Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill

I move, That the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill be now read a third time. It has been the Government’s ongoing focus to steadily reduce inconsistencies and anomalies in our tax system in order to make it fairer for all taxpayers. This bill continues that focus.

To remind members, I want to briefly summarise the main contents of this bill. The bill addresses the tax treatment of assets used both privately and for earning income, including holiday homes, boats, and aircraft. Following on from the changes to the livestock valuation rules in Budget 2012 legislation, this bill contains the detailed supporting provisions rules to the general proposal of the irrevocability of the herd scheme election. A proposal to treat lease inducement payments and lease surrender payments as taxable income for the recipient and as tax-deductible expenditure for the payer is also included in this bill.

A number of GST-related changes are also proposed. It is proposed that certain non-resident businesses may register for GST and claim input tax deductions for GST incurred, with some restrictions to protect the tax base. It is also proposed that all local authorities move to an invoice accounting base for GST.

Other substantive measures include changes to the time periods for claiming refunds under the Income Tax Act 2007, ensuring that expenditure on trees and plantings for erosion, shelter, and water protection purposes is tax deductible, and clarification of the definition of dividend in relation to certain rights issues, premiums paid under book-building arrangements, and share splits by companies. Also included in this bill are two additions to the bill made by Supplementary Order Paper. These make remedial changes, which, respectively, align the Tax Administration Act 1994 with the Search and Surveillance Act 2012 and make minor technical adjustments to the Child Support Amendment Act 2013.

These are the main features of this bill. Together these measures will help strengthen our tax system and support our economy by ensuring that people more fairly pay tax that is due. It is a good bill. I would like to thank and acknowledge officials for their contribution in developing the policy, and the drafters who worked on the detail of the legislation. I would like to also thank the hard-working Finance and Expenditure Committee for its close consideration of the proposed reforms—great consideration was given—and I do know that members on both sides of the House spent extra time delightfully reading this important legislation in draft form at home, in their weekends. I am pleased to commend this bill to the House.

The Minister of Revenue talked about the Government steadily reducing inconsistencies and anomalies. The only anomaly that it is reducing in this Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill is the car-park tax, which it stripped out of it. Talking about inconsistencies, under that Minister’s plan, if a car-park was in the central business district of Auckland or Wellington and you used it, you paid fringe benefit tax on it outside work hours. If it happened to be two blocks over in the central business district fringe, it did not apply. If you were in the central business district of Christchurch or Dunedin, it did not apply—well, it would not apply in Christchurch because there is no central business district. If you were in Tauranga or Hamilton, it would not apply. But if you were in Auckland or Wellington, it would. This Government is busy creating inconsistencies.

So under pressure from a very interesting coalition of unions, business groups, and Matthew Hooton, the Government rolled over and stripped—not before time—the ridiculous car-park tax out of this bill. It was ridiculous because it was going to cost more in compliance costs than it raised in revenue—by some independent accounting estimates, more than twice as much in compliance costs. So it is typical. National says that it is the party of low compliance costs but it is busy introducing ridiculous taxes that raise costs for ordinary New Zealand businesses and workers. It says that it is the party of prudent fiscal management but actually it has the worst economic record in how many years, Dr Clark?

💬 Dr David Clark: 50 years.

50 years. This Government has never run a fiscal surplus since taking office—the last Labour Government never ran a fiscal deficit—but it would have the country believe that it somehow has had a change of heart and it is now managing the economy.

In this bill we no longer have a car-park tax. We need the Government to wake up and smell the coffee on several other ridiculous, petty taxes such as the iPad tax—the idea that people, the public of New Zealand, would be charged for the personal use of their cellphones, iPads, and other devices. Imagine having to go through your phone bill and work out which were the private calls and which were the work calls, apportion them for tax purposes, and then, somehow, if you mention both in the same call, share the cost. What would be the compliance costs of that?

That the Government is happy to tax the public on their private use of cellphones is kind of ironic, is it not, because now the Government wants the Government Communications Security Bureau to listen in as well on every cellphone call you make. I wonder whether the Government is going to tax us for that privilege as well. The Government has not, however, got the foresight or the ingenuity to ensure that the people who make cellphones and iPads are paying their fair share of tax. The base erosion problem looms large, and the Minister of Revenue is too busy chit-chatting in the House to do anything about it.

Another example of this Government’s ridiculous, petty tax drive is the bizarre proposal to tax clergy housing. We all know that clergy do not earn much money. They do not get full salaries; they just get stipends. Part of the way that is offset is that many clergy get a free house to live in—a vicarage or a manse or some such. The Government thinks that should be taxed at an imputed, full cost, and the poor clergy or the poor church is going to have to find cash that they do not have to pay the grossed-up cost of this clergy tax. I want the Minister to stand up and tell the House he is going to fix that anomaly and that inconsistency, because it is not before time.

An accommodation fringe benefit tax is another thing the Government is pushing. The idea is that if you are in temporary accommodation for more than a year—and that includes in Christchurch—then that would be classed as a personal benefit and you would pay fringe benefit tax on it. Is that not ridiculous? The Government is going to be charging workers who move to Christchurch and have to stay in temporary lodgings for the rebuild a fringe benefit tax on their lodgings as if it were a private benefit. What a misbegotten, ridiculous impediment to the rebuild of Christchurch. I sincerely hope that the next Mayor of Christchurch, the Hon Lianne Dalziel, works with the Government to remove that ridiculous, petty tax.

