition that the previous Government sent the IRD on to survey 311 high net worth New Zealanders, and they calculated how much money those people had and how much their paper assets increased over a period of time and how much tax they paid. And they divided the tax they paid by how much their paper wealth had increased to try and calculate what they described as an effective tax rate.

Well, the problem with that is that if that was really the standard that was applied to New Zealanders, then take a year like 2021. The median house price in 2021 under the previous Government, when it lost control of monetary policy and lost control of inflation, increased by $135,000. And that means that the average person has a $45,000 tax bill. That’s what they would have paid if we took this thinking seriously. If we were seriously going to say that every time your paper assets go up, such as house prices increase, that you are liable to pay tax on that, then we would have a very different tax system. And, actually, that is the policy of the Greens. The question is whether it is the policy of the Labour Party.

Does the Labour Party want to join the Greens in saying that people should pay tax on their paper asset gains? Should there be a tax on your house? I see Grant Robertson waving the bill at me while I’m responding to members who have contributed to the debate. And if Grant Robertson doesn’t like the members contributing to the debate, he’d better think about how to win back Wellington Central from them. That’s the real problem he’s got.

So that is the real question about tax principles—are we serious about taxing wealth? Because the Green Party is very clear that they’re coming after your house. I remember debating Julie Anne Genter in Epsom one day years ago, and the question was asked: how should a person who has a lot of assets, perhaps a widow who has recently lost their partner, pay for the Greens’ wealth tax on their house? And Julie Anne Genter told the audience, “Oh well, maybe they could get a reverse mortgage,” and you could hear the air getting sucked out of the room. She hasn’t said it again, I’ve got to say.

But that is where these tax principles take us. The problem that the Green Party has, and the Labour Party for that matter, is that none of their own policies would actually adhere to these principles, because these parties want to start using tax not as a way to raise revenue, not in a way to be fair, not in a way to be efficient—they want to add new taxes that will go after your assets and if you don’t have the money to pay, they’ll put you on a reverse mortgage and start bleeding you dry. That’s what these guys really believe, and that is why the Taxation Principles Reporting Act, which we’re repealing today, makes no difference—because the parties opposite who brought this legislation in then went and wrote tax policies and campaigned on policies that would never be consistent with the Taxation Principles Reporting Act.

I see a new member over there from the Greens who’s frowning at me, thinking, “Does this make sense? Was that really our policy?” Well, let me explain to her how it works. Actually, the Green Party’s policy is that you pay 1.5 percent wealth tax on assets in trust. So you’ve got two people, one owns a home, one owns a home that they’ve put in trust, and if you’ve put your home in a trust because you’re worried that your kid is getting married and you don’t want them to lose their asset in a settlement when it’s their inheritance from you, you pay 1.5 percent. The person that keeps the house in their own ownership doesn’t pay the 1.5 percent. So that’s one Green Party policy that would fail the horizonal equity test. So they voted for the legislation and then they campaigned on a policy that would fail the first test.

And here’s another one. They say that if you have $4 million of wealth, you pay 2.5 percent as a couple but you pay only 2.5 percent on $2 million of wealth if you’re single. So what happens to an older couple who might have $3 million of wealth that they’ve worked their whole life for, they’ve got a nice house, they’ve got some retirement savings, their $3 million is not taxable because it’s under $4 million. All of a sudden, one partner dies—that can happen with elderly couples—and all of a sudden one of those people is liable for 2.5 percent on the extra million dollars, a $25,000 a year tax bill for that elderly lady who’s grieving the loss of her husband under the Greens’ tax policy. Now, is that equitable? Oh, here we go.

Hon Julie Anne Genter: Point of order. I just wanted to raise with you a question because it seems to me that the member currently speaking is not speaking to the bill at all but is talking about imagined conversations from 10 years ago, policies from other parties that they campaigned on. It’s very interesting and I’m glad that he’s promoting our policies, but it’s not really in the bill.

DAVID SEYMOUR: Speaking to the point of order, Madam Speaker—

DEPUTY SPEAKER: Can I first of all say I am actually hearing the member who has been on his feet talking about tax principles, and the bill is about tax principles reporting, so unless the member has something further to add to the point or order, I’d ask you to carry on.

