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

I move, That the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill be now read a third time. This bill aims to continue the work of further rationalising the tax system and ensuring that existing tax bases are applied fairly. I want to recap on the main points of this.

The bill aims to simplify the rules relating to the tax treatment of foreign superannuation schemes. This will bring fairness and certainty to the rules and ensure that more people understand and can therefore comply with their tax obligations. It also contains proposals for bringing the tax treatment for mining of specific minerals broadly into line with that for other industries in New Zealand. This bill aims to clarify the minimum financial reporting requirements for companies and includes changes to the tax rules relating to bad debt deductions for holders of debt to make them fairer. It is important that existing tax rules are working as intended, so the bill continues proposals to ensure that income tax rules cater for the rebuilding activity now taking place in Canterbury, and I think this is a very fair thing.

Proposals are also included to ensure that the changes to the general and life insurance business tax rules work as was intended, as well as proposals to further improve the integrity of the Working for Families tax credit provision. In addition, an extension of time is proposed to allow the Inland Revenue Department to fully test and implement changes to the child support scheme and to bring certainty. Donee status is proposed for three new charitable organisations, namely the Kailakuri Health Care Project—New Zealand Link, Marama Global Education, and Marama Global Health. Donors to these charities will now be eligible for tax benefits on their donations.

I would like to thank, at this point, the Finance and Expenditure Committee for its work on this bill and its recommendations for improvement. Its members have done a very good job here and I commend the chairman and all members for working under such difficult and arduous circumstances. I would also like to acknowledge the work of our officials, including the tax law drafters and policy development staff, and to recognise many from the tax industry in New Zealand who have worked closely with the Inland Revenue Department on the development of many important tax policy positions in this bill. I commend the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill to the House.

I applaud the Minister of Revenue for coming into the House to deliver the third reading—sorry, I mean for remaining here to hear my words of wisdom in response. The Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill, which we are debating, will be supported by Labour, but with significant reservations. We have debated these on the way through.

Significant among them is the fact that this bill solidifies the tax changes that were made in 2010 that have seen inequalities in New Zealand grow to their highest level since we have kept reliable records. Those changes, of course, have to be affirmed every year for our tax rates—that is part of the Government’s business; it has to reaffirm the tax rates—but as this bill passes through, we note that we are not comfortable with the divide that is growing between rich and poor, primarily because of the opportunities that are being stripped from those at the bottom and those in the middle. It is at their expense that those at the top have had the biggest benefit from the tax swindle in 2010. We know that a full 44 percent of the value of those 2010 tax changes went to the top 10 percent of earners in New Zealand and that the bottom 20 percent got just 2 percent of the value of those tax changes, which, of course, was immediately swallowed up in the GST increase that John Key said he would not make, but then made as soon as the election was over and he had the opportunity.

The people in the middle are the people who are getting squeezed but who did not used to get squeezed, and that is middle New Zealand. We are hearing more and more from those people as they see the opportunities for their children dwindling. Children who can get away are getting away, and I note that over 200,000 New Zealanders have left for Australia under this Government’s watch, despite its promise that you would not lose your loved ones.

This is a Government that is out of ideas, and even those few ideas that it did have do not seem to be working. So we have a situation in New Zealand where the inequalities are growing bigger and bigger and bigger, and that is proven by all of the statistics available to us—the Gini coefficients and other measures relied upon by economists throughout the world. We also know that changes could be made. We could be having a more productive economy through having a progressive tax system that is actually aimed at growing the economy. A pro-growth tax reform package could have been put into this bill, but it was not. Right now we know that there are loopholes for those who wish to invest in the speculative sector—in property—and we have people there who pay very little tax, but who have a high degree of capital invested in that speculative sector.

When a pro-growth tax reform is achieved, and it will be achieved under a future Labour-led Government, we will have more money going into businesses in the productive sector. We expect that that will halt the decline that is inexorable under this Government for manufacturing in the non-primary sector. That Government does not seem to care. Government members have all got their heads down now because they know that the statistics are not in their favour. They know that what little vision they had has not been realised. They know that median wages are still below what they were when they took office and the recession was kicking in. That is a Government that has failed to deliver on its promises. It has talked about ambition, but it has not delivered.

Some of the other things in this bill are uncontroversial. The fact that the mineral development taxation regime is being looked at—to firm up expectations and to be clearer about when taxes will apply and at which stages in the mineral development process—is appropriate. It will, hopefully, make things clearer so that there can be investment in the responsible development of our resources.

In the bill we note that there are some changes that will be difficult for New Zealanders to swallow in terms of the way in which foreign superannuation will be treated. We know that two siblings going on separate overseas experiences on their OEs—one to Australia and one to the UK—who return at the same point in time, having earned comparable amounts, will have their superannuation treated differently when they return to New Zealand, as the Australian scheme will be treated far more fairly than the British one. That will be a point that many, many, many New Zealanders will be uncomfortable with.

Some of the changes to the foreign superannuation provisions were needed because there is a lot of lack of clarity in the law. That will certainly make it simpler for people to understand how it will apply. That said, the way in which people can transfer their funds from the UK is somewhat more complex, and we have certainly had many submissions in the select committee process calling at the very least for a thorough education programme so that people know how to comply with the law whilst preserving the savings that they have made abroad for their retirement.