This bill does a couple of useful things. We agree with the Government on the fact that we should be charging people’s private use of baches, boats, and cars appropriately, and if it is a business expense for a certain part of the year, the tax implications ought to be proportionate. There is no argument about that. We also agree that the livestock taxation rules, the valuation rules, should be adjusted to prevent people turning what should be profit-earning farming businesses simply into capital gains plays because of the absence of a proper capital gains tax. This bill does not go that far, but it at least tightens some of the egregious loopholes around livestock valuation.

I do want to acknowledge David Bennett MP, who brought some of his former professional training to bear on the drafting of that part of the bill. It is good to see the poacher becoming a gamekeeper—I wish that applied to all his colleagues. In the background of this bill is the issue that the public of New Zealand is sick and tired of waiting for this Government to show some leadership and a real economic plan. The public is tired of hearing excuses for why the New Zealand economy cannot get out of the rut and why we have to put up with some of the highest unemployment in the developed world. Previously, under the Labour-led Government, we had the absolute lowest unemployment in the developed world.

Whether it is the global financial crisis or the Christchurch earthquakes, this Government is fast running out of excuses. At a time when decisive leadership, decisive action, and real vision are required, this Government is tooling around with petty, ridiculous taxes on car-parks, on iPads, on clergy housing, and on Christchurch accommodation and the like. It is putting up compliance costs, putting up costs on ordinary New Zealanders, and making it more difficult—not easier—for people to get ahead.

An aspect that this bill starts to touch on is the erosion of the tax base, and it makes small but useful progress on closing down a couple of loopholes. But in the meantime, in the background, there is massive avoidance going on through the use of company structures and the use of trusts. The sad fact is that more than half of the hundred wealthiest New Zealanders are not even declaring tax at the top tax rate. Let us say that again: half of the hundred wealthiest New Zealanders—these are multimillionaires, if not billionaires—are declaring that they are not even on the top tax rate. They are declaring incomes, therefore, that are less than—and the Minister of Revenue is so ashamed that he has crossed the floor and will now be sitting on the Labour benches, helping to bring down this Government. He is helping to bring down this Government. [Interruption] He wants to take the next call. I yield my time to the new member of the Labour Party—well, I suppose we have got certain constitutional process, Todd, so you can lodge your nomination at www.labour.org.nz, and say: “I want to be a candidate because I’m jumping off the sinking rat-infested ship called National and I’m coming to work with the Labour Party to make New Zealand a better and brighter place.”

We recognise that member’s foresight. It is really a death wish to stay on that side of the House, because here is the most important economic legislation of the day, which the Government has put right up on the flagpole: a very, very limited tightening of loopholes around baches and boats. That is good as far as it goes. We will be supporting that. In the background are these two 800-pound gorillas: the fact that the bill is full of petty taxes and puts up compliance costs on New Zealand, and the fact that the Government does not have a vision for getting our economy out of the rut.

You can tell a lot in Parliament by the way members are sitting. Colleagues, when you look across the floor and you see those members looking at their feet, shuffling their papers out of embarrassment that this is the best that their ministry can do in trying to modernise the tax system, you know that that is a Government that is not long for this world. Thank you.

I am not sure what planet that last speaker, David Cunliffe, is on, but let me contest what he is saying. I think we are seeing a Government on this side of the House that is focused on building a stronger, more stable economy that can weather global storms and deliver higher incomes and more jobs. The Government has set out a very clear economic programme to support and accelerate that progress, and this taxation legislation we are discussing this morning—the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill—is going to help deliver that.

Under the leadership of our Prime Minister, John Key, the National Government approach has been clear and predictable. We have said very clearly to the last speaker, David Cunliffe: “No capital gains tax. No capital gains tax.” That is why he is spitting the dummy this morning, because that is the legislation he wants. We have told New Zealanders what we will do. We have campaigned successfully on our programme over two elections. We have taken New Zealanders with us by making consistent and moderate changes year after year, as we have promised. In the shorter term, we have worked to protect New Zealanders from the sharpest edges of recession, and the people of Christchurch from the unavoidable effects of devastating earthquakes.

We have incurred significant extra debt by spending in excess of our revenue to protect the most vulnerable families, to maintain living standards, and to support the renewal of our second-largest city. This legislation is entirely supportive of that direction. At the same time, we have set out on a longer-term path to repair the damage to our economy from a decade of excessive borrowing, consumption, and Government spending by that last speaker’s party. We are rebuilding the economic capacity to deliver more jobs and higher incomes over the next decade.

The Government is in the midst of a comprehensive programme to give businesses and families the confidence to invest in our shared future, despite global economic uncertainty. There really is only one way that we can do that. We need to shift resources away from debt-funded consumption and housing investment and towards more savings and investment in export-intensive sectors. New Zealanders have a good understanding of the challenges faced by the wider economy, and they understand the importance of this taxation legislation. I totally support this bill. Thank you.