DAVID SEYMOUR: Oh, I do, Madam Speaker. In raising the point of order, Julie Anne Genter said that the conversation I assume she was referring to, events where she told a group of my Epsom constituents to get a reverse mortgage, was an imagined conversation. I just want to put it on the record that that actually happened, and for her not to take me at my word and accuse me of lying is wrong.

DEPUTY SPEAKER: Thank you. I’m sorry; that’s not a point of order. I’m sorry, I was talking and I missed that comment when I was speaking to the Clerk.

DAVID SEYMOUR: Thank you very much, Madam Speaker. I think that people watching at home can take heed of the fact that the Green Party is the only party I know that has just tried to shut down a discussion about its own tax policy. But it’s kind of understandable. The point that Julie Anne Genter was not following along is that the Green Party voted for the Taxation Principles Reporting Act and then ran the election on policies, and had they been successful they would no doubt have tried to implement policies that violate the Act.

That is why we oppose it—because even the people who believe in it don’t follow it. Why would it make any difference for this Parliament to require the IRD to go to great expense to prepare a report every year when even the people whose idea it was don’t agree with it and don’t follow it? If it can’t have any influence on the Green Party, who think it’s desperately necessary to have this law, then how can it possibly have an effect on anyone else? They don’t do it; why would anyone else?

There’s another point that maybe needs to be considered. The Labour Party and the Green Party were in Government for six years, and not a single report was produced under the Taxation Principles Reporting Act. As we heard earlier, the first report is due at the end of this year. So how is it possible that the Labour Party and the Green Party are sitting here desperately telling us that we have to have this legislation, when they themselves governed without it for six years? They cannot be sincere when they believe that this is important.

On this side of the House, we are interested in saving the taxpayer money. We are interested in a smaller, more efficient Government. We are interested in removing red tape, regulation, and bureaucracy wherever we find it. Taking a few hours to debate the removal of the Taxation Principles Reporting Act is a very good example of this Government getting to work and saving money so that people sitting at home can actually have some more money left at the end of the week and spend less of their time funding pointless bureaucracy and stupid law that even the people who came up with it and supported it do not believe in, because even they don’t follow it in their own policy. As an added Christmas bonus, the Green Party are over there and they’re not going to be taxing a house. Thank you, Madam Speaker.

Thank you Madam Speaker. Look, what is very, very clear from the select committee report is that it was only a majority report in favour. In other words, it was contentious at the time. We’ve heard suggested from the Opposition benches that this is in some ways some sort of slight on the hard-working staff at the IRD, which clearly it is not; it’s just about whether this piece of reporting needs to be done.

I think we’ve also heard from the Opposition a lot of discussion about the principles which are there, and I don’t think, again, you’ve heard any disagreement with those principles. They’re good principles. The question is do you need to report on those principles under the Act? I think we’ve also heard some very interesting discussion about whether some of the party’s policies that are around here would actually meet some of those principles. And I was interested that the Hon David Seymour didn’t also highlight the boondoggles that were around GST, which clearly would not—clearly would not have met those principles.

I think the key thing here is whether those principles need to be reported under this Act. If you look at the regulatory impact statement it’s quite clear. Obviously it’s from the IRD, and they say that following the select committee and bill process “it became apparent that the final reporting framework did not have broad support. It is, therefore, unlikely that the framework will prove enduring”. They then go on to say “The Act, therefore, is unlikely to be effective in achieving its purposes. In Inland Revenue’s view, this indicates the anticipated benefits of the Act are unlikely to be fully realised.” Now, they’d obviously started off saying this was something that they thought was worth doing and then they came to the view that maybe after this process it wasn’t, which I think is interesting. Then they also say, well, look, we can still provide information there and “Inland Revenue intends to consider means of improving its current reporting under the Tax Administration Act 1994.” So they can still report on the things that they deem are important.