One of the more controversial things in this bill comes to us late in the piece. The Minister announced a few days before Christmas that this bill would also contain a remedial matter, as it is known in the kind of uncontroversial-sounding language that is used, and that it would be the winding back of the child support legislation that was put through Parliament not very long beforehand. The child support legislation aims to change the formula for calculating the amount that is owed to the primary carer of a child by the other parent. We know that there are families in New Zealand that have very difficult circumstances when they separate—there are many, many blended families amongst our communities—and that it is difficult for those families to work out their financial arrangements. The very sad thing about this is that it was entirely preventable. Families around the country will have been preparing—taking legal and financial advice—for the changing law, and now we know, as of a few days before Christmas, that the law change will not be implemented. The Government has decided to back out of that law change in order to retain the current law for a bit longer. So those families who took out extensions on mortgages, rearranged the education of their children, or made various other arrangements that involved them committing to financial arrangements will now have to seek further financial advice as to their situation in the interim before the bill that makes the law change to the new calculation regime is finally enacted.

We also know that that new regime will be far more complex, that the Inland Revenue Department is voting itself a whole lot more money to train its own staff how to use it, and that the regime will be challenging for families and parents to use. This additional complexity, this delay in the implementation, was entirely avoidable, but it is the doing of a Government that really has not got its head round the fact that the computer system that collects our taxes is now 24 years old. The Government was told 5 years ago when it took office that the system was on its last legs, but it has done nothing—nothing—to fix it. There would not be many people at home watching this broadcast who rely on computer software that was designed and implemented in 1992, but that is the situation in our tax department in New Zealand. We have a computer system that was built before Google. We have a computer system that was in place 10 years before Facebook was even a concept for people.

This is a Government that has had the responsibility for upgrading the system. We are not the only country in the Western World that has a tax system, after all. It should not be rocket science. The National Government was told 5 years ago when it came into office that the system urgently—urgently—needed fixing, but this Government has done nothing. Two years ago Prime Minister John Key said that tax policy was being held back because of this computer system. He said that the systems “can’t actually support radical changes from Government.” He also said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” That is where we are today. It is over 2 years on from John Key’s statement saying that this was a priority for this Government. This is indicative of the way this Government goes about its business. It says that things are a priority, but it is doing nothing. It is not repairing those most fundamental problems that need to be addressed.

That is why New Zealanders find that they are experiencing a lack of opportunity and lack of hope for their children. Not only are the changes that we do have ideologically driven to drive the gap between those who have and those who have not ever wider but even those productive changes, like implementing pro-growth tax reform, could not actually be put in place because this Government has neglected the most basic structures of government. But the system was not entirely neglected, I would say, because the one thing we do know is that it has spent $50 million in the past 2 years—$50 million, and growing—on international consultants to tell it what we already know: that there is a problem. It has now agreed in principle to spend more money—

💬 Hon Ruth Dyson: How much?

It has already spent $50 million on international consultants, and now it has agreed in principle to spend more money developing business cases to fix a problem that we already know exists.

It is my pleasure to stand at the third reading of this bill, the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. It puzzles me, following Dr Clark—he has a PhD, I believe. I am not quite sure what subject it is in but I thought if you had a PhD, you could expect that there would be some link between evidence and claims.

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. I do not think the member is being deliberately disrespectful to you in referring to your academic qualifications, but he has now done so three times. I am pretty sure that you do not have a PhD, Mr Deputy Speaker—I am not absolutely certain, but I am pretty sure—but the member is referring to it.

💬 Mr DEPUTY SPEAKER: I was not offended, but the member ought to be careful with his pronouns and not include the Speaker.

My apologies, Mr Deputy Speaker. It may well be that you indeed have an honorary doctorate from somewhere; I am not sure. But going back to David Clark, the member, he endlessly says that the rich are getting richer and the poor are getting poorer. Well, there is no evidence anywhere to indicate that at all. If you can show us the data—[Interruption] Clearly there was a change in the 1980s, when the Labour Government was in power, but there is no evidence anywhere that you can point to that since the mid-1990s there has been any difference in terms of income inequality in New Zealand. Please show it. Rather than keep talking about it, show us the facts, because there are not any.

The second thing is he stands up and says we should have a more progressive tax system. Well, hang on a moment, is it not progressive as it is at the moment? We have got nearly 70 percent of income taxpayers in New Zealand paying a marginal tax rate of 17.5 percent, which is not a high tax rate, and a very small group of income taxpayers—about 6 percent of them—paying around 40 percent of the income tax, and much more when Working for Families is taken into account. So why does David Clark not just stand up and scream it that he really wants to follow Mr Francois Hollande’s approach of a 75 percent income tax rate. That is what he wants. If that is what he wants, then why does he not say it and be honest about it? If he really thinks that that is how the New Zealand economy is going to grow—that we should get a real progressive tax system back—then why do you not stand up for a 75 percent tax rate? Because that is what the Labour Party wants. I am just waiting for Labour to do that. That party is clearly out of touch when its leader thinks his reasonably middle-range existence is one—I am not quite sure what tax rate should be appropriate for his middle range existence, but there you have it.

Getting back to this bill, the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill, the main thing that I just want to draw attention to is that there are four main proposals in this bill. I just want to thank—

💬 Dr David Clark: Is the member covering SOP 413?

