Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill

on behalf of the Minister of Revenue: I move, That the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.

This wide-ranging bill builds on recent work and represents a significant step forward in the modernisation of New Zealand’s tax system. It supports much of the work the Inland Revenue Department is doing as part of its Business Transformation programme. It represents an opportunity for New Zealand to transition its tax system to one where it is easier to get your tax right, compliance costs are lower, and Government policy changes can be made more quickly and cost-effectively.

The Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Act, passed in March this year, laid the foundation for a smarter, more responsive tax system by ensuring that the payers of employment and investment income provide better and more timely information to Inland Revenue. With that in place, Inland Revenue is now in a position to ensure the right amounts are deducted—

💬 DEPUTY SPEAKER: I’m sorry to interrupt the member, but we seem to have people standing there talking. Could they please respect the member on his feet?

You don’t want me to start again?

💬 DEPUTY SPEAKER: No, no—you can continue.

With that in place, Inland Revenue is now in a position to ensure the right amounts are deducted or withheld from individuals to meet their obligations and more accurately determine entitlements such as Working for Families. This is primarily what this bill is about.

The proposed changes will apply for the 2018-19 tax year end processes, and the full benefit of the changes will be realised from the 2021 year, when, for the first time, people will be able to see a full year of pre-populated information for PAYE and all of their investment income. Most people will pay what they need to and get what they are entitled to during the year, without having to do anything. The changes, which would come into effect on 1 April 2019, subject to the passage of this bill, will help individuals to use the right tax code so they pay the correct amount of tax during the year. They will remove unnecessary compliance costs, simplify filing obligations, and ensure refunds are paid out automatically for most wage, salary, and investment income earners.

The changes proposed to secondary tax codes are intended to address this Government’s concerns about the over-withholding caused by secondary tax. These changes will enable Inland Revenue to more closely identify workers with more than one job who have been overpaying their tax. Inland Revenue will then be able to suggest a more appropriate withholding rate for the employee’s second job. In this way, we will remove the negative impact of secondary tax for those affected workers. Inland Revenue will make it easier for taxpayers to see what they’ve paid and what they owe and will be better at detecting errors. However, while more people will have income reported on their behalf, they will continue to be responsible for reporting other income and deductions, assessing their liabilities, and meeting their obligations. A modern digital tax system will serve the needs of all New Zealanders. It will help people to get their tax and welfare entitlements right the first time, avoid errors, and give them a clearer view of what they’ve paid and what they owe during the year.

The tax system will be simple to comply with and responsive to people’s changing circumstances. People will spend far less time and effort ensuring they meet their obligations and receive their correct social policy entitlements, as tax will be correctly withheld and assistance provided at the time it is needed. This is the key thing: developing a tax system that responds in near - real time to changes of circumstances without requiring a wash-up at the end of the year.

The bill simplifies tax obligations for individuals who currently apply for a personal tax summary or file a tax return each year in order to get a tax refund. The changes in this bill will mean that many of these people will be able to get their refunds automatically. Under the proposed changes, around 750,000 more individuals who don’t currently interact with Inland Revenue will be given a tax refund without having to do anything. These changes will mean that most people whose only income is from salary, wages, or investment will pay what they need to and get what they’re entitled to without having to do anything. These improvements to how individuals have their tax assessed constitute the main part of this wide-ranging suite of measures to modernise and simplify the tax system, and they have risen directly out of the new technology that Inland Revenue has been rolling out as part of its Business Transformation programme. The Commissioner of Inland Revenue, Naomi Ferguson, has assured me and the Minister of Revenue that these changes as a result of the Business Transformation programme, as well as other Government priorities, will be delivered on time.

In addition to the changes benefitting individuals, a number of other important changes are being made to the Tax Administration Act, but, again, these changes are focused on ensuring a simple and fair tax system. A key aspect of these amendments to the Act is to clarify Inland Revenue’s ability to collect, use, and disclose information. The changes proposed in the bill will make the rules more efficient and transparent, which will improve taxpayers’ trust and confidence in the way Inland Revenue manages the information it holds.

This bill clarifies that information collected for one Inland Revenue purpose can be used for the department’s other functions. It also provides a more transparent and efficient process for collecting large sets of data, where this is done on a regular basis. The proposed changes in the bill will better focus the confidentiality rule, to protect taxpayer information and more clearly set out any expectations. These changes strike the right balance between the stewardship of taxpayers’ confidential information and improved customer service. These changes help affirm this Government’s commitment to improving openness and transparency, while continuing to protect individuals’ private information.

Another proposed improvement to the Act is the introduction of a short process ruling, where small businesses can more easily apply for a binding ruling from Inland Revenue on a broad range of matters. Binding rulings are where taxpayers can apply to Inland Revenue for a ruling on a specific tax matter. Currently, this service can be prohibitive to many small businesses due to the time and cost involved. The ability for a wider range of taxpayers to obtain binding advice from Inland Revenue on their tax positions will assist in the goal of first-time accuracy. Therefore, the bill proposes to extend the ability to obtain private binding rulings to taxpayers who are, in practice, excluded from this because of the complexity of the process and the fees charged. This aligns with work the OECD has been doing to encourage first-time accuracy in its members’ tax systems, but, more importantly, it opens up a key service that the commissioner of revenue provides to a wider range of taxpayers and businesses.

This bill also provides the Commissioner of Inland Revenue with more flexibility to correct anomalies in the tax legislation. The bill proposes additional tools for the commissioner so that anomalies can be resolved earlier, therefore reducing taxpayer compliance costs by providing earlier certainty. The proposed new tools, comprising regulations, determinations, and administrative actions, will be subject to a number of constraints, including being optional for the taxpayer to apply, and being for a period of not more than three years.

The bill also proposes a suite of improvements to KiwiSaver as a result of the Retirement Commission’s 2016 review of retirement income policies. These changes range from introducing more choice for employee contribution rates to making it easier for our older working population to join and stay in KiwiSaver.

Other changes proposed in the bill include amendments to add 13 charities to the donee organisations—

💬 Hon Member: Oh, you’re kidding!

—with overseas purposes, in schedule 32 of the Income Tax Act 2007. Mr Bishop’s been waiting for that for years. It will allow taxpayers to switch to the accounting income method from either the standard or GST ratio methods at any time during the income year. The bill also sets the annual rates of income tax for the 2018-19 tax year.