The Hon Deborah Russell said that the important thing here is the transparency of the tax system. Actually, I think the thing that is much more exercising the public’s mind is the transparency of the expenditure that goes on by Government. We’ve seen the recent report by the Auditor-General, which cast some severe doubt about that in some areas. I think the other thing which is sitting behind this relatively harmless looking piece of legislation in many ways is more about how people might want to spend, or how people might want to tax—how different parties might want to tax New Zealanders in the future. I think really what it comes down to is an issue of trust. I think that many New Zealanders do not trust that Government, given information—given powers, would not misuse that to really severely impact on them, and we’ve heard the example that we’ve just had about a couple with a $3 million house and what would happen if one of the couple dies.

I think really this is about the public’s confidence and trust in this Parliament and in Governments to make sure they do not overreach themselves into people’s lives. Thank you, Madam Speaker; I commend this bill to the House.

Before I call the Hon James Shaw, this is normally a split call and I just want to clarify for the House that I have a letter from the Maōri Party giving their five minutes to the Green Party. So James Shaw will have the option of a 10-minute call.

Thank you very much. I think this is very important that we debate this properly, because obviously we don’t have proper full parliamentary scrutiny due to the use of the urgency process to kind of sneak this in before the Christmas break. So I’d encourage the Minister of Revenue to buckle up, because this is his first piece of legislation that he’s presenting to the House, and clearly the removal of transparency and openness as the very first act of the new Minister of Revenue I find kind of remarkable.

I actually just wanted to respond to some of the points that I’ve heard in the debate just now. So the member for New Zealand First, Andy Foster, was just talking about trust and confidence and how important it is for New Zealanders to have trust and confidence in their Government and in their Parliament. I think the idea that you would take away transparency, take away evidence, take away data, take away that information, take away openness about the nature of our tax system is not a very good way of building trust and confidence. Trust and confidence actually come from having public information that is objective and publicly available, having information that is open and transparent, being able to form opinions about what is going on here. In fact, this Government is doing the exact opposite of building trust and confidence by removing data and information, which is directly contrary to their own coalition agreement principles that say that decisions will be based on data and information—except apparently data and information that they don’t like, such as information about the tax system.

The other thing that I wanted to respond to that Andy Foster had talked about was he said that he thought that New Zealanders would be exercised about the transparency of expenditure of the Government. And that is fair—that is fair. They are exercised about that. But it is inconsistent to say that they will not also be exercised about transparency around revenue, because revenue is how you are able to get expenditure. The two are inextricably linked. The idea that you would actually take away transparency and openness around revenue because you think that they’re more exercised about transparency around expenditure is an incoherent argument. It is not an argument for the bill.

One of the points that David Seymour raised in his intervention earlier was he raised a point that some of the tax policies that some of the parties took to the election campaign were inconsistent with the principles in the Act. I would agree with him on that point. That is an argument for the Act, because if nobody disagrees with the principles in the Act itself, having some information in the public domain about how the country is doing in relation to those principles you would think would, over time, start to encourage political parties to develop policies that are coherent with those policies.

In fact, I would argue—and if David Parker were able to be here, I suspect he would argue—that the point of the existing Act is to ensure that Parliament is better informed about the state of our tax system in relation to those principles, and that therefore that transparency and that openness about the tax system would start to inform Parliament and start to inform political parties and non-Government actors outside of the system who are informing us about the policies that we adopt here, in order to encourage them to start to develop policies that are more aligned with those principles.

If you say, actually, we don’t disagree with the principles, but we are going to remove information and data from the public domain about how the country is doing in relation to those principles, it means that we continue to operate in the dark. Now, that is inconsistent with, for example, the Fiscal Responsibility Act that was brought in by a National Government in the 1990s, the very point of which was to raise transparency and openness about the state of Government finances, right? That was the point of that legislation. And now the same political parties that brought in legislation in relation to a structure around transparent information are now taking it away when it comes to the tax system. It is an utterly incoherent argument to make.

They say that the reason that they’re doing that is because it’s bureaucracy. We’ve already heard a number of times in this House that there are 1½ fulltime-equivalent people in the entire country whose job it is to execute this law, so it will make zero difference—zero difference at all—to the ability of the Government to give tax cuts. It will make zero difference in the pockets of working New Zealanders, of middle and low income New Zealanders, at all, which is why I raised in the first reading speech: in whose interests is the repeal of this Act being taken?

