Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill

Kia ora, Mr Chair, and thank you for the opportunity to contribute during the Committee stage of this Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. It is an item of business that has been covered by the Finance and Expenditure Committee. It is something that this party of mine, the Labour Party, supports, but with certain reservations.

I want to direct our attention to a portion in the bill. I shall take as read that we are familiar with the purpose of the bill, but I just want to isolate a small element pertaining to the rules for Working for Families tax credits. When this policy was introduced, it took a while for eligible people to realise the full extent of the policy, and, like all major policy reforms, it has required refinement as time has gone on. It is important that we continually revise the application of such initiatives under our tax system to ensure that the intended recipients are totally aware of their entitlement and so that the information that will eventually flow from these amendments, this refinement, is put out in such a form that the public realise the extent of their entitlement, because, unfortunately, the public have been sold a line of misinformation recently. We are augmenting this raft of assistance measures to those who require the State to take an active role in lessening the burden of family life and raising children.

The changes that are made here are slightly dry, but the importance of them is that each time we endeavour to change the provision and access to State largesse for such social good purposes, we end up with a system that needs to be simplified. The cost of compliance is always a headache for both, I am sure, the Inland Revenue Department and those administering it through the various social welfare organisations. It is a constant reminder to us that although we do support this bill and we do claim credit for the architecture surrounding this policy originally, simplification is extraordinarily important.

I also want to direct our attention to what I think is a very intelligent set of changes designed to deal with the Canterbury earthquake situation. It is useful to note that this bill embraces the notion of an extinction of expiry dates for relief measures. Initially, it was not conceived to be necessary. The thing that I return to is that although we support this bill, the overarching lens through which I and my colleagues view these things is whether we are simplifying matters. Are we making matters clearer and more lucid? Are we not empowering the accountancy profession to set itself up as high priests, so no one can quite understand what is the intent or the extent of such changes? Whatever provision we might be debating or we might be discussing in our deliberations during the Committee stage, it is essential that we, all members of the Committee, bear that in mind. Whether it is the opaque or hellishly complex areas of understanding, such as imputation credits—and I will have more to say about Australians tomorrow in the general debate, so I will not litter these contributions with further information about the friends of the Prime Minister who are tied up with the Australian supermarkets. That is another matter. The point needs to be made—irrespective of what provision we are focusing on—my plea to us as parliamentarians, and the injunction to our professional advisers is to keep it simple and keep it lucid.

I follow my learned colleague the Hon Shane Jones in supporting this bill, the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. However, there are some things that ought to be covered in this debate, including the introduction of Supplementary Order Paper 413 by the Minister of Revenue, which must be regarded as one of the more embarrassing things that we will see in this Parliament this year.

The CHAIRPERSON (H V Ross Robertson): Order! Sorry to interrupt the honourable member. I just want to remind members that this debate on Part 1 is about the annual rates of income tax for 2013-14. That is just a general reminder for all members.

I am quite happy to come back to that issue in further parts of the debate. I appreciate that there will be opportunities in different parts to raise those issues, which are particularly embarrassing for the Government. But there is plenty more to cover in Part 1 that is embarrassing for the Government, so I shall concentrate on that as we start off.

I guess the embarrassing thing about Part 1, which covers most of the substance of the bill, is, indeed, the fact that it does not cover off those things that would really grow our economy. We see here where the annual rates are set for the taxes and so on and the way in which we agree as a Parliament to continue certain parts of Government business that they are something that can and ought to and should be debated time and again. The Government here has failed to really grasp the nettle. So we fail to see here the Government grasping pro-growth tax reform. Once again, the opportunity is slipping by, in a tax bill before this Parliament, to discuss the opportunities that the OECD would recommend to us, that Treasury would recommend to us, and, in fact, that any credible economist around the Western World would recommend to us. In fact, most Western countries have already adopted instituting pro-growth tax reform in the form of a capital gains tax.

A Labour-led Government aims to introduce a capital gains tax to ensure that businesses in New Zealand are assisted in having money that is currently involved in the speculative property sector transferred across into the productive sector. Right now, unfortunately, there is something of a loophole in our tax system. It does protect the rights of invested capital, but what it does not do is use that capital most efficiently in our economy. That loophole, very rare in the Western World, favours investors in property over investors in the productive sector. Labour regards this as wrong.

