Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill

Madam Chairman, thank you for the call on Part 1 of this, the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill. I thank you for that call.

Look, we’ve just come out of a detailed debate on a procedural matter, and now, of course, we turn to the substance of the legislation, and it’s a good opportunity to reflect on the fact that this bill is actually a very good bill. It’s a bill drafted with a huge amount of work that has gone into it from my colleague the Hon Judith Collins when she was Minister of Revenue, now picked up and continued by the Minister in the chair, the Hon Stuart Nash. On the whole, the bill picks up a number of very important matters in our taxation system, and it is probably worth taking a moment just to reflect on those because, of course, as I say, we have just come out of a very specific procedural debate about one aspect which I’m sure will be getting a lot of committee time over the course of the next few hours.

Broadly speaking, of course—and I’m sure the Minister will turn to this in his contributions—these are bills that are passed on an annual basis, as the name would suggest, to reconfirm the tax rates for the 2017-18 year, and, of course, because that year is almost largely completed, it will be of no surprise to anyone in the Chamber or watching that, of course, the matters remain unchanged. But also, in going back to my first stint on the Finance and Expenditure Committee, quite a few years ago now, these remedial matters bills that come up from time to time are critically important for picking up often small and important—but none the less perhaps not earth-shattering—changes that keep our tax laws working well.

There is, though, one other very important aspect of this bill before we turn to the matters within the Supplementary Order Papers (SOPs) that is worth highlighting, because this bill is about some of the critical changes to give effect to what has been labelled the Business Transformation programme of the IRD. This is a matter that the National-led Government put considerable work and money into over a number of years, and I’m pleased to see that it is a matter that really does transcend the politics of this House, and, actually, it’s my experience that those matters occur more often than the public might think, because they don’t perhaps attract the attention of the gallery. But this project to transform the way in which the IRD operates—to transform the way we think about and collect tax, the way we allow New Zealanders to understand their obligations in the tax system, to report on them, and to make moves that are incredibly important to the good functioning of the economy: the ability, for example, of small businesses to pay their tax on a pay-as-you-go basis so they don’t get into those situations we see far too often when they are, in fact, reaching the end of the year and have a large tax bill and haven’t accounted for it properly; so that ability for them to pay as they go and have a real time understanding of their tax liability—is critically important. Not actually all that much—yes—for the Government, but that’s not the primary consideration. The primary consideration is that taxpayers understand and can give effect to those obligations.

The other aspect, not just the payment of tax by, particularly, smaller businesses, is also this niggly issue of secondary tax, which I know as an electorate MP comes up repeatedly in my electorate office, and the concerns and the frustration that taxpayers have at what they perceive as a higher rate of tax on secondary income. Now, I know from having signed out any number of letters back to constituents and meeting with them that while the tax rate isn’t any higher when it all comes out in the wash, the net effect is what they pay is often quite considerable on them in terms of their cash flow, if you will, on an ongoing basis. So the ability to move the Inland Revenue Department to a system where tax can be assessed and paid in a much more real-time way is incredibly important. The frustration, that I’m sure is shared across Governments and through the IRD itself, of course, is the massive task of building the ICT capability to deliver that, and it’s not a secret to say that on many occasions, when changes to tax policy or the delivery of taxes were looked at, it was actually, in fact, the inability of the machinery behind our tax system to cope with that that actually prevented some of those changes being given effect to.

So the Business Transformation programme represents a significant investment in ICT and in computing technology certainly but also in actually just the way we think about and deliver taxation services. I did want to spend a little bit of time reflecting on that, because that is actually at the heart of what this bill does. Now, you will hear a lot of discussion from this side of the Chamber over the course of this debate around the two SOPs that the Minister has tabled. Let me set out at the outset the National Party position for you on this legislation and the SOPs. The core legislation in front of us, as returned from the select committee, we would, on the face of it, be happy to continue to support it. It is a good bill. It is a bill that, as I say, was started under our Government, and, while there’ll be questions for the Minister to answer about some of the changes contained within it, it is a bill that we’re broadly supportive of.

The Minister’s SOP 16 I regard as largely a technical Supplementary Order Paper and again, while there’ll be questions for the Minister to answer in respect of that, we are broadly supportive. The second, though, of the Supplementary Order Papers that cuts across a number of the parts in this bill is—

CHAIRPERSON (Poto Williams): I do have to remind the member that the SOPs come up in Part 2—

In 2 and 3, yes; thank you. I’m just setting out the position of National at the outset of this debate. As a contextual matter it’s one, of course, where we are strongly in opposition and we will be raising those matters as we proceed through the legislation.

So, by way of introductory comments and setting out the view of the National Party on this legislation, it is a very good bill. It came back from the select committee as a very good bill but we are deeply concerned that with the changes that may be made during this committee of the whole House stage, it will turn into a bill that we’re unable to support. It will be important to us that the Minister addresses a number of the questions that we have as we work through the legislation, and I look forward to hearing him do that.

I rise to speak on Part 1 of the annual rates of income tax bill. Tax, like death—a certainty in our life. And I might just start by taking this opportunity to note the passing of my uncle John O’Connor, who is actually the father of the Minister of Agriculture, the Hon Damien O’Connor, and for him death in the last day has become very real. He was a well-respected man both within the West Coast and nationally and I do note the passing. And he was a man who often railed against tax. He was a man who was very quick to rise when the subject of tax came up, so when I look at what we are now considering, the annual income tax rates for the 2017-18 tax year, which, as laid out in the bill, will be set at the rate specified in schedule 1 of the Income Tax Act.

I go to that schedule 1 and I look at it as laying out, to the extent to which a person does not have a basic rate under clauses 2 to 10—it outlines the formula by which people will be taxed. It is a relatively simple formula; certainly it’s not in rival of Einstein’s theory of relativity by any means. It’s a tax under table 1 and is divided by the taxable income. Tax under table 1 means the total tax calculated for each dollar in the person’s taxable income using table 1. Obviously, “divided by the taxable income” means the number of dollars in the person’s taxable income.

So then I look at just what those ranges are. In the range of the dollar in the taxable income for zero to $14,000, 0.105 percent is the tax rate, which, if you are on that income, is still a big imposition on your income. For $14,001 to $48,000, it is 0.175. Above $48,000, for $48,001 to $70,000, it is actually 0.3—30c in the dollar. And, of course, for over $70,000, it is 0.33.

So I think it’s good that those listening understand. It’s a reminder of just how our tax is calculated. Of course, there’s so much discussion we have on tax, and we’ll hear so much more later on today. It is important that this country is a good country, is a fair country, and the reason that it does thrive is because we have a fair tax system, and what we will be debating later on is how we make sure that it does remain fair. Thank you, Madam Chair.

Part 1 agreed to.

Part 2 Amendments to Income Tax Act 2007