In terms of the kind of spurious argument that the Act causes bureaucracy and waste, it does not. It creates transparency. It creates accountability. It highlights the inconsistencies that various political parties might have in their tax policies in relation to it. It runs entirely contrary to the coalition Government’s own agreements between its parties around making their decisions on the basis of facts and evidence, because they are saying that they do not want facts and evidence in relation to the tax system. That would be inconvenient to them. That would be inconvenient to the people that they get their money from at the election campaign.

I’m yet to hear an argument from the other side that says that if they—I mean, I’ve heard a number of times that they say that they actually do agree with the principles. I have yet to hear an argument that says why less transparency makes more sense than more transparency. In fact, yesterday the new Minister of Finance, the Hon Nicola Willis, got up and issued her mini-mini-mini-Budget and in that was complaining about the lack of transparency in the Government accounts, even though those accounts are under legislation that requires a Government to report on the state of the books, and it is all there. And now what they’re saying is they want more transparency on that side of the ledger but they don’t want it on the revenue side of the ledger. Why is that? Why would they not want that transparency? In whose interest is it to obfuscate that information? In whose interests is it? [Interruption] This is working, Simon. Keep it up. This is really getting the House going. In whose interest is it that we take away that information from the public domain?

I think the answers to that are obvious, but they will never admit to it, and so they give us these spurious arguments about how the Act is some kind of massive bureaucratic boondoggle because it requires 1½ people to do some work about the state of the Government’s revenue strategies and where we get our money from in order to be able to afford the things that New Zealanders expect their Government to pay for.

So I would like to hear from the Government at some point how repealing this Act is consistent with their coalition agreements for decisions based on facts and evidence. I want to hear an argument on that line. I want to hear an argument from the political parties that complained about the openness and transparency of the last Government about how repealing this Act increases openness and transparency. We have yet to hear an argument that relates to that. I want to hear an argument from the Government side about why they think, if they agree with the principles that are in the Act, it is so important to repeal the Act. If they do not disagree, if they agree with those principles, then they have yet to lay out an argument why reporting on those principles is a bad thing.

I have yet to hear a coherent argument about the exact line between if they think that this is bureaucracy, if they think it’s waste, if they think it’s—how much money will be delivered into the pockets of New Zealanders as a result of this bill? If that is the argument that they are making, how much money will New Zealanders get in their pockets by the repeal of this Act? Because they fought an election campaign on the basis of cost of living and they have yet to make that argument.

Thank you, Madam Speaker. For the benefit of the new members in the House, I thought it would be helpful to get an understanding of where this, the original Act that we are now repealing, came from. It was a genesis—an idea—from the Hon David Parker, who is an enthusiastic follower of Thomas Piketty. He’s the French economist, and for those who don’t know his work, I suggest you look it up and it will explain all. So, on that note, I commend the bill to the House.

Thank you, Madam Speaker. I had to have a little bit of a giggle after that contribution from the chair of the Finance and Expenditure Committee—

Hon Grant Robertson: All 40 seconds of it.

Hon BARBARA EDMONDS: —a little bit of a giggle at the 40 seconds it took for the chair of the Finance and Expenditure Committee to provide a history as to the Taxation Principles Reporting Act 2023. So I’m going to spend my contribution on the second reading of this bill which, again, has come under urgency with no select committee process—and very much like the leader of the ACT Party, who spent his contribution deflecting transparency, deflecting the reason they should have this bill—I’m going to spend my contribution on providing the people of the public a history of the Taxation Principles Reporting Act 2023, and how we actually got to the point where this Government does not want to be transparent and does not want to be able to provide a reporting framework so that ordinary New Zealanders can understand the principles by which their tax policies, whatever they will be, will benefit them. Because that is the absolute purpose of this bill, despite a press release that is full of contradictories.

So I’m going to provide to this House a reason and the background and the history of how we got to a Taxation Principles Reporting Act, which this bill now repeals, and actually, it goes way back—before Thomas Piketty. It actually goes back to 1776, to Wealth of Nations, Adam Smith’s magnum opus, Wealth of Nations.