Of course, as I have said, the OECD, Treasury, and other credible Western economists regard this as wrong, but this Government has taken no steps to change it. It likes the way it is now. It likes the fact that the very wealthiest New Zealanders do not pay tax. Many of the wealthiest New Zealanders do not pay tax like the rest of us do, because they are not on the top tax rate. The Government is not seizing the issue here. It is not addressing the fact that those New Zealanders are not paying tax on every dollar they earn. They treat their income in a different way so that it is not taxed.

New Zealanders know that that is not fair. They are seeing fairness and opportunity slip away under this Government as we see in New Zealand inequalities at the widest they have ever been in recorded history in New Zealand. We see in the Gini coefficients and the other measures that economists follow that inequalities in New Zealand are the greatest they have ever been. Here, where we set the rates of taxation, we are reminded that these were changed—and they are not changed again here. The Government again did not seize the opportunity in the 2010 tax package, where, against its promise, it put up GST, taking money off New Zealanders—ordinary New Zealanders going about their business. John Key said he would not put up GST, and, again, almost immediately after the election, up it went. We begin to distrust a Government like that, say the ordinary citizens of New Zealand.

At the same time as that consumption tax was raised, the Government sought to give some very big tax cuts to the wealthiest New Zealanders. The top 10 percent of New Zealand earners got 44 percent of the value of those 2010 tax cuts. The bottom 20 percent got just 2 percent of the value of those tax cuts. That was a very unfair tax change, as we have seen it from this side of the Chamber. We have seen since then, as we start to see here and there signs that the economy is growing, that that growth is not being shared fairly amongst New Zealanders. There is no sign of it being shared fairly. Those at the top—the very few at the very top—have been given a big tax cut by this Government, and the rest of New Zealand, middle New Zealand, is struggling. People are not able to get ahead, even though they work day in, day out. Even though they do those things that are good for our country and good for our future, or ought to be, they are not able to get ahead for themselves or for their families or for their communities, because this Government has set the system, through the way it sets up the tax rates, in such a fashion that the wealthiest New Zealanders get this big tax break while the rest of New Zealand pays and pays and pays for the services and pays for that tax cut for the wealthiest New Zealanders.

This Government is not about fairness and opportunity—those are Labour values, the Labour values of fairness and opportunity. This Government is about preserving the interests of the wealthiest. That is why it has not gone near the capital gains tax in this particular bill. That is why it has not helped out New Zealand businesses that are struggling by introducing pro-growth tax reform that would support emerging businesses and that would see money directed towards the productive sector. Instead, it is preserving the interests of capital that is already there. It is preserving the big money and big end of town’s interests. That is what we are seeing from this Government time and time again. We see the echoes of it in the Skycity deal. We see the echoes of it in the handout to Rio Tinto, which made record profits. The Government did not ask for any job guarantee, and the next day Rio Tinto was cutting jobs. It took the $30 million from the Prime Minister, but it carried on with cutting jobs anyway. That is the kind of corporate welfare and the kind of attitude that underpins these tax rates we see here that we reaffirm again today in this Parliament, unfortunately. They drive this wedge between rich and poor and undermine the fairness and opportunity that New Zealanders value, which are actually what New Zealand values as a culture. This Government is anti - New Zealand with its policy of driving a wedge between those at the very top and the rest of us New Zealanders who are struggling to get ahead despite working hard.

It is a great disappointment that that is not being addressed properly in this bill, because I think this Government is out of touch in not addressing it. It will in time see the consequences of not addressing it. Ordinary New Zealanders are sick and tired of being neglected and of seeing their hard-earned dollars being transferred to the tax cuts for the wealthiest New Zealanders. So this Government will face a day of reckoning come the next election. We heard from across the House during question time the Prime Minister offering to have the election in a month’s time. It had those echoes of Nineteen Eighty-Four as the Prime Minister, off the top of his head, said “Well, let’s have it next month, Sunshine.” I bet he scuttles away from that before too long. He is out of touch, but he is probably not out of touch enough to not recognise that that would not go well for him, because ordinary New Zealanders are becoming more and more and more concerned about the lack of opportunity and the lack of fairness in our society that is happening under this Government’s watch. They are concerned that the opportunities they had through the schooling system and so on have disappeared. It is now the case that more and more New Zealanders are living in poverty and cannot afford to buy raincoats or shoes for their kids or to feed them so that they can learn in the schooling system.