—I will come to that—the members of the Finance and Expenditure Committee, who have worked very collegially and hard on this bill. There are quite complicated matters around foreign superannuation and the mining of specified minerals. We had a lot of detailed submissions, and we worked our way through them more or less in a collegial manner. I do want to thank all members of the committee. I just mention that the changes to the tax on foreign superannuation are designed to make it simpler and fairer both for New Zealanders returning from having worked overseas and for migrants. It is a difficult area. Where we have got to is, you know, it may not be perfect, but it is a lot better than where we were before, where we had a huge number—a very high percentage—of those people who were not actually paying their tax and not even understanding where they had to go.

Finally, bringing the tax treatment of mining of specified minerals such as gold and silver into line with general business tax principles is the way to go, and this bill achieves that. On that basis, I commend the bill to the House.

There are a couple of points I want to make about previous speakers. Without getting into any detail about the presence or absence of members, it used to be a tradition in this House that Ministers, when they were making the first speech on a bill, would listen to the response. They would be in the House listening to the response in order to be briefed by their officials and to work with their colleagues on the team.

I could tell that the Minister in charge of this bill, Mr McClay, was not listening or communicating with later speakers on the legislation. I think that is a pity. It is a loss. Ministers used to think that the House took some priority for their time, and, in fact, there used to be a requirement for many more Government members to be present in order for there to be a quorum, and I think it is a pity that that is not the case at the moment.

I now want to turn to Paul Goldsmith—the person who sacrificed his seat so that the major ethical supporter of the National Party, John Banks, could come to this Parliament—and refer him to his comments by way of interjection, and, I think, during the Committee stage, that there is a lot of the detail in the bill that he, as chair of the Finance and Expenditure Committee, did not understand. Well, what is the point? What is the point of having a member who chairs the Finance and Expenditure Committee, who gets extra funding for doing it, who is meant to look after the process, and who admits to this House that he did not focus enough on this very important legislation to the point of being able to understand it? That is sad.

💬 Maggie Barry: Tell us what you know about it. This is your chance.

I hear Maggie Barry going on. Clearly, it is after lunch. Clearly, it is after lunch, because Maggie Barry has had some of her stimulation.

💬 Maggie Barry: FebFast, Trevor—you should try it. You need it.

There she goes again—another clear example. The member got a bill out of the members’ ballot this morning, and maybe she celebrated for 2 or 3 hours. She celebrated for 2 or 3 hours in the bar over lunch. She does not need that sort of win to behave in the way she is in the House today. She seems to do it without an excuse.

But I do want to go back to the bill. In particular, I want to focus on the child support part of the bill and say that any member who is worth their salt and who works in their electorate would have worked over the last year with constituents who have been looking forward—sometimes for many years—to the changes that were meant to occur and have been deferred.

No one—no one—will ever describe the current system for child support as fair. It is not fair. It does not take enough into account, it is much too narrow in its effect, and it does not take into account properly both sides of the custodial relationship. There was an agreement within this Parliament for a new system, whether it is totally satisfactory or not. Again, I do not think anyone would agree with that. I think it would be in the eyes of the beholder, and, certainly, people who are involved in custodial and support disputes will not agree that the new system is ideal. But the vast majority of reasonable people will agree that the new system is better and will be better than the one it is replacing. People have been looking forward to it.

All of us, I am sure, have been sending out to our constituents copies of the changes that were to have occurred. I am feeling somewhat culpable because I relied on the word of the Government, I relied on the decisions of this Parliament, I shared them with my constituents, and they made their financial planning decisions based on them. And what did we have by way of an awful, grubby little Supplementary Order Paper? We had Todd McClay coming to the House and taking away from parents an entitlement that had been established by this Parliament. He took away from parents a decision of this Parliament without any consultation, without going to a select committee, and without even an apology—without even an apology—to those parents who have increased their mortgages, those parents who had made schooling arrangements, those parents who let their kids join clubs, and those parents who let their kids get involved in sports that were slightly more expensive than what they could normally afford.

Parents made a lot of spending decisions for themselves and for their children. Some of them had bought a car and arranged to pay it off using the money that was coming. Some of them did an extension in order to have an extra bedroom so that teenagers of different genders could have their own rooms. Houses were extended. Some people shifted houses to places with higher rent. And now Todd McClay has come into the House and said: “Oh, sorry, the money that we agreed you would have you are now not allowed to get for 2 more years. And, by the way, it will not be backdated.” Which member opposite says that that is just and fair? Not one. There is not a single member opposite who is prepared to say that they agree with Todd McClay. But I want to be generous to Todd McClay because he is not the Minister who for most of the last 7 years has been in charge of developing the computer system for those changes to occur.

💬 Dr David Clark: Who was?

That was Peter Dunne. Peter Dunne was the Minister who was meant to be in charge of that computer system, up until June last year. He spent $50 million. Peter Dunne has spent $50 million not on buying a computer system but on overseas-based consultants—$50 million on overseas-based consultants, spent by Peter Dunne. Who thinks that that is good value for money? And what has John Key done now that he has brought back Peter Dunne into his ministry? He has given him charge of the computer information systems and their oversight, not for the Inland Revenue Department but for the entire Government.

💬 Dr David Clark: What about data security?

He is in charge of data security, notwithstanding the fact that John Key has told the House that he thinks Peter Dunne is the person who leaked the Kitteridge report or made it available to a reporter. John Key has, in an act of desperation, brought Peter Dunne back into his ministry when we all know that Peter Dunne is a guilty man who is responsible for the parents of New Zealand not getting the amounts to which they are entitled, and their kids will suffer as a result. There is not one National member opposite who is prepared to defend Peter Dunne from the accusations—from the facts—of his ineptitude.