The members on the other side of the House are getting exercised about this history lesson that I’m just going to take them through. The reason why the members on that side of the House, from the Government, cannot provide a strong reason to remove the Taxation Reporting Principles Act is because those tax principles have been used throughout generations—throughout centuries—to be able to develop tax policy across the world. It then moved on—and I’m going to move history a little bit closer, a little bit closer to their home, maybe in 2010, when the Victoria University of Wellington Tax Working Group, which was led by the formidable Sir Rob McLeod—he used to be a partner of Ernst & Young and he’s still very much an active commentator on the tax community, isn’t he, Dr Russell and Dr Webb?

That also then led to another review in 2019 by the previous Government, which was the Tax Working Group, to assess the design of New Zealand’s tax system. Time and time again, throughout the ages, throughout centuries, throughout decades, and throughout different Governments—including members who are still in this House, who have throughout those different tax working groups—New Zealand has grappled with this question of fairness and where does the incidence of tax fall in New Zealand. That’s why there have been millions of dollars spent over generations and decades to try and grapple with this question.

So what this Government then did, back in 2011, was we asked the question: “What is the problem that we’re trying to solve? Can we save the public of New Zealand millions of monies in the future by being able to have a data set, to be able to have a framework in which these principles, which we have used over the decades through various economists who have written many books over this?”. We asked, “Is there a way to futureproof it so that it doesn’t matter who is in Government, they can use this framework in order to develop tax policy in New Zealand so that it is fair?”. Because I will admit, fairness has a different definition depending on which side of the House you’re on. I’m not going to say whether that’s right or wrong, although I definitely agree with this side of the House. But fairness has different definitions, and the tax principles therefore try to draw out from those centuries of history, the centuries of economists’ views—basically, what have been the principles that this country has used to develop tax policy since, I think, the late 1800s when our first land tax was actually the first income tax that New Zealand ever had. So what this side of the House then managed to draw out was the different principles which we have used.

Then if you look at the regulatory impact statement for that first Act, it says that Governments around the world are currently facing similar challenges in the form of rising inflation and supply chain shortages, therefore putting pressure on the economy and revenue collection. It then carries on in the form of rising inflation and supply chain shortages, therefore putting pressure on the economy and revenue collection. It then carries on—there are also impacts from technological changes and the impacts of climate change and the changing nature of work.

Basically, that Act provided the background and the history in which the context that the previous Government was grappling with as well as other Governments across the world—and then it covers out through the different reviews that we continued with. But actually, what that regulatory impact statement also referred to—and I’ve met different members across the House who have referred to this—is that the Government then tasked Inland Revenue with collecting information to determine the effective average tax rate paid by the wealthiest people relative to their economic income. Now, this is important, because economic income—yes, it may be on paper, but at any point it can be realised, so we wanted to understand where is that incidence of tax falling.

The Inland Revenue high-wealth individuals research project revealed a startling disparity, and this is a world first, another world first that provided data and evidence to show that there is a startling disparity between the effective tax rates paid by the super wealthy compared with other New Zealanders. Everybody across the House may have a different definition of tax, but actually, that high-wealth individuals project provided the data and evidence. It was a world-first—such a world-first that other revenue jurisdictions were actually asking us: “How did you do it? How did you manage to get this data—because we have been grappling with this as well; we have the same challenges post-COVID, we have the same challenges with climate change.” So we were a world leader.

That individuals project again basically compared the full income of the super wealthy. What it showed was that on full income information from 311 of our wealthiest citizens, the average person in this group pays an effective tax rate of just 8.9 percent tax on their economic income. In contrast, most New Zealanders—and I’m going to hear, probably, time and time again in this House in adjournment debates, us thanking the cleaners; us thanking the security guards. Well actually, those salary and wage earners—if someone earns a salary of $80,000, with no other income, they pay 22 percent tax on that income. That excludes GST. Now, if you add GST, the wealthiest—their effective tax rate rises to 9.5 percent, but you know what? For the other New Zealanders, if you include GST, it goes up to 28 or 29 percent.