💬 David Bennett: Prove it.

They mock across the Chamber. They think that it is a laughing matter that one in four New Zealand kids goes to school hungry. But we on this side of the Chamber think that every New Zealander should have the opportunity to get ahead. We think we should have a fairer tax system where everybody pays their fair share. That includes multinationals and that includes the wealthiest New Zealanders who currently structure their affairs to avoid paying tax. On this side of the Chamber we stand for fairness and opportunity, and we think it is a great shame that the Government is not taking the opportunity in this bill to rectify the tax system to make it fairer for all New Zealanders so that they can all reach their aspirations and stay in New Zealand, achieve their dreams, and educate their children, instead of having to take flight to Australia in order to get opportunities.

This bill is largely uncontroversial, aside from the lack of opportunity it represents and the foreign superannuation changes that colleagues have spoken to.

Thank you very much, Mr Chair.

💬 Paul Goldsmith: Really looking forward to this!

Well, why not stand up and take a call? Why not? Mr Goldsmith is the chairman of the Finance and Expenditure Committee, as I understand. I am very much looking forward to his contribution.

💬 Dr Megan Woods: Take a call.

Take a call. OK, I will do it quickly, and let us look forward to the contribution from the chair of the Finance and Expenditure Committee. Thank you very much, Mr Chair, for this opportunity to contribute. The Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill has lingered on the Order Paper for a very long time. I believe my learned colleague will correct me if I have got it wrong. I believe that this bill is a result of what has been known for quite a while as a telephone book bill. Labour supports this bill, but with some reservations. This bill, as my colleague said in her earlier contribution, is largely uncontroversial, apart from the foreign superannuation changes, and I will come to that point later on.

Of course, changes are needed, and these proposals have the great merit of simplicity and should eliminate the uncertainty of treatment, which has been a problem since first identified in 2006. The principal issue that was unclear was whether foreign superannuation schemes were subject to the foreign investment fund, or the so-called FIF regime, and the tax treatment on transfer.

The legislation largely follows the proposals set out in the Inland Revenue Department issues paper that was released in July last year, but also incorporates some of the submissions made in respect of the issues paper. The new rules will take effect from 1 April 2015, although there are some retrospective clauses in this bill, and we will come back to that Supplementary Order Paper later on, at some later stage of the Committee of the whole House.

Under the proposed legislation, interests in non-Australian foreign superannuation schemes will no longer be taxed on an accrual basis under the foreign investment fund regime or if a transfer represents distribution from a company or a trust. In terms of the problems with the foreign superannuation changes, the first issue is that it will apply to all transfers, even those made into a locked-in scheme such as a KiwiSaver fund. In this case, it is proposed to allow the taxpayer to withdraw an amount up to the value of the tax due from their KiwiSaver scheme. This sounds good, but it ignores the fact that where the transfer is made from a UK pension fund, withdrawing funds would possibly either invalidate the transfer or trigger a 55 percent tax charge in the United Kingdom. Probably Mr Goldsmith could answer that question in his contribution. How can a person who makes a transfer but who cannot access their transferred funds until a later date be said to have somehow derived income—

The CHAIRPERSON (H V Ross Robertson): Part 1.

Back to Part 1. The other issue relates to the treatment of transfers made prior to the commencement of the new rules.

💬 Paul Goldsmith: He’s got no idea—he’s got the wrong speech.

Take a call, Mr Goldsmith. But one thing that I believe Mr Goldsmith will agree with me and with other members on is that this bill, as it is presented in its current form, represents a huge mismanagement.

I am very pleased to be taking this call. I understand we are focusing on Part 1 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill—this part being discussed relates to the annual rates of income tax—not on Part 2. It is a very important part. It is not a huge part of this bill, but it harks back to the single-greatest contribution in the tax area made by this Government. The switch of keeping the income tax rates lower and increasing GST a little bit encourages people to work hard overall in a tax-neutral way in order to reignite the economy in New Zealand by having a tax system that is not hiking tax rates but is ensuring that existing tax bases are applied fairly. Ultimately, building a more competitive and productive economy is one of National’s key priorities. Only by lifting our economic performance can we create the jobs, boost incomes, improve the living standards, and provide the world-class public services that Kiwi families need.