I stand here to speak on the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill, which the Green Party will be supporting even though it has some significant concerns about the bill. Perhaps the single largest problem with the bill is, of course, the way that the Government has chosen to cut tax rates for upper-income earners as part of its 2010 signature tax cuts policy. Of course, part of this bill continues those tax rates going forward. It is a simple fact that the tax cuts from 2010 meant that the top 10 percent of income earners were $1.1 billion a year better off. Those basic tax cuts that National introduced were a direct transfer of wealth to the top 10 percent of income earners of around $1.1 billion per year, one of the single most expensive policies that this Government has introduced. The Government prioritised spending—public money—on the top 10 percent of income earners in New Zealand.

We live in a country with over a quarter of a million children living in poverty. You would think that getting money to that quarter of a million children would be a top priority for spending $1.1 billion every year, year on year. But, in fact, what the National Government decided with the support of John Banks, Peter Dunne, and the Māori Party, as they voted for the Budget was that the priority for spending $1.1 billion—so $1,100,000 every year; that is the cost of the tax cuts—was the top 10 percent of income earners in New Zealand. It beggars belief that this is the value system of this Government. The value system of this Government says that the priority for spending a huge amount of money every year should be those who have the most. Instead of saying we should be directing spending to the 270,000 children living in poverty, to the kids who cannot afford lunches at school and the kids who cannot afford shoes to wear to school—instead of those kids being the priority for Government spending; instead of the kids who are growing up in poverty and cannot get a proper education because it is very hard learn when you are hungry—instead of National prioritising those children, National chose to prioritise giving $1.1 billion every year to the top 10 percent of income earners. Year on year it is continuing the spending in every Budget. To my mind, that is a completely unethical decision, and I think it tells so much about the values of the National Party.

The Green Party recently proposed spending about $100 million a year to support children going to decile 1 to decile 4 schools, that is, the poorest schools in the country, so that they got a decent lunch and access to welfare services and health care at their schools. We called it the school hubs programme. The spending involved was $100 million a year, or thereabouts—a very significant sum of money. But it is less than one-tenth of what National gave to the top 10 percent of income earners through the tax cut policy. National attacked the Green Party for spending lots of money on the poorest children in New Zealand—$100 million a year, a significant sum of money, I totally agree—but we believe that it was the priority. National spends $1.1 billion every year giving money to the top 10 percent of income earners, and it attacks the Green Party because it wants to spend one-tenth of that amount to make sure that poor kids get an opportunity to get a decent education. Those are the priorities of the Government—the National Party and the ACT Party—and these are priorities of the Green Party. We believe that the Green Party proposal should be in this bill. If you were going to do something about income tax, then why would you think that you should give $1.1 billion a year to the top 10 percent?

The other thing, of course, that is remarkable about the tax system in New Zealand and the spending that the Government prioritises is the subsidies to the oil industry. The Government subsidises the fossil fuel industry in the order of $40 million to $50 million a year. On top of that, there is no price on carbon any more in New Zealand. The Government has slowly gutted the emissions trading scheme, and, of course, there is no carbon charge, so, effectively, there is no price on carbon. The Ministry for the Environment has modelled what will be the effect of the current policies of this Government on greenhouse emissions. The Ministry for the Environment tells us that, according to its official projections, net greenhouse gas emissions from New Zealand will increase by 50 percent in the next decade. So there will be a 50 percent increase in net emissions by New Zealand in the next decade. That is a result of the current policies of this Government.

Instead of putting a price on carbon and introducing complementary measures—around transport, for example—in order to reduce our greenhouse emissions, the New Zealand Government has policies in place that will result in a 50 percent increase in greenhouse emissions in the next decade according to the Ministry for the Environment. Just think about it for a second: what if every country in the world was as irresponsible as this Government. If every Government in the world took the attitude that it was going to increase its net emissions by 50 percent, we would have an even worse climate problem than we have at the moment. It would be a climate catastrophe. When you look at the floods across southern England at the moment and when you look at the typhoon that hit the Philippines most recently, these are kinds of extreme weather events that climate scientists tell us we can expect more of as we destabilise the climate. This National Government has a policy of destabilising the climate so that our children inherit out-of-control climate change.

💬 Hon Tau Henare: I thought climate change was calming down because of the winds in the Pacific?

💬 David Bennett: What a load of rubbish.

The noise that people might hear in the background is the heckling from the Government members who are climate change deniers. They deny the science of climate change, which is remarkable. They are very happy to have the science that sits behind their mobile phones or the science that sits behind their computers, but when it comes to the science behind climate, all of a sudden they become science deniers. They say: “Oh no, we do not want to have that kind of science. We do not like the climate science.” So they heckle repeatedly about how they do not like the climate science, but the fact is that climate science tells us very clearly that if we keep increasing our greenhouse emissions, we will destabilise the climate, which will result in more extreme weather events—the kind of extreme weather events that we have seen in southern England and the Philippines in the recent past. Under this Government’s policies the plan is to increase New Zealand’s net greenhouse emissions by 50 percent.

💬 Hon Tau Henare: Rubbish! Why is it that climate change has calmed down through winds in the Pacific, or did you not read that article? I didn’t think so.