Finally, the bill contains a large number of mainly technical amendments, and while mostly remedial in nature, these measures are of major importance in making sure that the existing tax rules work well in practice. The proposals in this bill make paying tax simpler and clearer for Kiwi taxpayers, and it is therefore my great pleasure to commend this bill to the House.

I stand to speak here on the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. On this side of the House, we agree with many of the provisions in this bill. In fact, most of them were started by the previous National Government and were part of a long process of tax development. However, we will not vote for this bill for a simple reason, and that is that it is fundamentally an annual rates bill. It sets the taxation rates, and those taxation rates are the same as they were last year, and they weren’t the rates that would have been in place if this Government hadn’t taken away the modest tax cuts that the previous National Government had enshrined in law prior to the Government.

So what we have in this bill: it outlines that there are four tax rates for personal income tax—it’s worth reminding New Zealanders of that. So for the first $14,000 an individual earns, they’re paying 10.5 percent tax rate; from $14,000 to $48,000, they’re paying 17.5 percent; from $48,000 to $70,000, they’re paying 30 percent; and above $70,000, they’re paying 33 percent. Now, if it weren’t for this Government’s changes post the election, we would have been paying different rates by now. We would have adjusted those rates for inflation over the past few years. It would have been from zero to $22,000 that paid 10.5 percent; $22,000 to $52,000 that paid 17.5 percent; and then the upper rate wasn’t changed. So the net effect of that would’ve been that anybody that earnt $52,000 or more would have kept in their hands more than $1,000 a year extra. That was all taken away by this Government, and we will not support this bill, on the basis of that change.

It was a modest adjustment, cancelled by this Government on the basis that it was too generous to higher-income families—they didn’t need the money, apparently. But I suppose the thing that makes people scratch their heads in New Zealand is the incoherent nature of this Government, because the day after they took away those modest tax cuts because too much money was going to wealthier families, they then gave those very same wealthier families access to $6,000 or $7,000 worth of free tertiary education. So I couldn’t understand the logic behind that necessarily. And they’ve done a whole lot of other universal handouts at the same time. So they oppose tax cuts—they don’t like leaving more money in the hands of New Zealanders, but they’re happy to give them much larger sums for free tertiary education.

So it’s incoherent, but it’s also unbalanced, because we were at a stage when the books had been managed for nine years very well. We’d gone from a massive deficit situation after the Christchurch earthquakes and the global financial crisis. We’d brought the books back into surplus, and we had choices as a country. When you have budget surpluses, you’ve got three options: you can reduce taxes—not you, but a sensible Government—spend more, or pay back debt. And it’s only appropriate that there should be some balance in that. We had modest tax cuts, we had signalled some extra spending, and we were paying back debt. This Government, of course, has changed the whole emphasis, purely and simply to spend more, spend more on every occasion. So the answer to every question is to spend more, and they are implacably opposed to any reduction in tax—notwithstanding the fact that inflation grabs a little bit more every year.

Of course, on top of that, they have brought in the fuel taxes that Aucklanders are paying and are very angry about at the pumps as we speak. The only people that are happy with the regional Auckland fuel tax are the owners of petrol stations around Franklin and somewhere north of Ōrewa, where they’ve seen a massive increase in people coming in to their things in order to avoid the fuel tax.

So we believe we should be leaving money in the hands of New Zealanders. The tax rates which are referred to in this bill should have been what National had put in place, and that would have put more money back in the hands of hard-working New Zealanders, and it’s a shame that it’s been taken away.

Now, if I can turn my attention in my remaining time to the positive elements of this bill, which are a legacy from some of the hard work and policy analysis of the previous National Government, and I commend this Government for carrying them on. In particular, I think people will be interested in the changes around KiwiSaver. I’m looking forward to the opportunity of working through these matters in the select committee over the next few months to ensure that they’ve got the details right.

Some of the things that we’re going to be looking at with this legislation are around—well, one thing, allowing people over the age of 65 to join KiwiSaver. Now, you might think, well, why would they want to do that? Well, actually, the funds management business in New Zealand is not huge, but, actually, some of the lowest fees available for people investing in managed funds are actually through the KiwiSaver products that are now building size and scale. You can actually get access to some good managed funds—whether growth, or balanced, or conservative—at reasonable fees through KiwiSaver providers. The law at the moment didn’t allow you to join over the age of 65 if you wanted to put some money away. Of course, you can always take it out at any stage over the age of 65, but you couldn’t put it in. The primary reason for that was because of the kick-start payment that used to exist but no longer does. So we think that’s sensible.

It also adds a couple of extra rates to KiwiSaver contribution rates. So at the moment an individual can choose to pay into KiwiSaver at 3 percent, 4 percent, or 8 percent. That’s not all that flexible, and so this bill includes a 6 percent and a 10 percent opportunity as well. I think that’s all important because the broader idea for KiwiSaver is to make it easier for New Zealanders to put a little bit of money aside for their retirement, not to replace the universal national superannuation that we have as a country that works well but to augment it and to increase their savings over time. So we want New Zealanders to have the ability, in times when they feel they have the resources available to themselves, to put a little bit more into their KiwiSaver funding, and that will all add up.

It also slightly limits the time available for a KiwiSaver contributions holiday, and that ended up being five years. We think that’s actually too long, because people can get out of the habit of putting into KiwiSaver, and will reduce the available funds that they’ll have later in life. So the proposal here is to reduce that from five years to one year and to change the name from “contributions holiday”, which is something that everyone likes the idea of—having a holiday—to a “savings suspension”. It’s a minor thing, but it does send a signal that we’re not talking about holidays here; we’re actually talking about suspending the opportunity to put some money away for retirement options. So we think that makes sense and we’re looking forward to working in the select committee about that.

Some of the more mechanical areas around the short process ruling, which has been mentioned by the Minister in his speeches—it is actually a very important area, which will enable small businesses to more easily apply for a binding ruling from the Inland Revenue Department on any tax matter. So it’s just a matter of when there’s uncertainty and when a business is not clear about what it can do, whether it can claim a deduction here or what their exact tax liability is, the current process in order to go for a tax ruling is very expensive and time-consuming and cumbersome. This process is much better tailored for small businesses so that they can actually get some clarity around their tax position earlier rather than letting things fester and get out of control. That is, I think, a reflection of the fact that the vast majority of companies in New Zealand are small. When we talk about small business in New Zealand it is actually very small business, and the resources that they have available for complicated tax planning are not huge. So I think that’s a practical way we can make a real difference to New Zealand businesses and maintain the integrity of the system.