This bill is the latest piece of tax legislation aimed at making the tax system fairer and simpler and strengthening the economy. An important aspect of fairness in the tax system is that taxpayers must be able to understand and comply with the rules, and the necessary tax rules must be cohesive, fair, and applied consistently. Part 1 of this legislation here is about the annual rates of income tax for 2013. Only the prudent management of the economy and Government spending by this Government is getting us back to surplus in this year, which many people did not believe this Government would achieve. But we will be back in surplus, notwithstanding the fact that we have been able to keep the tax rates at relatively low levels and we all aspire to have them lower in the future. Having a strong, stable economy run by a sound and sensible Government is the way to go, and on that basis I think that this is an excellent piece of legislation.

It is my pleasure to take a call on the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill and discuss Part 1 of this legislation, which does refer to the annual income tax rates. The contribution that we have just heard from the opposite member Paul Goldsmith, the chair of the Finance and Expenditure Committee, showed that there can be no greater evidence about how out of touch this Government is about the lived reality of everyday New Zealanders. We had that member herald the great tax contribution that this Government has made in terms of the great tax switch.

Well, actually, for many New Zealand families this was the great tax swindle. What it meant was that New Zealand borrowed hundreds of millions of dollars in order to give some of the highest-earning New Zealanders tax cuts. Where did this leave everyday New Zealanders trying to make ends meet? Well, it left them struggling, and the fact that that member can stand up and give the speech that he gave shows the arrogance and how out of touch this Government has become. It does not know what it is like for families who cannot put food on the table, who cannot afford to pay their rent, and who certainly cannot afford to heat their houses. In my electorate there are houses that have been registered at 9 degrees Celsius overnight in winter, with 90 percent humidity. Those people have not benefited from National’s borrowing hundreds of millions of dollars to give tax cuts to some of the highest-earning New Zealanders. This has done nothing to benefit them.

We have had from the member who just spoke a recitation of trickle-down economics. He told us that this was going to flow through to ordinary New Zealanders, but it has not happened. Members on this side of the Chamber could give you case after case, which are sitting on our desks in our offices, where we are trying to find some way forward for families who simply cannot make ends meet. For members opposite to claim that this was an achievement of their Government just shows how badly wrong they have gone.

As my colleague Dr Clark has talked about, not only does this bill not do anything to address the great tax swindle that this Government has pulled on the people of New Zealand but also it completely misses the mark in not having any pro-growth tax policies. My colleague Dr Clark talked about how we actually could have had something that would see our economy be transformed through the introduction of a capital gains tax. But is this Government bold enough? Is this Government brave enough to actually do something that will transform our economy, or does it just want to give income tax cuts to the highest-earning New Zealanders? There is a recipe for a growth economy!

This bill does nothing to do anything innovative, like putting in place research and development tax credits for companies that are there on the cutting edge, which are creating the wealth, creating the jobs, and creating the higher-paying jobs that, if the proper skills training is put with it, actually could see some of the families in our electorates that we deal with have a better life. But there is nothing in this bill that does that. This is not a tax bill that has anything about sharing the fruits of any recovery that we are seeing fairly, it does nothing to set aside the unfair tax structure that this Government put in place, and it certainly has nothing that speaks anywhere about having a fair kind of New Zealand, where everybody can have opportunity.

I look forward to further calls from members of the Government to tell us how their tax policies and the tax that is contained in this bill are going to make life for everyday New Zealanders better. I look forward to members of the Government telling my constituents in Wigram how they are going to pay their power bill this winter and how they are going to pay their rents, which they simply cannot afford. I look forward to members of the Government telling my constituents and people all around New Zealand just how they are going to make ends meet, because there certainly is not anything in this bill that tells us how to do that.

My colleague Raymond Huo has talked about how this bill has lingered on the Order Paper for so long. It simply is another case of this Government not getting legislation before the House in a timely manner, to such an extent that we actually have to have a ministerial Supplementary Order Paper revising the implementation date because it has been sitting around gathering dust for so long. Thank you.