It is not working. The member Mr Hayes, who has resumed his seat, has talked about this long-term plan that the Government is putting in place to support the economy and growth through tough times—all of that. The Government has been here for 5 long years, and we do not see the results. This Government still has the worst economic record of any Government in the last 50 years, and that is a shocking reputation to have. No amount of spin by Mr Hayes is going to change that fact. If the economy is not growing and if the policies are not working, carrying on with the same policy is not going to change anything, Mr Hayes.

Coming back to the specifics of this bill, the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill, it is a bill that does amend the Income Tax Act. It attempts to plug a few holes here and there. There is nothing wrong with that—nothing wrong with that. It is what is not in this bill that is the most significant talking point. This bill refuses to engage with pro-growth tax reform—the kinds of things Mr Hayes was explicitly ruling out in his speech. The OECD, the IMF, Treasury, and nearly every Western country believe that a capital gains tax is the answer to an anomaly in the tax system. It is a way to make sure that every Kiwi pays their fair share and to make sure that the investment signal is neutralised. But Mr Hayes continues on saying that his Government will not listen to the OECD. It will not listen to the IMF. It will not listen to Treasury. It will not listen to any serious economic commentator. It is determined to carry on. Mr English is there, driving along the motorway—driving along the motorway—in his little clapped out 1970s Honda Civic. He is driving along, and he says that everyone is going the wrong way. Everyone on the motorway is going the wrong way. The OECD is going the wrong way. The IMF is going the wrong way. Treasury is going the wrong way. They do not know what they are talking about. Every other Western country does not know what it is talking about. Mr English is the only one driving the right way on the motorway, and along he goes—vroom, vroom, vroom! He is saying: “We will not adopt pro-growth tax reform. We want to carry on as we were. We’ve got pride. We’ve got our pride. If the economy suffers, if New Zealanders suffer, we don’t care; we’re going to keep driving the wrong way along the motorway.” That is where he is sitting, and that is what Mr Hayes is promoting here.

Well, a Shearer-led Labour Government will bring pro-growth tax reform to New Zealand. We care, Mr Hayes, about the future of New Zealand. We care about those who are struggling. We care that the median wage has gone down under this Government in real terms, and that the average New Zealand family is much, much worse off than when this Government took power 5 years ago. We care that New Zealanders are struggling and that they cannot pay their power bills. We will introduce policies to make power more affordable, because we recognise that it is a problem. Again, this Government says that there is no problem: “Oh, the system is fair. Everyone is paying a fair amount for their power prices.” That is what Mr Key says. Well, New Zealanders disagree. Labour disagrees. We think that we need a plan to address these things in our country that are wrong. We will take a hands-on approach to the economy and we will address the big issues. A Shearer-led Labour Government will be out there making the changes that need to be made, because that is the plan. We have a plan, unlike the members opposite. We think that the matters that matter to ordinary New Zealanders need to be addressed. We are not going to stick our heads in the sand.

This legislation repairs little gaps here and there in the tax system, but it does not address those fundamental issues that will get our economy back on track. We know that these changes that are proposed will not close the loopholes whereby 75 percent of New Zealanders with a net worth over $50 million are not paying the top tax rate. That means that they are not declaring income over $70,000. That means that the tax system is fundamentally not fair. It is not making sure that every New Zealander pays their fair share. The little guy at the bottom and the little solo mother, whoever it is, are paying their fair share of tax. They have got no opportunity to get around it. But many at the top end are employing the accountants necessary to avoid their obligations, and are burying things in capital.

It does not suit these folks here to challenge that. They have said that. Mr Hayes has said that they are not going to change that. They are not interested in pro-growth tax reform. They are not interested in a capital gains tax. They are not interested in research and development. They are content to let ordinary New Zealanders struggle, whilst those who already have a lot of money protect their interests. That is where the Government’s interests lie.

One of the other things that the Government has got on the table for tax reform is to start charging for clergy housing—introducing a tax on clergy housing. Yes, members of the House heard it right—a tax on clergy housing. We know what that will mean. It will mean that many small, struggling, rural communities, those who are suffering the most under this Government’s terrible policies, will no longer be able to afford to have a full-time vicar or minister in their local community. Often, that person is the last professional left in the community. Those vicars, those ministers, and those pastors in those small rural communities are often the only professionals left in town. Struggling families go to them for advice, for basic legal advice or for advice on filling out forms for the Government—for all manner of things. They are not just “hatching, matching, and dispatching”, as is the ordinary work of the vicar. They are out there, supporting small communities. But many small communities will lose their vicars, they will lose their ministers, because this Government wants to introduce another petty tax.

It introduced the paper boy tax, the paper girl tax. Let us think back to that terrible Budget where the Government tried to stamp on the paper boys and paper girls of New Zealand by introducing a new tax. We have got the Government also trying to introduce a car-park tax. Well, that was in this legislation, until there was a popular revolt. The Government is always trying to put petty taxes on New Zealanders, on ordinary, struggling New Zealanders, but not actually addressing the big issues, not actually putting progressive tax reform in place. The Government is not willing to entertain pro-growth tax reform that the OECD, the IMF, Treasury, and every serious economist recommends, or introducing a capital gains tax that would see money flow towards the productive sector and away from the speculators. If it is not in this Government’s interests, the Government will not entertain it. So we do not see it in this legislation.