The Government members may shout and scream about it, and heckle about how much they hate science and how they are not going base their policies on science, but the science around climate is pretty settled now. We have very large studies done by thousands of climate scientists across the world and they have now reached these conclusions. Yet, still we have the deniers in this very Parliament—

💬 Hon Tau Henare: Oh, the deniers.

—who are screaming and shouting, as climate deniers do, that they do not accept the science around climate. That is why in this bill in front of us, which should be putting a price on carbon, there is no price on carbon and New Zealand’s greenhouse emissions will increase.

On top of that we have increasing inequality in New Zealand. The labour cost index, which is, according to Statistics New Zealand, the way to measure changes in earnings over time, tells us that since this Government came in wages have increased 9.3 percent while inflation has increased 10.5 percent. This is according to Statistic New Zealand’s labour cost index, which is what it tells us to use. Wages have gone backwards compared with inflation. Real wages are declining in New Zealand under this Government. Those are the statistics according to the Statistics New Zealand labour cost index, the one measure that it tells us to use to measure changes in earnings over time. All of these things are happening under this Government.

Then we have the structural imbalances that this Government is making worse. This is reflected in the current account deficit. The Reserve Bank of New Zealand says that the current account deficit in New Zealand will increase to 5.8 percent of GDP by 2016. That is 5.8 percent of GDP. We will have to borrow or sell assets in order to cover the current account deficit. That is what “current account deficit” means. So, yes, there is a short-term stimulatory effect going on in the economy at the moment, but it is funded by borrowing and by selling assets to offshore owners. That is not a sustainable strategy for Aotearoa New Zealand. That is not smarter, greener economics. That is going backwards. It is our children who are going to have to pay, and the next Government is going to have to fix it up.

I rise to talk at the third reading of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. As I have said in my previous calls, and would like to affirm at the beginning of this call, this bill—with all of its complexities, with all of its technical difficulties, with all of the things that it seeks to readjust—is very simple at one level, which is that we are trying to make this tax system fairer and more transparent so that people will comply with it. That is the essence of it. The issue of foreign superannuation is probably one of the more interesting aspects of this legislation for many people because it impacts on so many people’s lives. We really need to keep in mind that with the current rules for New Zealanders who live overseas and for the people who come to live in our country and bring with them their own superannuation funds, people have had to deal with some very complicated and variable superannuation schemes. This bill really addresses those complexities.

Under the proposed changes, from 1 April 2014 lump sums from foreign superannuation schemes will be taxed only when they are withdrawn or when they are transferred to a New Zealand or to an Australian scheme. This tax would depend on the gains made while the person has been a New Zealand resident. That is fair because it uses one of two calculations options. Not being taxed on accrual under the foreign investment fund rules is a major simplification. It is going to make it a whole lot easier for a lot of people who want to come and settle in this country who have been genuinely confused—as have their advisers. People came and made submissions to us, talked to us at length, about how tax specialists and experts found this to be a very confusing area. I commend the advisers, I commend the people who have drafted this, because it is complicated and it has been a minefield. I think the path has been trod very well and very carefully, so I am very pleased with the legislation as it is. I know that Todd McClay, as the responsible Minister on this piece of legislation, is as well.

It has been shepherded through the Finance and Expenditure Committee, of which I am currently deputy chair. Todd McClay was the chair of the committee at the time when this was first introduced. I give you that background by way of explaining the rigour that has gone into this and the length of discussion that has gone on, as well. We really do want to make it as simple as possible for people to meet their tax obligations—for example, getting back to the foreign superannuation, one of the measures that I particularly approve of is that when people are transferring their foreign superannuation scheme interest into KiwiSaver, they can then make a withdrawal from the KiwiSaver scheme to pay their tax bill. That is going to allow people who have complied with their tax obligations by using those foreign investment fund rules before May 2013 to continue using those rules in relation to that interest after 2014, which is when those new proposed rules will, of course, come into effect. Those measures do make it fairer and easier for people who have not actually got the amount of money that they might need to pay their tax.

As with the student loans amendment legislation, we are trying to make it possible for people to pay back their loans and to do what they need to do, because they need to actually meet their obligations. As we have said about the student loan scheme, it is not a gift; it is a loan. People have obligations to pay it back. That is an issue of fairness, and so too is this bill. I commend it to the House. Thank you.

It is very good to stand and take a call on behalf of New Zealand First in this third reading of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill, and to come after the deputy chair of the Finance and Expenditure Committee, Maggie Barry, who has obviously given it great rigour. We think, though, that it should be regarded more as rigor mortis perhaps, rather than rigour, because at one stage the deputy chair was saying that it was going to be very simple and by the end of her speech she said that it was very complicated. So, hopefully, somewhere between the simple and the complicated, there is an average ground.

When that member said she was going to help foreigners bring their superannuation onshore, I hope that she did the same when she moved from Point Chevalier over to the North Shore. Maybe she has moved her KiwiSaver funds to Fisher Funds in Takapuna and Devonport, rather than leaving them on the south side of the bridge. If she is a true North Shore-ite, she will have moved her funds over the bridge to invest them in the North Shore.