I had a little more to say about pro-growth tax reform, the opportunity for which has been missed in the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. I was disappointed that Mr Goldsmith, as Finance and Expenditure Committee chair, did not have a little more substance to add to the debate. He may be very dry as an economist, and he may have written some historically worthy tax books, but, unfortunately, today he was merely spouting the Government line and not really showing the underlying flint and intellect that we have come to expect of him as a promising—one day to be—Minister in a National Government, probably decades away, after a very long, fair, and opportune Labour-led Government.

That sentiment aside, the 2010 tax swindle, to which my colleague Megan Woods has referred, is really the thing that we are affirming today. I think we need to put it in terms that simple. It is the National Government’s policy to drive a wedge between the very wealthiest New Zealanders and the rest of New Zealand. And it has done it quite successfully. In 2010 the Government put through tax law that drove that wedge hard, and here we are today, in this bill, reaffirming that policy as a Parliament, effectively. This Government has not been bold enough to chop down those changes and to say that actually it thinks we need a fairer system and to make sure that we have some way of driving growth in the economy.

Let us not forget that we have had a dream run in terms of dairy commodity prices internationally. New Zealand has benefited from the high primary produce prices. We have had trading partners, our biggest trading partners, which have avoided recession, in the likes of China and Australia. New Zealand should be booming. New Zealand should have been booming for the last X number of years. But this Government has squandered that opportunity. It has been so focused on shovelling money towards the wealthiest New Zealanders that middle New Zealand and those who are struggling most have been squashed and pressed and are not able to get ahead. And here it is, trying to do it again. Well, it is important that we speak out against this, and that we speak in favour of fairness and opportunity and in favour of pro-growth tax reform that will actually grow the economy and that can then be shared for the benefit of all New Zealanders.

We are also missing, in this bill, the opportunity for research and development tax credits, the likes of which Labour has put forward—the opportunity for businesses to access tax credits for developing ideas that will create a new and innovative economy in this country. That Government opposite seems to have given it all away.

One reason, we know, that this Government has struggled to implement or even propose these changes, of course, is that the Inland Revenue Department computer system is simply not up to the task. This Government was told, when it came to office 5 years ago, that the first computer system, the legacy computer system, was on its last legs. It was built in 1992. The internet was still in nappies. Google did not exist in 1992, members of the House will know, and Facebook was more than a decade away. That is when New Zealand’s tax system was invented and was implemented. The one that we are using today, the computer system that is in use in the Inland Revenue Department, was put in place in 1992. It has been on its last legs for quite some time, and this Government has done very, very little about it.

Two years ago John Key, the Prime Minister, said that tax policy was being held back because the computer systems “can’t actually support radical changes from Government.” He said that on Valentine’s Day 2 years ago. The Prime Minister said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” He was giving a nod in the direction of sorting this problem out. Two years on, two Valentine’s Days have passed, and the Prime Minister’s Valentine’s Day promise appears to have been broken. He showered bouquets here and there, in an effort to try to remedy this problem with our tax system and $50 million has been spent on international consultants to look at the tax problem. Do you know what conclusion those people have come to? After 2 years and $50 million, they have come to the conclusion, in principle, that the tax system needs fixing. The Government was told 5 years ago by the Inland Revenue Department that the tax system, the computer system, needed upgrading. It was built in 1992 and 5 years ago this Government was told it needed upgrading, and $50 million later and 2 years after the Prime Minister said that you do not want to be held hostage to it—the Government has spent $50 million on consultants—it has agreed in principle that it needs to be fixed. This is a flagrant waste of taxpayer money—a flagrant waste.

The Government has gone one step further than agreeing in principle that it should be fixed. It is also now saying that it will build some more business cases—some more business cases. The Government will spend more millions building business cases. This Government is sitting on its hands, not repairing the Inland Revenue Department’s broken computer system, and therefore it cannot implement the kind of pro-growth tax reform that is necessary to take New Zealand ahead, to grow the economy, and to share those proceeds fairly. This Government has been sitting on its hands and not doing anything about it. That is a sad indictment on this Government.

It is a Government that is so tied up in scandals, in dealing with corporate bailouts like that for Skycity for its casino deal, the $30 million for Rio Tinto, with Chorus, looking at deals there, and so on that it is not focused on fixing the basics—the tax system that implements the decisions of this Parliament. So we will see, when we get to later parts of the bill, that other deadlines are being pushed out because this tax computer system is in disrepair. It is long past its due-by date, and this Government has done nothing about it—to its shame.