But those families out there in the small communities, who are really hurting, who are seeing the absence of jobs hit their families hardest, which is a consistent feature of this Government, have been given increased prescription charges by this Government. It just builds up and builds up and builds up. Those communities will not have a local minister or vicar to advocate for them, if this tax on clergy housing goes ahead. They will lose those people who support their communities, due to another petty tax. This Government is just after the little guy, and that is a shame—that is a terrible shame.

We in the Labour Party do not have any problem with the Government tightening up the tax system. We will be supporting this legislation. But we wish this Government would step up and address the big issues that would get the economy back on track, that would see the kind of growth in the economy that you get under a Labour Government. I remind members of this House that over the last 50 years Labour Governments have grown the economy by 3.7 percent, on average, while National Governments have grown the economy by nearly a percentage point lower. This National Government is worse than most. Its record on growing the economy is the worst, as we know, in the last 50 years. It is worse than most. That is, in part, because the Government is not willing to step up and address the big issues of the day. We have the worst current account deficit in the developed world, the IMF says—the worst. It is worse than that of Greece. And yet this Government does nothing about it. We see the Minister of Finance sticking his head in the sand. He is driving his clapped out 1970s Honda Civic the wrong way up the motorway, saying that everybody else has got it wrong. All those people in their Lexus, their Toyota, or their Subaru, going the other way, zipping past, have got it wrong. The OECD—what would it know? The IMF—what would it know? Treasury—what would it know? Every other Western country—what would it know about pro-growth tax reform? Mr English, in his clapped out 1970s Honda Civic, going the wrong way down the motorway, is convinced that he is the only one who has got it right. He will not introduce pro-growth tax reform.

This Government is determined to protect the interests of the big end of town, and does not seem interested in getting our economy back on track so that everyone—everyone—can get ahead, so that the ordinary New Zealand family would start to see jobs being created, start seeing wages go up, and start seeing the kinds of incomes that they could live on to help their families get ahead, which would mean that they would have the security for their future, that they could save, and that they could actually dream of owning a house one day. It will take a Labour Government to introduce policies like KiwiBuild, to introduce pro-growth tax reform, and to bring power prices down through NZ Power. A Shearer-led Labour Government will get these policies in place and will make sure that we are addressing the big issues, not these issues that we are tinkering with here in this bill. We need a Labour Government, and we need it soon. Thank you.

Tēnā koe, Mr Speaker. Tēnā koutou e te Whare. I rise to speak on the third reading of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill. The Green Party will be supporting this bill because it does make some entirely consistent and logical, but very small, moves to tighten up the tax system. But I have to say that we are very disappointed that we did not take the original opportunity that was proposed in this bill to explore extending the fringe benefit tax to employer-provided car-parks in the Auckland and Wellington central business districts. It is really unfortunate that there was such an uninformed debate about it, and that the position the Labour Party took was so inconsistent with the other sorts of outcomes and objectives that it says it is trying to achieve. Of course, it is just as bad that the National Government dropped it. It is always good to see it propose to tighten up loopholes, particularly in the case when it is going to have added benefits for things like our transport system in our two biggest cities.

The Green Party has a very keen interest in reforming our tax system to get better outcomes. The main reason that I stood for the Green Party and I am in Parliament is not just so I can collect a pay cheque; it is that we have some pretty pressing problems that we need to address. One of these is climate change. We have to transition to a sustainable low-carbon economy. If anybody was looking at the Guardian last night, there is a very interesting article about a paper by James Hansen, one of the foremost climate scientists in the world, stating that if we do not fully decarbonise by 2030, we risk completely wrecking the planet for future generations. Obviously, I think everyone in New Zealand, and everyone in this House, cares about their children and their grandchildren, and the opportunities that they are going to have to live great lives and to have prosperous, sustainable lives. All of us need to come together and figure out how we are going to address this problem. How are we going to transition to a sustainable economy—one that is not over-reliant on fossil fuels? It is not that difficult.

In fact, when I studied economics, urban planning, and transport planning, and when I worked as a consultant urban planner and transport planner, I found we were working on exactly these sorts of smart ideas that can easily be implemented and that are going to result in all sorts of co-benefits.

So not only can we decarbonise our economy but also we can—

The ASSISTANT SPEAKER (Lindsay Tisch): Taxation, we are on taxation.

—do it in a way that is going to save money and get better outcomes in other parts of our lives. Tax law is exactly one of those areas where we can get those sorts of smart outcomes. What was proposed originally in this bill is a perfect example of that. What was proposed was extending fringe benefit tax to employer-provided car-parks, admittedly only in the Auckland and Wellington central business districts, as those are the areas where car-parks have the highest value.

Interestingly, early last year, in 2012, there was a research report published by the New Zealand Transport Agency entitled Company cars and fringe benefit tax—understanding the impacts on strategic transport targets. This research report had not been provided to members of the Finance and Expenditure Committee. I do not think officials at the Inland Revenue Department even knew about it when they were proposing to extend fringe benefit tax to car-parks; they were just looking for a way to raise a little bit of revenue. It turns out that there had been all this work done for the New Zealand Transport Agency. It had spoken to somebody at the Inland Revenue Department, and what it found was that there were huge potential benefits from extending fringe benefit tax to car-parks in the Auckland and Wellington central business districts, and potentially, actually, anywhere where car-parks have a high value. Of course, other countries have done this. It is a perfectly logical thing to do. Australia extends fringe benefit tax to car-parks.