That is the evidence and the data that showed that it was unfair. So the Tax Reporting Principles Act therefore tried to provide a reporting framework to show this unfairness—or, actually, just to show what’s happening, because maybe it wasn’t going to be unfair if they did more data. A major obstacle to understanding that unfairness that that project brought out has been the lack of reliable data. So what this Act wanted to do is basically—we’re already framing tax policy based on those principles. Governments across the centuries have been making tax policies based on those principles. What happened was, the previous Government said, “Let’s put that down on to paper so that we can communicate it to the average Kiwi so they can understand, so that that cleaner and security guard, or those who are earning $80,000 who are having to pay more tax than the super wealthy in our country, can at least know that the decision makers here in this Chamber know that they have an ability to be able to have some fairness in this system”, and that’s what that reporting framework is going to provide. It was going to provide the data and the evidence and the transparency which that side of the House has proven over the last two weeks not to contain.

That is why, again, days before Christmas, when a draft report is likely to have been written, they do not want to release that report under this framework. That is why they are rushing this legislation through. But this side of the House absolutely believes that New Zealanders need to know where the incidence of tax is falling. That is why we are fighting hard to ensure that there is transparency. It doesn’t really matter what that side of the House want to say to Kiwis about cost of living—it is really clear by their actions, and their actions matter—that they want to push under urgency something that will help the fairness of our system.

Madam Chair, thank you. I support the second reading of this bill. On this side of the House, we are focused on what truly matters to hard-working New Zealanders, and that is less tax and a fair tax system. Requiring Inland Revenue to produce additional annual reports would take extra resources, and we would be focusing on the wrong things. We need to get back to the priorities, and that is reducing the cost of living and getting the Government’s books back in order.

The members on the other side of the House talked about how us as new members had little political experience in Parliament. But what I will tell you is that we have a lot of experience working hard in the real world, running businesses, working real jobs, rolling our sleeves up in the orchards and on the farms, being efficient, but being challenged by paying more tax and having more bureaucracy. We understand that to strengthen our economy and reduce the cost of living we need tax relief and less bureaucracy and less redundant reporting. I commend this bill to the House.

It’s a really sad, sad day to see one of my favourite pieces of legislation be so cynically pulled and repealed without a select committee process, and five days before Christmas. I would ask viewers at home to ask why are they repealing it—why are they repealing it?—and why are they doing so at this time?

Secondly, I would like to raise the issue of accountability, and this is an area that I really plan to interrogate with the Minister in the committee stage. Because what this Act did—the one that is being repealed—is it gave a beautiful coherence to the architecture of our financial system. Andy Foster, on the other side, raised the issue of accountability. Well, what they are doing by repealing this bill is taking away that accountability on the taxation side.

We’ve heard in the House today that some of the reasons that they may be repealing it is a fear of data. Now, why would the Government be scared of data? Perhaps it’s not; perhaps they are scared of fairness. And if we look at the timing of the bill, as has been alluded to, there is very likely to be a report sitting in the Minister’s office that contains information that they don’t want the public to see. Is that transparent and is it fair? What is in that report that they are so worried about?

We’ve heard it would be bureaucratic to keep this legislation in place. Two and a half staff members—that’s far fewer, I would say, than those that would be needed to change all the road signs around New Zealand into English first. Although, obviously, Chris Bishop didn’t get the memo because he is still calling it Kāinga Ora.

This bill that we’re appealing helps to inform decisions. It’s around data and information, and we haven’t seen data information in the tax arena. Look at the tax cuts that the Minister of Finance is proposing. There is still no detail as to how they will be paid, despite her repeated promises that she would say how she was going to fund those tax cuts; that information is not out there.

The question that I will have for the Minister is: how will the tax system be accountable to the budgets that it funds? This was raised really eloquently by the Hon James Shaw. Because we have accountability in the budgeting process, but when it comes to taxation, we don’t have a way of understanding how decisions are being made. There is no transparency around the different pillars around fairness. Now, the Act does not purport to say what is fair; what it does is say that the information will be available so that New Zealanders can see for themselves that decisions are being made according to different principles and those principles will have different weightings. That is what accountability in the tax system looks like.

There was a small change that we made in the select committee, which I was really proud of because we added the words “comparative wellbeing” into the principle that was around flexibility and adaptability. That talked about changes in inequality, it referred to the extent to which the tax system keeps pace with technology and so on, and it referred to inequality—and we added “or comparative wellbeing”. Now, the reason that’s significant—and I’d really like to hear the Minister’s views on this when we question him about it—is because wellbeing was also put into the Public Finance Act 1989, in 2020, under section 26M(2)(aa). That meant that there would be reports done on the Living Standards Framework which would show the level of wellbeing being achieved by budgeting.