That is part of the reason why, even if it wanted to make a fairer tax system, it cannot. It is clearly not a priority for this Government. It needs a wake-up call. It needs to understand that ordinary New Zealanders do want tax policy that grows the economy and that gives people a chance to get ahead that is fair, so that everybody pays their fair share of tax, as indeed most countries in the OECD have in place already. New Zealand is a real outlier in not having a comprehensive tax system, and by having this loophole for property speculators we sit outside the OECD norm. The OECD tells us this, Treasury tells us this, and every respectable economist tells us this. But this Government knows better. It is protecting vested interests, and that is to its shame. Ordinary New Zealanders, middle New Zealand, are struggling to get ahead. They are working hard, they are doing the right things, but they do not feel like they can get ahead. This Government is out of touch if it thinks that the current settings we are affirming here today should not be challenged. They certainly should, because New Zealanders deserve a fairer deal. Every New Zealander deserves the opportunity to get ahead, and that goes for the people down in Dunedin, in the wonderful electorate of Dunedin North, as I am sure it goes for the people right up in Kaitāia.

We are not the only country in the Western World with a tax system. Those people in the Government across the Chamber need to accord fixing it the highest priority, and they need to stop spending tens of millions of dollars on international consultants, who simply tell them that in principle things need fixing. They have had that message before, and they have had that message again now. I look forward to seeing progress on that issue, so that we can have tax policy that is fair and that allows all New Zealanders the opportunity to get ahead.

I also look forward, later in this bill, to discussing the delays in child support legislation, because it is true that that is an embarrassment for the Government and it is inconveniencing New Zealanders. I look forward to hearing more from the Government as to why it needs to make these delays. It must have excuses, but I can assure you they will only be excuses. They will not be things that New Zealanders want to hear. New Zealanders are sick and tired of hearing that they are a low priority for this Government, that only the wealthiest have their interests protected, and that ordinary New Zealanders should not be afforded the opportunity that everyone else at the very top of the heap is afforded, when it comes to getting ahead for themselves, for their families, and for their communities.

When Labour is in Government we will implement a capital gains tax that drives this economy forward, that moves money from the speculative sector into the real, productive economy, that creates jobs, that makes sure that economic growth is shared fairly, and that reduces the gap between rich and poor, which has grown and grown under this Government. We will have an economy that grows and shares the benefits fairly with all New Zealanders, so that all New Zealanders have the opportunity to work hard and to get ahead. Thank you.

I take a call on behalf of New Zealand First on the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. Many good, hard-working, low and middle income New Zealanders must be looking at legislation such as this and wondering what is in it for them. I guess they would be reflecting on the fact that 3 years ago, in 2010, the National Government provided some $2 billion in tax cuts to the wealthiest 10 percent of people in New Zealand. The good, average people of New Zealand will be asking why the likes of the Prime Minister received a cut of $1,000 a week in the tax he was paying and why the likes of Paul Reynolds, the head of Telecom—its chief executive—got a cut of something like $5,000 a week in tax on his income. Why is it that this National Government is so intent on helping the rich and its mates, but good, average, working Kiwis are being left out in the cold?

Once again, this Government is tinkering around the edges. This bill is just sort of fudging the numbers. At the end of the day, with taxation in this country there are still those who are benefiting greatly from the whole process while poor families in this country are really struggling. We need a full revision of the tax system in New Zealand, not just this tinkering where they bring in these bits of bills here and bits of bills there. We need a full review of the tax system so that there is a fair and equitable system for all and across all areas of the New Zealand economy. At the present time there is still a huge amount of tax evasion, estimated to be in the order of $2 million to $3 billion a year—$2 million to $3 billion a year of tax evasion, which this Government is simply not getting on top of.

In addition to that, this Government has put up GST in recent years, going up to 15 percent—

💬 Dr David Clark: I thought they promised they wouldn’t.

—which it promised it would not do, absolutely. Prior to that particular election it promised that it would not increase GST, but it did put it up from 12.5 percent to 15 percent. Again, the people who hurt the most are those who have to buy everyday goods and services but who cannot afford that extra 2.5 percent of GST.