The final area is around the personal tax summary in order to get a tax refund. This will—on the basis of all the investment that’s been made in technology—enable about 750,000 New Zealanders to get refunds due to them without having to go through actually applying for them, and the complicated system there, and again that makes sense.

So when we look at this bill there’s much that we support and we will work collaboratively with the Government through the select committee process to ensure that that is as good as possible, but we will oppose it on the basis that it represents a real missed opportunity to give to New Zealanders a little bit more money back in their pockets as tax cuts, which they richly deserved and which were taken away from them by this Government.

This is a sad, sad day in the history of this House, and it is a sad, sad day because for many years we have worked collaboratively across the House on tax measures. We have debated them tooth and nail in select committee to get them right, but, by and large, when it has come to voting in the House, tax bills have been passed unanimously with all sides of the House agreeing. In fact, this reflects a pattern in the way that tax is done in this country. By and large, people don’t ask for special concessions. People don’t ask for special rules. The objective of the tax professionals, the tax experts within the Inland Revenue Department, within the large accounting firms, within law firms has been to get the tax law right. The objective between Opposition and Government has been to get the law right. So when bills have come to the House, the tradition has been that that collaboration, that collegiality, means that bills are voted on unanimously.

Yet this Opposition is seeking to undermine all that, and on this sad day they have said that they will vote against this excellent tax bill. It is an excellent tax bill because of the way it improves tax administration. It’s an excellent tax bill because of the way it works for the small New Zealanders, for the people earning salaries and wages, for the people who need to have their tax processes simplified. It is an excellent tax bill because of the way it improves some of the rules around KiwiSaver, but they are still going to vote against it because it is also the annual rates bill.

May I suggest to the members of the Opposition that they could have done this differently. They could, perhaps at a later stage in the debate on this bill, have offered a Supplementary Order Paper around those rates and have argued their case there, but have still agreed to the bill overall. They had an opportunity to argue about tax rates during the Budget debate. They’ve had plenty of time to talk about tax rates, and because of their ideological commitment to it—their ideological commitment—they are going to undermine the established tax practice in this House, and that is why it is a sad, sad day. Shame on them, I say. Shame on you for undermining the way we do tax in this country.

💬 DEPUTY SPEAKER: Not me—not me!

I agree, Madam Deputy Speaker, definitely not you. So, members of the Opposition, I invite you to reconsider. Please, think again. Make sure you actively support all the—

💬 DEPUTY SPEAKER: Don’t bring me into the debate.

I am sorry, Madam Deputy Speaker. Please, members of the Opposition, actively support the excellent measures in this tax bill. Perhaps consider putting in a Supplementary Order Paper if that desire to debate the tax rates is so strong. But, at the end of the day, do not undermine the way that we as a House have tried for so long to get tax right. I urge members of the Opposition to support this bill, to vote for it, and, because of the excellent measures in this bill, I commend it to the House.

Thank you, Madam Deputy Speaker. It is a pleasure to be talking on the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. I’m going to start out with the good stuff that’s in this bill—and I think there is some good stuff.

First of all, I want to just reflect on the KiwiSaver changes. It’s interesting; there was a report that’s just come out earlier today saying that many young people do not understand how KiwiSaver works. Of course, if we are to provide an environment where New Zealanders do save for and look forward to and plan for their retirement, then it’s absolutely essential that they do have a very clear understanding of KiwiSaver, even though we’ve got the New Zealand superannuation scheme in place, and I think some of the changes in this bill will go a long way towards addressing some of those issues with KiwiSaver.

In particular, there are five key changes—and, I’ve got to say, these all reflect, basically, the report that the Retirement Commissioner prepared in 2016. The first one is that it removes what’s called the “five-year lock-in period”, which is something we agree with because, for those people who start putting money into their KiwiSaver from 60 to 65, they have a five-year lock-in period; so if they retire at 65, in some cases they cannot actually access their KiwiSaver savings account until later on.

The second one is that we think it’s a good thing that older New Zealanders who may not have invested in a funds-management approach to their retirement can actually put their money into KiwiSaver after the age of 65. I had one particular constituent who came to me on this matter some time ago and suggested this because, by doing so, it’s a way for older New Zealanders to use a proven method and funds-management approach to look after their funds in retirement.

The third one is around increasing the number of contribution rates. At the moment, we’ve got a slightly weird situation where you can introduce funds into your KiwiSaver account only at 4 percent, 8 percent, or, in fact, I think it goes to 12 as well. What this bill proposes to do is give greater flexibility by adding 6 and 10 percent as rates that the Kiwi person can recommend they want to contribute to their KiwiSaver account, and it therefore gives more flexibility. What we hear from many people—and what we have heard from many people—is that the jump from 4 to 8 percent is too high and, therefore, the 6 percent, in particular, is a very useful start.

The fourth element is reducing the holiday period from five years to one year. Of course, the way that operates is that when people get into financial difficulty or their financial circumstances change, what they can do is actually decide to opt out of their KiwiSaver contributions. At the moment, it’s set at five years. What this bill will do is give better flexibility and require that opt-out to take place every year, because what we do want is New Zealanders to actively think about that opt-out clause every year, so that, if they can, they actually get back on to the saving regime and continue to contribute to their KiwiSaver.

The last thing they’ve done in the bill is change the term—and I think it’s a good thing—from “contributions holiday” to “savings suspension”. It adds a bit of nuance around the wording, but I think it’s useful in terms of making it clear that if you are going to take a holiday, in a sense, what you are doing is deferring your savings from that period onwards—and that’s why we want the annual review.

Also, there are some changes in it around business packages, clarifying IRD’s ability to provide taxpayers who are not tax agents with an ability to get access and lodge PAYE returns and GST returns. At the moment, to be registered as a taxation agent, you have to go through a process. What this does is give the commissioner more flexibility around that. Also, in terms of determinations, there’s always the point where the commissioner can make a determination, but the bill provides a bit of flexibility in terms of the interpretation of the legislation.

Then the third main element is around personal tax changes, which are good in the sense that they remove the need for people to provide a tax return and also make the ability to get an automatic tax refund much more easily. The IRD can, effectively, look at your historical financial information and anticipate what tax code you’re going to have, and all those are good things in terms of getting money out of the IRD and back to taxpayers on a much quicker basis.