But we are back on to the bill and we are talking about a number of things here. This bill is very much an administrative bill. New Zealand First will be supporting this bill in its third reading, as we have done in the earlier readings. It basically amends the Income Tax Act 2007, the Tax Administration Act 1994, and the KiwiSaver Act 2006. In so doing it replaces some existing tax rules for New Zealand residents with interests in foreign superannuation schemes. It also changes the tax rules relating to the mining of specified minerals, clarifies the rules for Working for Families tax credits, addresses a mismatch in the tax rules relating to imputation credits and Australian dividends, refines the rules for the deductions available to holders of bad debt, and includes the granting of donee status to three charitable organisations. We are in agreement with all these measures and we believe that this is correct legislation to be passed.

The bill proposes a much simpler regime for taxing New Zealand residents who receive foreign superannuation interests in their previous country of residence. The bill proposes a simple way for people to remedy their previous positions and start afresh under a new regime, and a concessionary approach encourages them to do so. This particularly takes account of the fact that in terms of KiwiSaver, there are proposed changes to the KiwiSaver Act 2006 to allow taxpayers who transfer from a foreign scheme to a KiwiSaver scheme to withdraw sufficient funds from that KiwiSaver scheme to pay the tax that arises on that transfer. Again, this is sensible to encourage those KiwiSaver funds back into New Zealand. In terms of student loan obligation, the bill allows a taxpayer to withdraw funds from KiwiSaver to cover their student loan repayment obligations arising from such a transfer as well as the tax obligation.

These measures are just a sampling of some of the things in this bill. There are a great many other facets, including in relation to mining. The bill proposes a range of measures, including the fact that immediate tax deductions for prospecting and exploration expenditure will continue. However, on the establishment of an operational mine, exploration expenditure on items used for the extraction of minerals will be clawed back and will be deductible over the life of the mine. Tax deductions for development expenditure will be deferred and allowed over the life of the mine also.

I note that the bill also contains a number of amendments to ensure that the income tax rules cater for the rebuilding activity now taking place in Canterbury. Again, that is a good move. So, overall, we are in agreement with what is in this bill, and New Zealand First commends it to the House.

I think that although I did not understand the gobbledegook of that last speech from Andrew Williams, I did understand its general tenor, which was that the speaker’s party, New Zealand First, agrees with the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. I am pleased that those members want to do that, because this bill is about our country building a more competitive and productive economy, which is one of the Government’s key priorities. It is only by lifting economic performance that we can create jobs, we can boost incomes, we can improve living standards, and we can provide the world-class services that the people in my community in the Wairarapa want.

This bill is the largest piece of tax legislation aimed at making the tax system fairer and simpler and strengthening our economy. This Government aims to raise revenue not through hiking tax rates, as some people in this House would like to do, but by ensuring that the existing tax rates are applied fairly to everybody. An important aspect of fairness in the tax system is that taxpayers must be able to understand and comply with rules, and it is necessary for the tax rules to be cohesive, to be fair, and to be applied consistently. This bill does that, and I commend it to the House. Thank you.

It is a great pleasure to speak to the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill. It is not a bill that I followed through the House in great detail, nor did I participate in the Finance and Expenditure Committee deliberations on it, and I really had only one minor contribution to make in the Committee of the whole House, but it is a bill that I feel a great deal of affection for because I think it illustrates one of the distinguishing features between this National Government and the Opposition.

It is the fact that this bill, once again, represents a lost opportunity for this Government. Our colleague Mr Hayes, who has just resumed his seat, said that this is a bill that will assist with economic growth and that great bounteous virtue will flow from it, but it will do nothing of the sort. We know that it confirms existing personal income tax rates. Well, that is another lost opportunity because what this country is desperate for is a more progressive scale of taxation. That opportunity has been lost. The National Party’s biggest donors, and the biggest income earners in the country, have had their benefit. They had their benefit within weeks of this Government being elected in 2008 and the rest of the country has been paying for it ever since, and it will continue to pay for it because we are now wallowing in an additional $60 billion of debt racked up by this Government. This bill is a lost opportunity.

The bill also deals with a new regime for taxes for the mining industry. There is nothing particularly controversial about that, but the mining industry is not the industry of the future. It is not the industry that in 20, 30, 40, or 50 years’ time is going to be generating the value that this country needs to sustain its citizens, to provide for health, education, support, and a coherent society that we have come to expect in this country. It does not. It misses a great opportunity to provide for a capital gains tax. That is a good form of taxation because it is about directing investment, incentivising investment away from our preoccupation with property into productive investment—

💬 Hon Maryan Street: And R and D.

—and in research and development and all those other things. How disappointing it is that we do not have an accelerated depreciation regime in this tax bill. That could have been put in there, too. That would have assisted the wealth creators and the real value creators in this economy. The truth is that this Government is not a Government that is about long-term wealth creation, value addition, and lifting the general wealth and harmony of this country. This is a Government obsessed with mucking around in the same puddle of water we have been in, frankly, for far too long—more primary production, more mining, more commodity goods to be sold at commodity prices. The challenge for this country is to make the shift in our economy into totally new productive enterprises and into the new economy—the economy that is going to generate real wealth. It is the economy that is going to enable incomes to be lifted and the economy that is actually going to see an improvement in productivity, whether it is labour productivity or capital productivity, or multifactor productivity.

This bill represents everything wrong in this country, and it represents everything that this Government stands for, and that is, do nothing, do the barest minimum, do a bit of window dressing to make it look like you are doing something, but do nothing meaningful that is going to make a long-term difference to New Zealand. Do nothing that is going to inspire some hope and give a bit of inspiration to the young people, who are looking around now—teenagers who are looking around—and asking where their place is in the future, where their place is in this country, and how they are going to generate incomes, make their mark and make their way so that they can provide for themselves and their next generation. This bill represents a frustration of ambition and of aspiration. Those are the very things that this Government claims to have been elected on. This bill represents nothing important or big for New Zealand.