So New Zealand First calls on the Government to have a comprehensive taxation review; to not just help its mates—not just help the wealthy heads of corporates, the wealthy financiers and bankers, and all that sort of thing—but help good, average, everyday Kiwis to get on and have a better slice of the cake in the New Zealand economy. We stand for a fair society. We stand for a society where all New Zealanders are put first. We stand for a situation where the Government goes after those who are avoiding paying their dues to the country. There is speculation on so much property and on so many investments in this country, and so much in the way of finances and the New Zealand dollar is being speculated on. There are all sorts of other speculative activities that this Government turns a completely blind eye to while large amounts of revenue and profits are being made by rorting the system and taking huge amounts of dollars out of the system, particularly for the benefit of that top 10 percent of income earners who are doing very well in this country.

The gap is widening between the rich and the poor in this country, and this National Government, in the 5 sorry years that it has been in power, has seen that gap widen. It is time that this Government faced the fact that New Zealand is on a slippery slope in terms of those who cannot afford the daily cost of living: those who are out of work and those who are underemployed. We now have 8 to 9 percent underemployment. These are people who have got only 1 hour or more of work a week. These are people who would dearly love to pay more tax if they had a decent job. But when you are on the minimum wage of $13.75 an hour, when you—

💬 Maggie Barry: Read the bill.

I am keeping to the bill. This is about taxation. When you are on $13.75 an hour and you are struggling—

I move, That the question be now put.

Thank you so much for the opportunity to take a call on Part 1 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. Of course, Part 1 actually deals with the annual rates part, which is really what most New Zealanders come into contact with when they come into contact with our taxation system. So Part 1 is a lost opportunity because there was an opportunity for the Government—and goodness knows that it has had long enough, because it has had this bill on the Order Paper for such a long time that it has had to bring amendments forward to actually change the start date of this bill because it has been languishing on the Order Paper for so long. So the first thing that we would have to ask is why that is. Why has this bill been so badly mismanaged that the Government has now had it in front of Parliament for so long that the start dates have to be amended? Also, why is it that the Government is so stuck in its old ways—the same old mantra that the National Party always has—that it has not taken the opportunity to recognise the opportunity that this bill presents to actually have a fairer tax system than the one we currently have?

Part 1 of this bill continues the problem that we have with every single National Government that I have seen in the course of my lifetime, and that I imagine most people listening to this debate have also seen in the course of their lifetime. There is—

💬 David Bennett: Come on, Sue, change the record.

David Bennett says: “Change the record.” That is exactly what I am saying to the Government. I am saying to the Government “Change the record.” because here is the record of the National Party. A National Government always cuts taxes for those at the top, who do not need it. Then it goes about cutting public services because it cries poor about not having enough money to fund public services properly. Then it flogs off State assets. Then it flogs off State assets. It is the same old formula that this Government has followed and that every other National Government has followed.

It starts off with what the Government is continuing in Part 1 of this bill, and that is the old tax switch, as they call it—the old switcheroo of taxation—which the rest of us would call the tax swindle. John Key, despite promising that he would not raise GST, in one of his first Budgets—well, not his first but probably, at his instruction, Bill English’s—did exactly that. Despite promising that he would not do it, he raised GST from 12.5 percent to 15 percent. Remember when GST used to be 10 percent?

The CHAIRPERSON (Eric Roy): Order! This is an income tax bill. It has not got a lot about GST. I appreciate that the member can talk about GST, but you have to make it relevant to Part 1 or schedule 1.

Thank you, Mr Chair. The reason why this debate is relevant to Part 1 is that not only did Mr Goldsmith, the chairperson of the Finance and Expenditure Committee, raise the issue of GST in his Part 1 debate but also it is the entire package around the whole way in which the National Government has shaped up its taxation.

💬 David Bennett: It’s waffle. She’s got no idea.

Mr Bennett says: “It’s waffle.” It is not waffle to those people for whom every single item they bought went up overnight. His leader broke a promise to the electorate, and that is what happened. Where people were paying 12.5 percent on GST, they suddenly found themselves paying 15 percent and everyone’s living costs went up overnight. Did their wages go up to compensate? No, but what did happen—and this is where Part 1 continues to make the mistake—is that the people at the top end of the income scale got huge tax cuts. They got huge, walloping tax cuts. We believe—and he has never denied it—that the tax cut that the Prime Minister himself got was in the order of $1,000 a week. That was not what he paid; that is what he stopped paying. Every week there was $1,000 in the back pocket of the Prime Minister, and everyone else’s GST went up to pay for it. That was the tax swindle and not the tax switch.