But it is a sad, sad day because what this bill does do is lock in the tax changes that the coalition Government wants to bring in under the so-called Families Package. The issue around the taxation package is that it’s good if you have a young family and you’re a lower-income family—and the family tax package deals with that in the Budget changes that the coalition Government proposed—but the issue is that if you are a student trying to save and earn money so you don’t have to take on a student loan—

💬 DEPUTY SPEAKER: Don’t bring me into it.

—the student will still pay a high level of tax on the minimum amount of money that they can make to be able to save for their studies. If you’re a young family—a husband and wife, or partners—without children, then the Families Package provides absolutely no benefit to you at all. Or if you’re a superannuitant, you, in the first year, will only receive a portion of the so-called $400 or $700 winter energy payment, because in the first year that is a considerably lower sum—it’s closer to about $340 because of the way it’s been introduced. On top of that, what’s happened, as we’re all aware, is that the coalition Government has now brought in a host of new tax revenue since election day last year.

On the current basis, $2.3 billion of additional taxes have already been introduced by this coalition Government. They include the fuel tax that we’ve talked about significantly over the last few weeks in this House, both at a local Auckland Council level and also at a Government level. We’ve talked about the Amazon tax, we’ve talked about the removal of the average income earner tax cut, and there’s a whole range around some of the business changes. And this is against the backdrop of a Government that is now raking in $73 billion and the tax take from this Government, over the foreseeable future, will rise to just under $100 billion without any additional tax being proposed. We know that there’s a working party beavering away right now trying to drum up new taxes to impose on unsuspecting New Zealanders.

The worst thing about this bill is that it locks in the same tax rates that all New Zealanders pay, and the technical term is “fiscal creep”, which means that, with inflation, as your income rises, you increasingly get pushed into a higher tax bracket even though, in real terms, you are not better off. That is the travesty of this bill, because that means that those average New Zealanders who are out there working hard, saving for their future, looking after their children, and, generally, trying to get ahead will be locked into higher tax rates than otherwise should be the case.

If this coalition Government had put in place the tax changes that the National Government had said they were going to put in on 1 April this year, then they would be much, much better off, and that’s what New Zealand should be about: fairer treatment for all, not just looking after a certain category of people, but ensuring that all New Zealanders share in the wealth of this country and can get ahead. Thank you, Madam Deputy Speaker.

Thank you, Madam Deputy Speaker. It’s a pleasure to rise on behalf of New Zealand First to speak to this, the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill.

I’m glad I get to follow Mr Bayly, because what Mr Bayly has done for me is highlight some of the inconsistencies in the National Party’s positioning on tax. For example, Mr Bayly spoke to the House about “fiscal creep”—or fiscal drag, just in case we made the mistake of thinking he was talking about himself. What the member opposite forgot to mention was that, for years, lobbyists and people would come to National and ask them to address this very issue, but year after year after year they refused to act to do anything about it. Now the accusations fly that this Government is doing the same. Well, Mr Bayly, let me put that into context for you.

You speak of our refusal to shift or decrease the annual tax rates. Let’s analyse that from the perspective of a small- or even a large-business owner, Mr Bayly. What that member has to realise is that what was happening under the previous Government was that those employees were struggling to get to work. They were, literally, spending over a month per annum in traffic to get to work every day in Auckland, and those members opposite refused to address the issue. They couldn’t, because they didn’t have the revenue. They didn’t have the money to do anything about it. What that meant for business was that there were huge losses of productivity, especially for our businesses in Auckland—huge losses of productivity. It was affecting the bottom line.

What about the education of our employees? The member decried the leaving alone of tax cuts, but what that has meant is that this coalition Government is able to invest so much more significantly into our education system, so that those people working in our businesses, contributing to the bottom line of our businesses, are making those businesses better off. They are more productive, by definition, Mr Bayly.

I’ve spoken about transport, but what about housing? What does it do to a business’ bottom line when their workforce isn’t sure where they are living from day to day, from week to week, or when our employees are moving across the country, trying to find a place to live? What does that do to the bottom line of a business trying to find people to work for them? It makes it next to impossible to find and hold on to good employees. So, actually, what we’re trying to do here, on this side of the House—never mind all the social issues and the cost to the individual and the cost to families—is make sure that New Zealanders are in a position to contribute in a positive way to New Zealand business, and you don’t do that, right now, by cutting our tax rate.

I just want to finish on the health of the employees of our businesses. What does it do for a business if the health system is not looking after a business’ employees? What does that do to the business’ bottom line when people are taking sick days because they can’t afford to go to the doctor, they can’t even access our hospital system? That is bad for business. That is fundamentally bad for business.

What I’d like to do now is be a bit more positive and actually acknowledge the Opposition now, and acknowledge that, yes, this legislation originated with the Opposition and the Inland Revenue Department’s desire to modernise their operations. So what we have here is that Inland Revenue went to the National Party and said, “Actually, we think that our operations are quickly becoming outdated. People’s access to our services is becoming antiquated as modern technology progresses.” So, good on the Government of the time—National; they said, “Well, what do you need?” And here it is: the solution put to National around the modernisation of the Inland Revenue Department and, actually, the tax system itself. It was, and continues to be, a huge undertaking by the Inland Revenue Department. I myself, in Opposition, had concerns about the sums of money involved, but those concerns have been addressed, because the Inland Revenue Department has been able to mark their progress in a positive way over recent times. There is confidence going forward, because the Inland Revenue Department forecasts are being backed up by the very numbers that they have given this House.

This has been a logical undertaking. It is a move into the modern world. It’s almost ironic that I use those terms, because, basically, email has become a lot more accessible and more of a tool for people to interact with the Inland Revenue Department and vice versa. This is legislation that enables this modernisation, this transformation process. And, as has been spoken to on both sides of the House, the main gains from this are around compliance issues and the cost of subsequent compliance, and the timeliness of Inland Revenue to respond to those broader issues. So what this legislation does is enable these changes so that compliance is not so arduous on the individual or the business. We have more timely transference of information, and, if I get time, I’ll give examples of where the tax department itself will be proactive in supplying individuals with their tax obligations, rather than the individual stressing and worrying about their tax obligations.

What I did want to touch on—and I hope this is where my notes start—is that through this bill, individuals automatically will be given the right code in terms of secondary tax. Let me try to explain. It’s been difficult for individuals to have multiple jobs and to ensure that they comply with their tax obligations. They’re often found wanting at the end of the tax year in terms of their tax bill. So what this legislation does is actually be proactive in the reporting of an individual’s tax obligations, such that a person working multiple jobs will have their wages and tax forecast out for an annual period. In doing that, there won’t be a need for a secondary tax code. They will know what their tax obligations are at that time and going forward, and they will be taxed at the correct rate. For me, as the New Zealand First spokesperson for revenue in the previous parliamentary term, that was actually quite a frequent interaction with hard-working Kiwis who were confused by the system and were frustrated by the system.