What is the point of this? A lot of people got very unhappy about the idea, and made it sound like it was a very unfair thing to do, to tax a car-park. In fact, the value of a car-park in the Auckland or Wellington central business districts is, conservatively, $2,750 annually—that is a very conservative estimate of the value of a car-park. The value of an annual public transport pass is $2,700—very similar. If an employer wanted to provide public transport passes to its employees, it would be forced to pay fringe benefit tax on those public transport passes. If it offers its employees a free car-park, it is not required to pay fringe benefit tax. This is not fair. It is not going to result in good outcomes for transport in our two biggest cities in New Zealand, when we have serious issues with congestion in Auckland, if employers are able to use a tax loophole—and that is what this is—to provide benefits to their employees and not have to pay tax on that.

How is it fair, when the majority of people commuting to work in the Wellington and Auckland central business districts do not drive and do not receive free employer-provided car-parks? How is it fair that they get taxed on the additional income they might receive instead of a free car-park or on their public transport passes, if the employer decided to provide them, yet we are not going to tax the equivalent benefit of a free car-park, even though that incentivises people to drive into the central business districts at peak time, thereby congesting the roads? Here was something that was actually going to raise a small amount of revenue for the Government, was going to result in getting the incentives right, direct, and fair, and was going to have potentially huge benefits for reducing congestion in Auckland, because it would mean we were no longer subsidising single-occupant vehicle trips into the Auckland central business district.

I admit there were some problems with the proposal. One of the problems was that it could have unfairly hit shift workers such as cleaners who have to go to Skycity in the middle of the night. Obviously, it is entirely possible to design this in a way that it would not affect people who do not travel at peak times, because the value of a car-park is highest at peak time. Actually, there are a whole lot of empty car-parks in Auckland and Wellington central business districts in the middle of the night. There is no reason why somebody using a car-park in the middle of the night should be taxed for it, because the value changes depending on the demand and the time of day. Since there is a huge surplus of car-parks in the middle of the night in the Auckland and Wellington central business districts, I think it would have been entirely possible to design the tax in such a way that it got the outcome we wanted, which was simply to remove a tax loophole that primarily benefits high-income earners. If you look at the people who drive into Auckland and Wellington central business districts for work, they are all on above-average incomes, and the vast majority of them are on the highest incomes—well over $100,000 a year. What many people in the House have described as a sort of unfair tax that would hit hard-working Kiwis would actually have been simply taxing appropriately people who are already on extremely high incomes, and making sure that they have the opportunity to benefit from consuming fewer resources.

As I said before, the Green Party is very interested in using the tax system to get outcomes that are win-win, that are better for the economy, that are better for people, and that are better for the environment. It is entirely possible to do this. We have so many opportunities, if we stop thinking in silos and in this kind of reductionist way that got us into the problem we are in. If we start recognising the interconnectedness of our transport system, of our tax law, and of our urban planning laws, we can create an Aotearoa that is decarbonised, that has less air and water pollution, that has better public health outcomes, and that has good and equal opportunity for everyone, so everyone is looked after and it is not just the rich and the children of the rich who get richer, with the poorer stuck down there at the bottom. We can create this, and all it takes are some smart Green solutions.

It is also going to require some patient, informed debate. We cannot constantly be jumping on proposals that Government members put forward that might be good, just because we see a political opportunity to kick them when they are down. I welcome this Government introducing good, positive initiatives that will result in better outcomes and more sustainable outcomes, and a fairer, more sustainable Aotearoa. I would love to see more of that from it. Unfortunately, we do not see much at the moment. A perfect example is in this bill, which is about to pass into law without us having taken the opportunity to get a better outcome for our transport system. Thank you.

It is a great pleasure for me to speak on this Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill. This is yet another example of a progressive National Government working towards a best-practice, broad-based, low-taxation system. This is a bill that promotes fairness and integrity across the tax system and strengthens our economy. It certainly focuses in on the rural economy and it clarifies taxation regarding livestock, which has been something that has needed clarification for a long period of time.

It is very refreshing that the Greens are indeed supporting this bill, and I was delighted to hear Julie Anne Genter make the comment that, once again, here are the Greens seeing the light, supporting the National Government. After all, this bill also supports the environment and it confirms that farmers’ riparian planting is immediately tax deductible. This is a comprehensive bill and it is entirely worthy of support.

I take a call on this bill, the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill, on behalf of New Zealand First, and what a pleasure it is this time to be able to speak after Dr Paul Hutchison, rather than before. What a great morning in the House it is when we can alternate our positions and have a chance to comment in reverse.

💬 Dr Paul Hutchison: The member supports the environment.

Exactly—and, in this case, Dr Hutchison, you will be most pleased that New Zealand First is supporting this bill and that we are in line with much of the thinking that is in this bill. Rather than the previous State sector legislation where we were opposing the gutting of the Public Service, in this case we are supporting this bill. In this respect we support some of the measures, including the livestock valuation rule changes. We support the GST changes, which remove the inequitable situation of non-resident versus resident businesses. We support that this bill provides tax deductibility for expenditure on trees and plantings for erosion, shelter, and water protection purposes. As Dr Hutchison just said, this is a good measure because increasingly with our changing climate and the situation where we are having increasingly erratic weather conditions, we certainly do need to be very mindful of the significant erosion that is occurring around New Zealand. Therefore, tax deductibility to farmers and others, of course, in terms of the planting of trees and shelters, and water protection - purpose plantings, is all good for the environment and it does help to mitigate some of the adverse effects that are occurring in the environment.