That is what Part 1 continues to keep in place. It keeps in place a taxation regime that saw those at the very top end of income—in the middle of a recession, for goodness’ sake—get an absolutely huge benefit. What we know about people at the top end of the tax scale is that they do not spend every cent they earn. Every week they get to save quite a lot of money because they earn more than what it costs most people—

I move, That the question be now put.

I will give Andrew Little a go at debating the topic.

We should not take lightly what is really one of the central and core functions of this House, which is raising revenue for the Crown so that it can discharge its obligations to the citizens of this fine and fair country. So when we are called upon as a House to either set or confirm what the income tax rates are, it is not a matter where we should do so with any sense of jocularity or with any sense of frivolity. It is a matter on which we should proceed with great caution and with due solemnity and seriousness. It is in that spirit that I come here to the Chamber to speak on this bill, the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill.

My colleagues have drawn the Committee’s attention to, really, the underlying anxiety that members of the Opposition have about this bill and this provision in this bill, which is that the tax rate that was set only a few years ago—it seems like a long time now but, apparently, it was 5 or so long, hard, grinding years under this Government—has caused hardship and considerable concern to many people. Nobody won an argument on a public platform in this country by saying: “Quick, we need to pay more tax.”, but everybody understands the argument that if we want a cohesive society, if we want fairness and equity and egalitarianism, then the Government of the day needs to be funded to discharge those purposes and objectives that the people need in order to provide the bare minimum for themselves and their families and their communities. So the money raised for hospitals, for income support, for schools, for roading—all those things that actually keep communities together, provide opportunities, give confidence to investors to invest—all those sorts of things are underpinned by the revenue raised by the Crown to do that, and therefore by the money that people pay from what they earn. And whether they earn it by selling their labour, their time, their skills, their talent, their intellect; whether they do it through interest earned on their investments; or whether they do it through selling a succession of properties, which seems to be increasingly the New Zealand way—all those issues are important when it comes to setting our tax rates.

We in Labour say—and we have always stood for this principle—that from those who have done particularly well and who earn the greatest, more should be expected. That is the basic principle and it happens to be, I say to our Catholic friends opposite, a very Catholic principle. It still is and Pope Francis exemplifies it every day he goes about his duties. It is a very important principle. Emulating the lead set by St Francis of Assisi, the new Pope Francis stands for greater equality and fairness. The mark of fairness in any Government is the tax system, how the Crown gathers its revenue—and not just any form of tax but income tax—and those who do very well because life’s fortunes have smiled upon them and they have acquitted themselves and—

💬 Dr David Clark: And they’ve benefited from the infrastructure.

Well, people who take advantage of a good State education system and stand on the shoulders of those who have gone before them—good on them. And if they do very well as a result, it is not too much to ask that they put a little bit more back into the kitty to sustain the next generation and to sustain those who have not had the advantages of good fortune and a good life. That is very simple and people understand that.

💬 Paul Goldsmith: How much—66 percent, 70?

Paul Goldsmith might not understand that. He might not appreciate it. Not everybody is equipped with the same skill for writing hagiographies as Paul Goldsmith. Some people write serious books and some of them do very well. Eleanor Catton does very well, and she will not have to retract what she has written because any character in her book winds up in the dock facing criminal charges. That is the difference between Eleanor Catton, who writes good books, and Paul Goldsmith, who writes fiction.

But here is the point. We need to make sure that tax rates that we endorse in this bill are fair, and our concern is that when you look at the tax package as a whole, the weakness in our tax system is what has happened to income tax. We will address that. We will support this bill for now because it will get us through the next financial period, but we will debate these issues and the underlying principles of the income tax system in a few months’ time, because New Zealanders are crying out for greater fairness. They are crying out for a better chance and at least a chance to get ahead. Even those who are paying modest sums of income tax know they are struggling to get ahead, not because of the tax rates they are paying but because of the whip hand that has been given to employers to suppress their incomes.

Part 1 agreed to.

Part 2 Amendments to Income Tax Act 2007