So, for me, this is quite a timely moment. I’m proud to be part of a Government that sees where good things need to happen. That means the arduous nature of secondary tax codes will be dealt with, and those people who are obliged to work multiple jobs—and there are many of them still—will find this whole interaction with the Inland Revenue Department so much easier, hopefully. I personally think that the removal of this obligation will be huge for families.

Look, that’s just one of many examples of what this piece of legislation achieves. I’m grateful to be able to support this bill through the processes of the House. Madam Deputy Speaker, thank you very much.

I wouldn’t really need to talk about this bill at all—the ammunition the past two speakers from the other side of the House have given me to talk about—but none the less I will. I think that I want to pick up on the points that the last speaker—“the Professor”—made in his deliberations on this bill. I just want to comment on a couple of things he said. One of the things I was intrigued by—

💬 DEPUTY SPEAKER: You do need to use his proper name. In fairness, you do need to use his proper name.

💬 Fletcher Tabuteau: Say my name, ha!

I’m not sure who I’m talking about—sorry, Mr Tabuteau.

One of the things he said earlier in his speech was people are struggling to get to work. Well, I can assure him those people in Auckland are now struggling by a significantly larger amount to get to work because they’ve got a whole lot more money they’ve got to pay to get themselves to work each morning. That was one of the issues I thought was really quite interesting to take up on the point of this bill.

The other thing I wanted to talk about briefly was—I think that on this side of the House we agree with a huge amount of the stuff in this bill, and certainly around tax we are normally almost unanimous on that. I want to touch on why perhaps we’re not in this case in a moment. But I just want to talk briefly about an issue that Deborah Russell made in her speech. She talked about the ideological difference of the National Party, and frankly that’s exactly why we’re opposed to this bill. We’re only opposed to a little bit of this bill, and it is purely the ideological differences, because if didn’t have ideological differences, we wouldn’t need a Parliament, would we? We’d all be in the same place. So that’s the thing that I’m finding interesting about this.

I want to talk about one or two things that have created that ideological difference, and earlier in the day Paul Goldsmith spoke about one or two of them. One of them is a simple thing like the winter energy payment, where for want of something better to do the Government have cancelled some pretty meagre, effectively, tax cuts and put in their place a winter energy payment, which is universal for all over 65, unless they reject it. They’ve also put in place free tertiary education for the same students of the same families that they objected to so much over the potential for the tax cuts to benefit a percentage of our population that were better off. I find that very interesting because, effectively, they’ve made those families much better off than the tax deductions or cuts ever would have made them. So that’s the ideological difference that we’re faced with in the course of this bill.

I think everything else in this bill—and I agree absolutely with the last speaker around the modernisation of the Inland Revenue Department and the technology base they operate off. If we can get that to work in the manner that it’s predicted it will work, it’s going to make it a whole lot better. Despite some of my rural accountant’s views on it at the moment, it will eventually work a whole lot better for almost every taxpayer in New Zealand. It will make their lives simpler, it will make the roles of accountants and tax advisers simpler—in fact, this bill just extends that definition a little bit and enables some other people to provide tax advice. I don’t have any issue with that as long as they are qualified to do it and do it in a manner that is acceptable to everyone. So there’s some issues in this bill I think are very positive, but there are also some issues in here that we think are not so positive, and that’s the reason for us objecting to it.

I want to make a couple of other comments. I had the opportunity to go to Norway a few weeks ago, where they do pay extremely high rates of tax—much, much higher rates of tax than we do. But the same country has a $9 trillion investment fund, which enables them to put infrastructure in place for their communities. All that $9 trillion has come from the North Sea and a couple of pipes they run out of there. We no longer have that opportunity, so I think that it’s a very interesting philosophical debate as to how you extract money from people and provide it to the Government to give them the opportunity to put infrastructure and—

💬 Fletcher Tabuteau: They still tax the wealthy more.

—the like in place for all of us. I get a lot of advice from the Opposition on how to speak. I’ve got to say also that I never imagined I would come to Parliament and spend hours and hours talking about tax bills; I always imagined I’d come to Parliament and spend hours and hours talking about sheep, but it’s different.

The other thing I want to speak about—and, again, Bayly pinched some of my words on it—was the changes to KiwiSaver. I think KiwiSaver is hugely positive for New Zealanders. I also think it’s a hugely positive change to make to enable people over 65 to continue—to enable those contributions to continue to KiwiSaver, and enable them to commence making contributions to KiwiSaver. When I was young, people at 65 always looked very old to me. I can assure you now they don’t. I have had people in my office talking about exactly this issue, because it is frustrating for people that at 65 years of age their KiwiSaver employer contributions stop, and also they can’t join KiwiSaver if they wish to. KiwiSaver is very positive for New Zealanders.

The other thing I think’s a positive change about the KiwiSaver thing is changing the levels of contribution to KiwiSaver. I think that’s a positive step for New Zealand too. I think also that whilst superannuation is superannuation—it’s been a great thing, universal superannuation, for all New Zealanders. I don’t think there’s any doubt that in the future there’s going to be a need for Governments to look at retirement age. I think we need to be looking at that constantly, not because of what happens to us or even to the next generation of us, but what happens to the generation after that. I think that’s the key thing we need to be thinking about, so that’s hugely important for us as well, and KiwiSaver plays a part—a very important part—in enabling us to ensure that future generations of New Zealand will have enough money to survive on. So that’s my lot. Thank you.

Thank you very much, Madam Deputy Speaker. I’m really delighted to be able to stand up and speak strongly in favour of the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill in this, its very first reading. At the beginning of my comments, I just want to give a little teaser: a little taster of some of the outstanding benefits that this tax bill is going to offer New Zealanders.

We’ve quite recently come past the time of year at which many of us do our tax returns, and those people who make charitable donations through the course of the year will be aware that, at the moment, we have quite a cumbersome process whereby you sort of have to save up your receipts from the charity that you gave the money to, you put them in an envelope somewhere on your desk, and at the end of the tax year you have to fill out a special separate form—you can do it only via hard copy—and you’ve got to mail the receipts in, stapled to that form, if you want to get your return.