This bill also gives donee status to three charity organisations that operate internationally, and, again, this is sensible for those three charities concerned. It also eliminates tax treatment mismatches to certain foreign currency hedges. Again, in that foreign currency area, this is sensible policy to sort out that particular matter.

We were very pleased that the Government withdrew from this bill the car-park tax on the Auckland central business district and on the Wellington central business district. They were a nonsense, and, again, they were going to cost in the order of something like $30 million to secure $17 million in tax revenue. That was a no-brainer, so New Zealand First did put pressure on to have it withdrawn, and we were pleased that the Government did withdraw it from the bill.

Overall, this is a bill that helps to strengthen the tax system. It helps to streamline aspects. It takes out quite a number of loopholes and makes improvements where they are needed. The bill makes it easier for taxpayers, both personal and corporate taxpayers, and so New Zealand First will be supporting it.

I am very pleased to stand in support of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill in its third reading. I am very keen to talk about the riparian planting programme in Taranaki, which this bill brings some assistance to. As you know, Taranaki is a very extensive farming locality in our country, and we are pleased to note that 96 percent of all Taranaki dairy farms and almost all of the ring plain and coastal terraces of Taranaki have a riparian management programme.

So what this bill will do in terms of the management plans that are put in place is it will continue to encourage and incentivise farmers to plant out the 17,000 kilometres of stream banks in the Taranaki region with plants that will protect our waterways. So we are a very forward-thinking region, we are already at work doing this, and it is great to stand in support of this bill, which is going to bring a greater assistance to that programme. Thank you.

I begin by also acknowledging the contribution earlier of Julie Anne Genter. I thought that was a very erudite exposition of the principles that should underlie a neutral tax system. The difficulty that the Labour Party had with this proposal was that the compliance costs, as designed, were high. Some of the other complexities that the member noted herself in respect of shift workers had not been fixed in the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill, and the politics of it got away from the Government in a way that nobody could fix. But the member is quite right in her analysis about what a neutral tax system should look like and how that can have both economic and environmental benefits for our country. I congratulate her on her contribution.

I want to, whilst noting that the Labour Government will be supporting this bill for reasons that other—

💬 Hon Trevor Mallard: Labour Government—soon-to-be Government.

The Labour soon-to-be Government, sorry. The Labour Party will be supporting the—I am not sure whether I am ahead of myself or long behind, but I am—

💬 Hon Trevor Mallard: You’re slightly premature.

Premature—I like to think of it that way, thank you.

💬 Hon Trevor Mallard: Well, not in every sense.

Ha, ha! I think I might return to the bill.

Other Opposition members have already acknowledged that this bill does make some minor improvements to the taxation system and that therefore it deserves the support of the House. But I want to return to the points that David Clark was addressing at the end of his contribution.

We had a question in the House yesterday, which the Government put up to itself, where it tried to congratulate itself on having a good redistributive tax system. The problem is that it is not, compared with most OECD countries, and that was made clear by the OECD report on New Zealand that came out about a month ago—in June. That report said that New Zealand’s tax system is less redistributive than most OECD tax systems. What it did not say was that this Government has made it worse. This Government gave 40 percent of its income tax cuts to the top 10 percent of income earners. Mr English had the audacity to stand up and say that all is well in New Zealand, ignoring the fact that the income tax system is less redistributive than it was when the Government came to power and is now, according to the OECD, less redistributive than the average.

The same OECD report lamented the fact that income inequality in New Zealand is rising faster than in just about any other OECD country. We are no longer the equal country that we were 20 years ago. We are not, as yet, as unequal as some of the least fair societies in the OECD, but the rate of change as we progress towards being less equal than others is one of the worst in the OECD, and this Government has made it worse. It has made it worse not just through its changes to income tax but through the increase in GST that it imposed upon New Zealand.

So with 40 percent of the income tax cuts having gone to the top 10 percent of income earners, what was the distributional effect of the increase in GST that happened about the same time? The distributional effect of that was that it made New Zealand’s tax system less progressive and more regressive. The reason is that when you have GST it is effectively a tax on the wages of low and middle income people, because their wages are all spent on GST-inclusive services, with the exception of their rent and interest payments. The proportion of a low to middle income earner’s income that is spent on GST is higher than the proportion of income that is spent by a high-income person on GST. So, in effect, GST is more expensive for low and middle income people than it is for high-income people.

That was another step by this National Government towards a less equal and more unfair society—so much so, as I have already said, that the OECD has been lamenting the fact that New Zealand is becoming an unequal place. Further, the OECD noted that the most glaring hole in our tax system is not these little things that are being fiddled around with by this bill, but the lack of any taxation on capital income. There is very, very little tax on capital income.

Sam Lotu-Iiga shakes his head and says that is not right. Well, he is wrong. He says that is not right; he is absolutely wrong.