To have that at the outcome end is one thing, but to have it at the input end—at the taxation end—gives the system a coherence. It means that all the way through the financial system there is a wellbeing lens across it. The Auditor-General has said it is not to make substantive judgments about whether wellbeing has been achieved; it is to inform public discussion so the public can ultimately hold Governments to account in how money is spent. Well, the same should be true as to how money is gathered, and that’s what this report would allow. It would allow those discussions and their engagement, which ultimately leads to more trust in the system, and it enables taxpayers to have certainty about which principles are at stake. That comes up every three years during an election cycle. If they don’t like the way those principles are being applied, they can change the Government.

I don’t understand why this Government is so scared of having that level of accountability. It’s something the Auditor-General wants. We are very disappointed in this bill.

The member’s time has expired.

I rise to support the second reading of this bill. Members opposite previously talked about a small amount of fulltime-equivalents being an insignificant cost to the Inland Revenue’s total employees. However, we are not just talking about the cost this year but actually going forward, and we’re repealing this bill to save cost and time going forward. This is what a National-led coalition Government is about: saving cost and reprioritising our service for the betterment of our country and our people.

Kiwis don’t need Inland Revenue to produce additional reports, and so our focus should be on higher-priority measures to address the cost of living pressures and get the Government’s books back in order. So I commend the bill to the House.

Kia ora, Madam Speaker. Well, it’s a sad day when the Government calls urgency to repeal a bill which its great evil, according to the other side, is to find out how we’re doing in our tax system.

This is a Government which has said in its coalition agreements that it wants to be evidence-based, but in this most important area of all, it’s hiding from the evidence. What is it that they don’t want to know? What is it that the people who are influencing them don’t want them to know?

We heard from Barbara Edmonds moments ago that the IRD itself independently studied our richest New Zealanders and found the huge disparity in our tax system. Is that what they don’t want to know? What is so dangerous about knowing whether our tax system is equitable? What is so horrific about understanding whether we have horizontal and vertical equity? What is so dangerous about knowing that our richest New Zealanders don’t pay their fair share?

Well, I can understand why they don’t want to know that, because we’ve seen their tax policy already, which is to let the richest New Zealanders off the hook. There are landlords out there that are going to get a million-dollar tax break because of the tax changes that Government wants to put into place.

This study would show that the fairness of our tax system will go backwards under that Government, and it’s no surprise that they don’t want to know it. Do they want to improve our tax system? Absolutely not. That’s why they don’t want to measure it. If you don’t measure it, you can’t improve it. So of course they don’t want to know whether or not we’ve got an improving and a fair and an equitable tax system.

Are they scared? Are they scared of understanding that capital is being preferred over labour? That workers are paying the lion’s share of the tax whilst the owners of capital, who sit on capital increase, don’t get taxed at all? On this side of the House, we want to know. We want to know who’s paying tax and how fair it is, because we are committed to a progressive, forward-looking tax system that changes with society. The dinosaurs over there want to leave the tax system largely as it is, which is inequitable, which doesn’t look after those that need the most, which makes those who can’t bear the burden shoulder the lion’s share.

So why is it that they want to shield their eyes from the fact that there are dirty tax breaks that their mates are taking advantage of? We want to have an IRD which is equipped, prepared, and authorised to look into that.

That Minister there is presiding over a system where the very integrity of the tax system is at risk. He should be utterly ashamed of himself, here under urgency, through the last sitting days of the year, ushering through as quietly as he can an unfair tax system, a system which is less transparent than it should be. And that is going to be the first thing that he does.

So why is it that they’re in trepidation of it being known that the top 1 percent of New Zealanders, in terms of wealth, are paying around about 9 percent of their economic income annually in tax, whereas, as Barbara Edmonds said, a worker on the average wage pays around 28 percent? Is that equitable? Is that fair? He knows it’s not, but it’s his mates that are getting the benefit of this system, so he wants to brush it under the carpet. It’s a Government that doesn’t want to know.