It is very telling that at the heart of this bill—and one of the other key elements of this bill—is superannuation and the tax regime for repatriating superannuation funds from Kiwis or residents who have worked and saved overseas, got superannuation funds overseas, settled back here, and want to use those funds. What that illustrates is one of the real problems of New Zealand, and that is our shallow capital. We are dependent on funds raised overseas to fund our lifestyle and do things over here. That is what this illustrates. This Government—because of its inaction, lack of vision, and because it does not have a view about where our future wealth is going to be generated from—is presiding over some of the worst inequality in this country. Paul Goldsmith stands up in this House and asks where the evidence is. He does not see it because he is not interested in it. When you live in Parnell you do not see a great deal of inequality because all the $2 million to $5 million houses all look the same.

The reality is that there is growing income and asset inequality. There is a generation of young New Zealanders who cannot get into their first house because of the mismanagement of this Government. They know it is going to get worse. They know it is going to get worse when those interest rates start going up next month. They know it is going to get worse. The Government is desperate to spin, distract, divert attention, and make sure nobody notices. The one thing that the Government has been claiming credit for—for the last nearly 6 years—is that interest rates are low, which has nothing to do with the Government. It happens to be the result of a worldwide financial crisis, which we are still crawling our way out of. Actually, interest rates are going to go up because this is a Government that has borrowed nearly $60 billion in its time in Government, because it has slashed taxes for the wealthiest, and it has done nothing to encourage or promote greater wealth generation. That is the crying shame of this Government.

The people of New Zealand are waking up to it. They know it, they see it, and they are looking around now for alternatives. They have gone off this crowd. They have gone off this crowd because they want better. Working New Zealanders want better for themselves and they want better for their kids and the next generation. Their kids want better for themselves, as well. They want a future in New Zealand. They want to do good stuff. They want a Government that is interested in managing an economy in a balanced way, asking those who are doing extraordinarily well to contribute a little more, asking those who want to work and invest in themselves to make their contribution, and asking those who have a clue about value and wealth generation to come forward and be assisted and add to the great things that this great country can do, and can do for its people.

This bill is a lost opportunity. This bill could have done a lot more. It could have put in place a more progressive personal income tax regime. It could have put in place a capital gains tax. It could have ensured that the once gradual but now rapidly dividing income and asset inequality was actually rectified and addressed. But it does none of that. We are bound to support this bill because it provides the income tax rates that provide the revenue that the Crown needs to carry on doing the bare minimum that it is doing. But the bill offers no vision. It offers no hope. That will be left for the next Government to do, which will be a Government focused on the next generation of wealth generation. It will be focused on what this country is going to look like in 20 or 30 years’ time—a great country—and will be a Government focused on the sunlit uplands of a great future, with a good economic base, a balanced economic base, and a happy and prosperous people who do well, earn well, make their contribution to each other well, and who live to enjoy the benefits.

That member who has just finished his speech, Andrew Little, is a very good member of our select committee, but he always uses the words “crying shame” in his speeches. I feel that the crying shame is actually his leader—the leader who lives in Herne Bay, who seeks to represent the poor and downtrodden of this world, and who does not actually stand for what his party stands for. When we hear that member Andrew Little, we hear only about increased taxes, capital gains taxes, and things like that. That is all the Labour Party wants to do. It wants to tax the guts out of the working part of New Zealand and spend that on its mates. That is what it is after. That is what the Labour Party has always stood for. That is what Labour Party members want to do, and that is what they are talking about today.

When they talk about a capital gains tax, they are not talking about a real capital gains tax; they are talking about a capital gains tax that is on only the productive part of New Zealand—a capital gains tax that is on every house in New Zealand and on every business in New Zealand. Is Labour going to promote that? Is that true? Are you promoting that?

💬 Dr Megan Woods: That’s not true.

It is not true. So your capital gains tax is on everything, is it?

💬 Dr Megan Woods: It’s not on every house, no.

It is not on everything. I did not think it was.

💬 Dr Megan Woods: It’s not on family homes.

It is not on the family home. So the capital gains tax of Labour is not a real capital gains tax. We heard it here from the Labour Party. It is not a true capital gains tax.

All the people who go around the world saying “capital gains taxes are good for economies” and who are talking about real capital gains taxes—the Labour one is not. The Labour one is going to exempt the family home. All it covers is the productive part of New Zealand, and that is what the Labour Party stands for—less production, less growth, more interest rates, and bad economic management. This bill is good economic management, and we commend it to the House.

David Bennett is not often right, but he is wrong again. He has completely got the wrong end of the stick. He does not understand Labour policy, he probably does not understand National policy, and he certainly does not understand tax policy, by any stretch of the imagination. So let us talk about a capital gains tax and let us talk about why National hates the idea of a capital gains tax. First of all, David Bennett says that this is a capital gains tax on the productive sector. It is a pity that David Bennett is not paying close attention to what I have to say. It is a pity that David Bennett gets up in the House, makes inaccurate accusations, shows his lack of intelligence, shows his lack of understanding, shows his absolute ignorance, and then cannot pay attention to the speaker who responds to what he has to say.