The National Government occasionally says: “Well, if you’re a trader in property, you pay tax.” Yes, but you are not paying tax on capital income; you are paying tax on trading income. The wealthiest people in New Zealand can construct their affairs in such a way that their income is capital income, not taxable income. We do not tax capital income in New Zealand. We on the Labour Party side are not saying that you should tax all capital income. You have to be careful that you are not taxing inflationary gains in property, because that is not real income, but you should be taxing capital income, because otherwise you have rising inequality.

You have lots of other problems as well. One of the reasons why we have got rampant house price inflation is that there is a tax bias—which is felt most in Auckland at the moment—that drives investment into rental housing because there is a tax break. Again, the OECD said this in its report in just the last month. It said that the effective tax on different classes of investment is different, and that drives investment patterns. The effective tax rate on capital gains from investing in residential housing is nil—it is nil. In fact, you get tax deductibility from interest, which includes an inflation component. You would, effectively, get a tax deduction for some of the inflation that you suffer when you are in society because your interest payment includes an inflationary component. You get a tax deduction for that in New Zealand. You do not get taxed on any of the gain—any of the gain—and it is just unfair. Not only is it unfair; it holds the economy back.

That is why, when we talk about capital gains tax, we are safe when we say that a capital gains tax excluding the family home would grow the economy. It is part of our pro-growth tax reform package. We know that if you have a proper tax signal in the economy, instead of overinvestment in the housing market in Auckland—which drives up house prices, to the detriment of people trying to buy their first home. It also means that there is not enough money going into other, more productive parts of the economy. So too much money goes into the speculative economy based on a tax bias favouring tax-free capital gains—capital income—and not enough money goes into our productive factories, or into our service industries, which are selling services overseas and even into other parts of our export economy. That is one of the reasons why this Government has failed completely in its ambition to rebalance the economy.

National came into office promising that it was going to do a number of things. It was going to stop the drain of people going to Australia. “Wave Goodbye to Higher Taxes. Not Your Loved Ones.” was its slogan. It has failed completely in that ambition, with more than 200,000 New Zealanders having since left to live permanently in Australia—an enormous number of people. It is going to show up in the census figures when they come out soon, particularly in some of the provincial centres that have been so ignored by this Government.

It also shows up in the Government’s failure to rebalance the economy towards exports. Exports as a percentage of GDP have not changed, despite the Government’s promise that it was going to increase exports as a percentage of GDP.

Of course, it also shows up in the lamentable statistic that New Zealand has the worst current account deficit in the developed world, according to the IMF. The OECD says that it is the second worst in the developed world and is likely to be for the next 3 or 4 years, into the end of the projection period—worse than Greece’s.

This is all because we do not cover the cost of our imports and interest from the value of our exports, in part because our tax system has these structural biases that drive our investment capital into the wrong parts of the economy. It costs us jobs. Wages are lower as a consequence. We are a low-wage economy compared with most of the developed world now. And this National Government does nothing to change that, because it has not got the gumption to put aside the interests of the cronies for whom it governs—to put aside the interests of the wealthiest in society, who, in the long term, would benefit from the changes that we propose, but who would in the short term pay a little bit more tax. This bill does not do the many things that are needed to improve the New Zealand economy.

It is a pleasure to take a short call on this, the third reading of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill. I thank the Minister of Revenue, the Hon Todd McClay, for his work on this bill, also the previous Minister, the Hon Peter Dunne, certainly, for his hard work on this, and also the Finance and Expenditure Committee members who worked on this bill to bring it back to the House. As you have heard, and those around the country have heard, it has got widespread support here in Parliament.

So what is the purpose of the bill? It foreshadows Budget 2012 and the measures that we placed within that Budget—a well-received Budget, a popular Budget out in our communities. It broadens the tax base. The changes will make the tax system fairer, the economy stronger, and, contrary to my colleague across the House who just sat down, David Parker, it actually will provide jobs and opportunities going forward. I see a few young people up in the gallery here. To the young people of New Zealand, this bill will actually create jobs for you in your futures going forward.

The bill introduces amendments to several inland revenue Acts and regulations. It includes supporting provisions, as my colleagues have already mentioned, to the livestock valuation rules, which make elections to use the herd scheme generally irrevocable. That is popular in both rural and provincial New Zealand.

But the measure that is popular in my electorate of Maungakiekie is around the amendments to make two specific commercial land - related lease payments—namely lease inducement payments and lease surrender payments—taxable and deductible. This, again, reinforces the purpose of the bill: to make it fairer and to improve business efficiency across our country. The bill also tightens the rules for deducting costs of assets such as holiday homes, boats, and aircraft that are used by the owner both privately and to earn income.

I commend this bill to the House. It continues this Government’s focus on ensuring that everyone pays their fair share of tax and its focus on continuing to support jobs and opportunities in our economy. Thank you.

What a rubbish speech that was!

💬 Peseta Sam Lotu-Iiga: Oh!

Twiddling your thumbs while Rome burns. That member, Peseta Sam Lotu-Iiga, more than anyone else, should know that what this Government has done around tax has been outrageous. I have to say, I went to a breakfast yesterday morning put on by the voluntary sector. Professor Robert Wade—a Kiwi, actually, at the London School of Economics—was hosted by the Hon Jo Goodhew.