💬 DEPUTY SPEAKER: I thank you for the advice, but could you not bring me into it.

I’m sorry, Madam Deputy Speaker. The people of New Zealand can do this—although I’ll leave it there—to get their tax return done and to get their return on their charitable donations. One of the things that this bill does is it makes that process far less cumbersome for New Zealanders. It will enable people to file their receipts from their charitable donations at the very time they make that donation, so that they don’t risk losing the forms and, therefore, probably won’t end up getting the benefit of that donation back. It then enables them, effectively, to get a credit against those donations in with their income tax return at the end of the year, effectively bringing the two processes together. That is one of the small benefits that this bill offers New Zealanders, and it really speaks to the broader theme of the bill, which is about making our tax system simpler for New Zealanders, easier to access, and making sure that we treat people more accurately through the tax system at all points.

We’ve heard a number of speakers in the debate so far speak not about that point but about a number of the other areas in which the bill simplifies and improves the tax system. That is why, to my mind—and echoing the comments of my colleague Deborah Russell—it’s deeply disappointing that the Opposition, at this point of the legislative process at least, is choosing to, quite unusually, vote against this tax bill despite all of those things in there which are actually going to improve our tax system. On this side of the House, we know that the Opposition takes a different view in respect of tax rates, but, by tradition, this is a bill in which members of the House from both sides engage in the process and engage in the issues but, in respect of confirming the tax rates for the year, which is simply about making the tax rates of this current tax year actually appropriated in a legal way, there is generally unanimity around the House.

I’d actually encourage some of the members on the other side of the House who have spoken against this bill because of the tax rates to actually reflect on the comments of the Hon Judith Collins, who, only a little bit earlier this year, in a New Zealand Herald story, said that she didn’t think that she would go ahead with tax cuts if it was up to her, that they were not a priority for her, and that—here I quote directly from the Hon Judith Collins, the previous Minister of Revenue under the previous National Government—“What they’re saying to me is, and certainly in my area in South Auckland … is we need infrastructure,”—that is, instead of tax cuts.

So when we hear the passionate arguments on the other side of the House against this bill, because of the current tax rates and in favour of those tax rates being reduced, that is the question: what is the trade off? What is the trade off? If those rates are to be cut, what are they going to trade off? Are they going to trade off infrastructure improvements? I don’t think so. Are they going to trade off increased investment in our education and health systems? Are they going to trade off those measures that Mr Bayly, in his speech, referred to as being good for low-income people or people who have families—those measures in the Families Package that are going to lift 64,000 kids out of poverty?

That’s the thing about the tax rates: we know, on this side of the House, that there is no free lunch—there is no free lunch. If we want to invest in the social and the economic infrastructure of our country, we need the revenue to do so. And I have not yet heard one speech from one of those members who are going to oppose this bill telling us how they will bridge that gap.

As I said, there are many, many positive measures in this bill, and I just want to touch on a couple more of those. The first one is that—and this is one of the things that I was asked about a great deal in a previous role as Labour’s revenue spokesperson—this bill moves us towards a position of New Zealanders not having to pay secondary tax through the course of the year. You could talk to tax experts, and they would say, “Well, actually, the secondary tax system actually all sort of washes up in the end. We have to tax people that way, but they can get a refund, and it all balances out.” But the reality is that those New Zealanders getting hit with the impost of a higher secondary tax rate through the year on low and medium incomes often really struggle.

What is happening through this bill is that we are harnessing the benefits of the Business Transformation process, we are harvesting the benefits of previous pieces of tax legislation which allow the IRD to collect more accurate and timely information, and we are giving the IRD the tools to more accurately tax people, who may be in two or three different jobs, at the right tax rate at the right time, so that they don’t have to apply a higher secondary tax rate to that taxpayer. That is going to make life so much easier to those people who are often struggling week to week, month to month to pay the bills from their pay. I think that is huge progress, and there are going to be many, many New Zealanders who are very pleased with that measure indeed.

The final measure I want to touch on is the way in which this bill makes further improvements to our KiwiSaver system. KiwiSaver has been an enormous success. Over $40 billion of savings are invested through KiwiSaver schemes in New Zealand—one of the signal successes of the previous Labour Government. What this bill does is pick up on a range of recommendations to improve our KiwiSaver regime, fundamentally, to give people more options to feed into KiwiSaver. So we introduced two new rates of 6 percent and 10 percent. I think one of the speakers opposite previously made the point that jumping from 4 percent to 8 percent was potentially quite a high bar for people who might want to consider increasing their savings. By providing that 6 percent option, I’m quite confident we’re going to see more Kiwis in KiwiSaver and more Kiwis saving more through KiwiSaver, and that has got to be a good thing.

I’m very pleased this bill is coming to the Finance and Expenditure Committee. It’s a very hard-working and talented committee, with members from all sides of the House, and we’ll give this bill the rigour that it deserves. Tax is a complicated area. We need to look at it closely, we need to listen to the advice of officials, and we need to listen to the feedback that we receive from the public through the submissions process, and I’m sure that we’ll all do an assiduous job of that and make sure that this bill returns to the House in as good a shape as possible.

A message I would just like to leave for those members opposite is to say this: that, actually, what they’re doing in voting against this bill at this stage in the House today is a very unusual thing to do—it’s a very unusual thing to do. If they want to associate themselves with the good things in this bill that are going to improve our tax system, that are going to make things easier for New Zealand taxpayers and better for New Zealand taxpayers, that are going to ensure that people pay their tax accurately—if they want to associate themselves with those good measures—they can’t have it both ways. They can’t vote against it and then also take the political benefit of supporting those measures. So I think, between now and the further readings of this bill, I would encourage those members—and Mr Goldsmith, who led off the debate as the Opposition revenue spokesperson—to just reflect on that a little bit, and I would encourage them to engage in this bill and the measures within it in a constructive way so that we can improve the tax system and make it as effective as possible for all New Zealanders, which is what this bill will do, and I commend it to the House. Thank you.

Thank you, Madam Deputy Speaker. I too am pleased to contribute to this debate. I’ll pick up where Mr Wood left off and talk a little bit more about the KiwiSaver, because that is a part of the bill which has given greater efficiency and greater access to more people to be able to save for their retirement. That previously those over 65 were not able to participate seemed to me to be slightly an ageist proposition, and I’m pleased to see that those over 65 can now join KiwiSaver.