This is what a capital gains tax would do. It would encourage investment in the productive sector, the job-creating sector, and discourage investment in speculation in property. That is one of New Zealand’s biggest problems and it is something that this National Government has failed to address—the fact that far too much capital in New Zealand is tied up in unproductive speculation in residential property. It is true that Labour does not want to apply a capital gains tax to the family home. That is not speculation in the property market; that is putting a roof over your family’s head. The vast majority of nations in the OECD have a capital gains tax, and most of those do not apply it to the family home. This is an absolutely normal, run of the mill, international best practice approach to taxation.

But that party over there, the National Party, hates the idea of a capital gains tax. I wonder why that is—I wonder why that is. The first reason is that so many of them and the people who keep them in Government, the people who ensure National has the resources to run campaigns, rely on capital gain for tax-free income. They rely on investment and speculation in the non-productive residential property sector to make their money. They do not like the idea that a Government will come along and say to them: “Hey, the way you make your money ought to be taxed just in the same way that everybody else makes their money.” Why is it that a person can go to work for 40 hours a week, maybe 50 hours a week, maybe 60 hours a week, and earn wages to put food on the table, to put a roof over their children’s heads, and pay tax on every cent they earn, yet National’s property speculators do not pay tax on their capital gains?

That might be one reason why National does not like a capital gains tax. But I think there is another reason—speculators are the people who do best out of capital gains and the tax-free income it generates. And who are the lackeys of the speculators? It is the traders. It is the share traders and the money traders. Speculators are short-term investors. They put their money here. They wait for the price to go up. They pull their money out. They put their money somewhere else. They wait for the price to go up. They pull their money out. Every time they put their money in and they take their money out is a transaction. That is a transaction that a trader carries out, and the trader clips the ticket along the way. Who is the biggest trader in New Zealand? Why, is it our Prime Minister, John Key. So this is just a classic case of John Key looking after his old buddies, his mates in the trading sector—the money traders, the used-money salesmen—who want to clip the ticket every time a speculator makes a transaction. Those are the people who are opposed to a capital gains tax.

The real investors, the value investors, put their money into businesses for the long term. They want to see those business grow, create jobs, and contribute to our nation’s GDP. They are not funding the traders. They are not worried about the capital gains tax. They are worried about building a good business that is going to pay them a dividend—a dividend that they already pay tax on. No—a capital gains tax is opposed only by those who have no interest in building our nation. It is opposed by those with vested interests, those who support the speculators, and those who want to put their private wealth, their private benefit, ahead of the interests of the nation.

Tax tends to be something on which the left and the right do disagree. There are good reasons for that. Over here on the left we want a fair tax system, where everybody gets to pay their fair share. Over there, they want to make sure that the people reliant on salaries and wages, particularly the people who are on modest incomes, pay more than their fair share, and that the people at the top get a sweet deal. We saw it, of course, back in 2010 when National cut tax rates for the top 10 percent whilst at the same time putting up GST—that regressive tax—which meant that people buying food, buying clothes for the kids, and paying school fees had to pay more tax to make up for the shortfall from decreasing the tax on the people at the top.

Bill English late last year tried to defend these changes by saying that the tax system is more progressive now since those 2010 changes. He said that households earning less than $60,000 a year, which total around half of all households, are generally expected to pay less in percentage terms than they were in 2008 and 2009. Conversely, those at the top are expected to pay more. That tells me just one thing—inequality is growing in New Zealand. Those at the top are earning more and, mercifully, are, it would seem, paying a little bit more tax, and those at the bottom are earning less and therefore paying less of the overall taxation. But is it fair—is it fair? That is the question we have to ask.

A measure of whether or not taxation is fair is simply this. If the top 10 percent, say, control 50 percent of the wealth, they should be paying 50 percent of the tax. Those who control, say, 5 percent of the wealth should be paying about 5 percent of the tax. Here is what Bill English said. Here is what Bill English said—the words of the Minister of Finance himself. He said the top 12 percent—not just the top 10 percent, but the top 12 percent—pay around 46 percent of taxation. So they are paying less than their fair share under National. Meanwhile those earning less than $60,000 a year, who make up around half of New Zealanders, i.e. those who control about 5 percent of the wealth in New Zealand, are paying 11 percent of income tax. So those earning the least, who have the least wealth, are paying about twice as much tax as is fair whilst those at the top get the sweetheart deals from this Government not only in income tax but also through the benefit of the tax-free capital gains that that party over there refuses to budge on.

It is clear, it is plain, and it is in the words of the Minister of Finance himself that our tax system is unfair and New Zealand is growing more unequal and has become more unequal over the last 5 years. You do not have to listen to me. You do not have to listen to my colleagues in the Labour Party or our friends on the left of politics. You just have to listen to the Minister of Finance, Bill English. His own words say it for themselves. New Zealand is more unequal, and New Zealanders on moderate and low incomes have a higher tax burden than what is fair. In fact, they are paying twice as much tax as they ought to.

Labour members think we can do it differently. We think this bill should have been used to implement a progressive, growth-focused taxation system, but that is not here. That is not here, because that party over there is not interested in growth. Its members are not interested in supportive innovative businesses that create jobs and contribute to our nation’s GDP. National members are interested in doing deals that support their mates. They are interested in maintaining the status quo because that is in the best interests of their mates. They are not interested in growing our economy, they are not interested in creating jobs, and that is why they will be out on their ears by the end of this year.