We know the work’s been done. We know there’s a draft report. I’m sure the Minister will be happy to release it. Will you release the report—will you release the draft report? Do you want to answer? I’ll yield if you answer. The Minister is sitting there po-faced because he doesn’t want to answer the question.

Here’s the other question. Why are we repealing all of this Act? Which principle is it that he doesn’t like? Is it the principle of horizontal equity? Is it the idea that people in a similar position should pay similar tax? Possibly not. Much more likely it’s vertical equity—the fact that people who have more should pay more, because we know that doesn’t happen at the moment, and this Government, the Government on the other side of the House, doesn’t want to address that issue.

David Parker laid the foundations with a study of the wealthiest New Zealanders, with the passing of this Act, to make substantial changes to our tax system. The evidence is there. Whilst on the other side of the House they talk about it not being legitimate in some way, it’s an independent study using verifiable information that itself was not previously available, but we changed the law to make it possible to look at those wealthy New Zealanders. So the foundations are laid, but over there they just don’t want to know. They want to keep it on the low-down.

What I want to know is what that Government is going to do in terms of understanding these inequities, these imbalances in our tax system? Even the tax breaks that they’re now going to create, the landlord’s tax breaks, the deductibility of interest—we know what that’s done to the market. We saw the housing market price increases. We saw the crisis in house prices, which were contributed to by the fact that landlords were getting tax breaks on interest payments. We know that one of the things that’s going to happen when they restore that tax break is that house prices will go up. So much for caring about ordinary New Zealanders, because under that Government, homeownership will be further away for many homebuyers. Of course what they’ll be doing is lining the pockets of their landlord mates who’ll buy more houses and deprive first-home buyers of their first home.

So once again we see a Government that doesn’t really care about the effects that the tax system has on the wider economy. They’re going to be preferring landlords over renters. They’re going to be preferring landlords over first-home buyers. And are we going to see this tax break? Are we going to see rents go down? Not even the Prime Minister will lower his rents. He won’t commit to that on his rental properties. I wonder if the Minister has a few rental properties that he’d like to talk about. Well, he’ll get another opportunity.

Because we know these parties—well, at least the ACT Party, at least they’re upfront. They just don’t like tax. They just want lower taxes. They want flat and low taxes. Have a look at their policy platforms. So at least they’re upfront about it. As for New Zealand First, on the other hand, well, we know that the influences on them see them doing things like pushing for a roll-back of smoke-free and a roll-back of careful labelling of therapeutic products. Over there they’re a little more behind the scenes. They don’t want us to know who their backers are. They don’t want us to know why it is that they’re fronting for landlords, but we do know that they’re looking after their mates.

So it’s no surprise to me that when we look at the tax principles, tax principles which they say—and I loved the comment that we don’t all agree what fairness means. Well, I’ll tell you what, you’re on your own there, mate. I’ve got a pretty good idea that a progressive tax system is a fair tax system. These principles have not come out of nowhere. They’re widely and internationally accepted. Over there we have an island of unfairness. It’s a shameful example where we’ve got a bunch of people who say “We don’t believe in an equitable tax system. We don’t believe in a tax system that doesn’t distort. We don’t believe in a tax system that isn’t efficient. We don’t believe in a tax system that’s flexible and adaptable, certain and predictable.” These are the principles they don’t believe in.

So that Minister’s got some real answering to do. I’m looking forward to the committee of the whole House stage and I’m looking forward to the Minister answering some questions on exactly those matters.

Thank you, Mr Speaker.

Hon Kieran McAnulty: Here we go: 30 seconds of magic!

DAVID MacLEOD: You know, I was just closing my eyes just for a moment, and I could have sworn that’s what a speech from Karl Marx would have sounded like. I stand in support of this Taxation Principles Reporting Act Repeal Bill. This National-led coalition Government doesn’t need a tax principles Act to tell us our principles of tax. Our principles on tax are very simple: Kiwis should pay less of it. And that’s just what this Government is planning to do. And you’re absolutely right—30 seconds. I stand here, and I commend this bill to the House.

This bill is set down for committee stage immediately. I declare the House in committee for consideration of the Taxation Principles Reporting Act Repeal Bill.

In Committee

Part 1 Repeal of this Act