I have never seen a Minister look so uncomfortable in my life. Here was a National Government Minister hosting a person who basically stood up and said that the taxation regime in this country is outrageous and that the changes this National Government has made—he did not refer directly to the Government, he was far more polite than that; I am less polite—have created more inequality. He said the tax changes put in place by this Government—and the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill does no more than tinker—have driven greater inequality up and down this country.

Professor Wade clearly laid out what that means for a society, and it is pretty sad. We have, as has been explained by previous speakers, a number of technical issues around holiday homes, boats, and aircraft, and other issues, and some around the livestock taxation changes, which bring a bit more balance and a bit more certainty.

The bottom line is that when the National Government came into power it made two key changes to taxation, and I do not see a reversal of those changes in this bill here. Firstly, it lowered the tax for the most wealthy in this country, and, secondly, it increased it for everyone else through GST. People have probably forgotten that GST was 12.5 percent in 2008, and the National Government has now got it at 15 percent. It is a regressive tax, because those on low incomes spend all of their incomes surviving; those at the top end spend a small portion of their income, the rest they can spend in ways that do not attract GST. So not only did we have lower taxes for people at the top; we had regressive taxation and GST increases at the bottom.

This bill tinkers. The people at the top will have holiday homes and boats and aircraft, and they have been able to get a bit of tax break on that. People will say that is outrageous and that the National Government is very good to be moving on this area. Well, do not be sucked in. This is tinkering around the edges, and I am sure many of the people at the top end—people who have an aircraft and get a tax break on it, or have a holiday home and use it for something else—will find another way to get around it.

But the core issues of taxation are around the increase in GST. And the other one that the Government slipped in at the start of this month was, of course, the increase in petrol tax—3c extra for every litre of petrol for every single Kiwi in this country. The people in the regions are outraged because they are paying, basically, for money to go to Auckland. Everyone who does not have access to public transport is having to pay a whole lot more. That is increasing taxation to people who cannot avoid it and decreasing taxation to those who can, at the top end. That has been the consistent approach of the National Party in Government.

Robert Wade embarrassed the Minister there yesterday—and she should have felt that way. He talked about a just society being one where distribution is done in the right way, not redistribution. What we are effectively talking about here are changes in redistribution—tinkering at the edges, but not going to the core of the taxation system in this country. My colleagues have pointed out a number of other flaws. On balance, we will support the bill. It makes, as I said, slight progress in areas, tidying up a bit here and a bit there, but it does not do anything to change the underlying unfairness of taxation in this country.

I raise another point that a colleague brought up yesterday, and that is in regard to the Inland Revenue Department and its whole running of the taxation system. Its ability to actually implement all these changes has come under serious question, and, of course, its use of consultants is now being exposed. The Government, in slashing and undermining Public Service capability, is increasingly bringing consultants into the taxation system, and every other area of Government responsibility, at a far greater cost, but they are on a different appropriation line. Sometimes, it is hard to track down unless we ask the right questions.

The point is that if the Inland Revenue Department is going to give effect to the changes here, it has to have the capability, and bringing in consultants to help it tidy up mistakes of the past or to deal with a lack of capability is not the best way forward. If the Inland Revenue Department does not get on and improve the system, and if the Government does not fund it properly, then not only will the computer system fall over but so too will the basis of taxation in this country. So I hope that the Government gets on and deals with it.

I will just finish on an issue around livestock valuation, and I would like to reinforce a point I made earlier in the debate a couple of weeks ago. The Government seems to be, and claims to be, very good at livestock taxation. It is the issue of deadstock taxation that I want to refer to. The Government’s management of the trade of meat has not been good. Once again, it has squeezed a Government department, and it has no ability now to manage exports from this country into what are complex markets like China.

I fear that the ongoing determination by this Government to drive down Government capability is going to lead to some major problems, and none more so than in the area of biosecurity, once again. If biosecurity is breached—and this may be a corny connection but it is none the less an important one—and we end up with foot-and-mouth disease, the result will be that although the Government has sorted out livestock taxation, we will have a hell of a lot of deadstock taxation and a major blow to our economy.

So in endorsing and supporting the bill, I just want to remind the House that the Government record in the area of taxation is outrageous. It has made changes to give greater benefit to those at the top, and imposed a greater burden on those at the bottom. That creates an unfair society, and it is one that we do not support in any way at all.

I want to make just a very short contribution to commend the Minister of Revenue and to draw the House’s attention to a very sensible amendment that has some conservation significance. This Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill enables us to have tax deductibility for farmers for riparian planting.

As we debate in this Parliament the issues of water quality, all of us know that riparian planting is an important part of it. We know that in 2007 the previous provisions of the Income Tax Act made a somewhat arbitrary distinction that if you were doing shelter belt or commercial forestry planting, you could deduct expenditure in the year in which it was incurred, but if you were doing it for nature conservation reasons, you could not. The previous provisions of the Income Tax Act also excluded the capacity to do it for shrubs; you could do it only for forests.

I think we should commend this bill to the House for this sensible conservation step, which is consistent with this Government’s view of working in partnership with landowners. We are now going to allow the tax deductibility of investments in shrubs, trees, and riparian strips to deal with the issue of both sediment and nutrients into rivers, which is something I know many members of the House believe that this country needs to do better. Here is the Government taking a sensible step forward.

Bill read a third time.