Also, the holiday break is now no longer a five year minimum; it’s a one year minimum—that’s also a good thing. People’s positions change. They may not have been able to afford to contribute for a short period and therefore take a holiday, but to be locked into that holiday for five years does seem excessive, so I’m pleased to see that break is brought back to a one year minimum.

The 6 percent to 10 percent are interesting changes—remembering, of course, that we’ve always been able to add or put in lump sum payments. But it is always useful to be able to increase the flexibility around KiwiSaver and the contributions that are made.

One thing I would like to challenge or ask the Government to consider—the question is: are we having enough people contribute into KiwiSaver? Are we getting everyone in that should be in to KiwiSaver? We know that not everyone is in KiwiSaver, and perhaps those that can least afford to contribute and save are not in KiwiSaver. So there’s a little challenge for the Government of the day to think about.

Next point I’d like to touch on is the real time—or “near - real time”, I think Grant Robertson mentioned—measurement of tax liability. That’s a good thing—especially the fact that 750,000-odd people will no longer need to file a return—because, of course, the information’s already there. If you’re a salary or a wage earner and you’ve got some simple, straightforward investments, there is really no need for one to file a return, because the information’s already coming in to the IRD from other sources—from your employer or from the bank or the broker that’s declaring and showing through the other channels that are feeding into IRD exactly how much an individual is earning over a month or six months. And, again, there’s flexibility in this bill to allow provisional taxpayers to change the mode of provisional tax payments. And that’s also a good thing.

I know that IRD are turning their mind to it, but the challenge is to use this technology to catch up with the few people that are not paying their tax. Particularly, I’m talking about child support payments. I’m talking about fathers who go from job to job and, when they do get caught up by the IRD, they move on to another job simply to avoid their obligations to their kids, who are being looked after by, usually, mum—and certainly not them. So I know technology is changing within IRD. I know that that information is now available because we’ve got this bill which tells me that it is available from sources other than the employee. So the challenge is to make haste—I challenge the department and the Minister to make haste in rectifying what is a challenge for kids that are not being supported and could be supported by their fathers who choose to avoid their obligations.

The next point I’d like to touch on is Mr Wood talked about bridging the gap—how are we to bridge the gap about building infrastructure and social and physical infrastructure? We’ve got to tax, apparently—apparently, the only way is to tax. Well, I’ve got the answer, Mr Wood, and that is to prioritise properly—that is to prioritise properly. Do not waste—do not pour it up against the wall—when it comes to taxpayer funds. I’m talking, of course, about the priority that’s being given to tertiary students, I’m talking about the priority that’s being given to Shane Jones’ slush fund, and I’m talking about the priority that’s being given to Winston Peters’ foreign affairs budget. That’s how you bridge the gap. That’s how you do not need to increase—or maintain, I should say—and cancel the tax cuts that were proposed and put in this legislation by the previous National Government.

Remember, and I think we’ve already heard in this House around the fuel tax—about $500, $700 per family. It doesn’t really matter what the number is, but I think we all have agreed that that is a regressive tax. That’s a tax that hurts those who can least afford it. It affects them the most. It’s a fixed number, essentially, of a fixed fee, and we’ve agreed that it’s a regressive tax.

Now what this Government has done is to cancel a progressive tax cut. That is, the same sort of amount—about $1,060—that was going to go to any family that earned over $52,000, and a little bit less for those who earned less. But, essentially, it was a universal payment to workers. That is the opposite of a regressive tax—a fixed, lump-sum tax. It is called a progressive tax cut because it benefits—it benefits—those who can least afford it out there, because it means more to them than it does to someone on a very high income. It is exactly the opposite of the regressive tax that we’re talking about when we’re talking about the regional fuel tax.

So it is a shame and it is a sad day that we are continuing with the same old, same old fiscal drag tax rates and not taking the opportunity to introduce a progressive tax cut that affects poor people the most. It is disappointing to me that that is being revoked, and that is the fundamental reason—the fundamental reason—why we are opposing this bill. Despite the other good stuff that’s in there—the stuff that was introduced and kicked off by this Government—the fundamental reason is because the tax cut opportunity—a progressive tax cut that affects the people who need it the most—was rejected by this Government.

I understand this is a split call.

Thank you, Madam Assistant Speaker. I was just wanting to start off on the snappily titled Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill by responding to some of the comments from the previous speaker, the member for the Wairarapa, talking about regressive taxes like petrol taxes, and so on and so forth. I think I must have missed his speech in the House as a backbench MP in a National-led Government when the National Government put up our goods and services tax by 2.5 percent—which is also a regressive tax—and also put up petrol tax. I completely missed his speeches decrying those tax increases at that time—totally missed it. Maybe I wasn’t in the House that day, but as it turns out, it’s good to hear that he’s standing up for the little person. The next time that National is in Government, I look forward to him making absolutely sure that National does not ever again put up petrol taxes or GST, as it did in its last term of office.

But I just wanted to turn my attention to three key aspects of this bill, the first being the KiwiSaver changes, the second being around simplification, and the third being around the 2018-19 tax rates. One of the things that I’m most pleased about in this particular bill are the changes to KiwiSaver. There are two ones that I want to draw attention to. The first is scrapping the rule for people over the age of 60 that says that they have to be in the scheme for five years before they can draw down their money. I think getting rid of that rule and saying that once you hit retirement age you’re able to start drawing that down increases the value of the scheme and increases reasons for people to be in the scheme.

I also think, in particular, that having the additional 6 and 10 percent contribution rates added in makes the scheme far more flexible and far more attractive and, again, adds to that value and increases the chances that people will choose to be in the scheme—in addition to the existing 3, 4, and 8 percent rates. I know that those are recommendations of the Retirement Commissioner at the time, Diane Maxwell, and so I think there’s a solid evidence base for that. So I think we’re continuing to make improvements to KiwiSaver. I do think it has demonstrated its value to New Zealand, and I think that these improvements will do the same thing.

I also just wanted to finish by saying that the rules around simplification—

ASSISTANT SPEAKER (Poto Williams): No, I apologise to the member. We are having some technical issues with the clocks, but I can assure you, you’ve got two minutes and 16 seconds.

Yeah, I didn’t—

ASSISTANT SPEAKER (Poto Williams): We are taking care of it.

Well, in that case, let me just—[Interruption] Ha, ha! I can see that the members opposite are absolutely glued to every word. So around simplification, I think the technology that has been made available to us as a result of the New Zealand IRD’s Business Transformation programme does wonders for New Zealanders’ ability to interact or, in fact, not have to interact with the system in this case—particularly the ability of small and medium sized businesses to have their affairs simplified. For individual taxpayers, there will be 3 million taxpayers whose obligations will be automatically calculated, and any differential between what they’ve paid and what they’re obligated to pay will also be automatically managed. I think that that is fantastic because it removes the need for people to have to fill out a personal tax return in order to get a refund. We think that’ll benefit about 750,000 people, which I think is fantastic.

I think it will ensure that people have a much more pleasant experience, that all of that money that is currently available for refund that’s not getting drawn down will then be drawn down and people will actually get the money that they deserve. So I just kind of stand in admiration of the New Zealand tax system for being able to get to this point now with people that they’re able to interact in that way.

Finally—Madam Assistant Speaker, is that—

ASSISTANT SPEAKER (Poto Williams): Yeah, it’s correct.

OK. I just wanted to finish by saying that the tax rates for the next year remain unchanged and that I think that is a good thing because it means that we can fund the Families Package, it means that we can fund the Provincial Growth Fund, the Green Investment Fund, conservation, health, education, infrastructure, transport—all of the things that the previous Government left unfunded and made wild sorts of things saying that they were going to do all that stuff, but without funding it. This is a fiscally responsible package that ensures that we’ve actually got the revenue that we need to deliver—

I thank the member. I’m sorry; your time has expired.

Thank you, Madam Assistant Speaker. It’s a pleasure to be taking a call this afternoon in the first reading of the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. I will be joining my colleagues in voting against the bill this afternoon, and that’s, frankly, despite there being some good parts to the bill.

I just wanted to reflect on some comments made earlier this afternoon by Deborah Russell and also by Michael Wood. Deborah Russell’s contention was that because there’s some good things in the bill, National should vote for it—despite the fact that we want to lower income taxes, not raise them, we should vote for this bill—and then we should try and fix it up in the committee of the whole House. Well, actually, I have to tell Government members that it’s their responsibility to draft legislation. It’s their responsibility to talk to MPs across the House to gain their support and try and get other parties’ support. They didn’t do that with this bill. They didn’t come to us before they brought this bill to the House to try and gain our support. If they’d done that, we would have given them the advice to go off, split it into two bills, bring the KiwiSaver stuff as a separate bill—which we support—and bring the taxation rates as a separate bill, which we would have opposed. They didn’t do that, and for that reason we have to vote against this bill.

I just want to reflect on some of the good things in the bill, though, because, as I said, there are some good things. I’ve said in this House before that KiwiSaver is fantastic. I’m a huge supporter of KiwiSaver. It’s the reason I was able to buy my first house. Since I started work, I’ve put 8 percent of my income into KiwiSaver and that enabled my wife and myself to buy our first home, which I’m very grateful for. What the bill is going to do is expand that out to have more contribution rates, because, at the moment, as it stands, there’s a 3 percent rate, a 4 percent rate, and an 8 percent rate. There’s a lot of advice out there that the gap between the 4 percent rate and the 8 percent rate is too wide. There are a lot of people out there who’d like to be able to contribute a number in between that, but they’ve been required to put in a lesser amount, generally, which is the 4 percent, because they can’t quite afford that 8 percent. So I support that 6 percent rate being brought in.

The second rate that’s being brought in is a 10 percent rate, and I particularly support that because there’s a lot of people out there, particularly who have worked for a long time, who are able to contribute a bit more, and so that’s very positive.

But I do need to now come to the parts of the bill that we don’t support, and that’s in relation to the taxation rates that are contained in the bill. Just a bit of history on this: when we came into Government nine or 10 years ago, the country was deep in recession, the books were pretty shot, we were sliding into deficit, and, as a result, we had to take on a lot of debt to keep paying for core services. That resulted in blowing out debt, and then we were hit by the Canterbury earthquakes, which resulted in even more debt. So we set about growing the economy again, investing in the things that would grow the economy: investing in innovation, investing in education, investing in infrastructure, and that worked. We got growth back on track. We got unemployment down. We created 10,000 jobs every month. In my region of Rangitata, midland South Canterbury, alone, we’ve got unemployment down to 2 percent. That’s incredibly positive, and, frankly, it’s not down to the Government that that happened; it’s down to the people out there in the economy who made that happen: people working hard, people in their businesses, people on their farms, people investing in their businesses, growing the local economies—that’s how the economy succeeded, and they deserve some reward.

So, at the last Budget, in Budget 2017, this Government set out to reward those people. We gave them a tax cut. We gave the average worker a tax cut of $1,060 every year, aimed at the lower income earners—aimed at the lower income earners. This Government, this current Government, all of last year set about arguing for higher taxes—arguing for higher income taxes; arguing, funnily enough, for water taxes, which would have cost my region about $50 million a year. Now, fortunately, they lost that argument, but they have, unfortunately, gone on to legislate for higher taxes. This bill sets those taxation rates in place for the coming year, and we oppose it. Thank you, Madam Assistant Speaker.

I understand this is a split call.

Madam Assistant Speaker, there have been a range of emotions during this heated debate this afternoon. My colleague Deborah Russell was saddened by the position that the Opposition is taking; Michael Wood, disappointed. But I tend to disagree with them, and I’m sorry to do that to my colleagues but I actually think this is a good day for the Parliament. We are following through with an election promise that we made to not continue the tax cuts that the National Party made in their previous term of Government, to ensure that we had the revenue to invest in things like transport, like housing, like education, like infrastructure, because we knew that the public of New Zealand desperately was in need of support in those areas.

We’ve had members of the Opposition this afternoon decry things that have come about from this coalition Government, like the winter energy payment. But, as Mr McKelvie said, if he’s had plus-65s in his office talking about KiwiSaver, then I challenge them to have those over-65s in their offices and say that they don’t want the winter energy payment—that over-65s don’t feel the need for a bit of support during those winter months to make sure that they can keep their homes safe. So whether they’re in Hastings, whether they’re in Huntly, whether they’re in Martin, whether they’re in Kerikeri, whether they’re in Timaru or Masterton, those members across the hall at the moment, they can go back to their communities and say, “We don’t support the winter energy payment.” to those superannuitants who desperately need help to do a pretty basic thing, which we have at this House here, and that is to keep their houses warm. So that’s the challenge that I put across to other members of the House if they don’t support this piece of legislation.

They don’t support the fact that we went out there and made a promise to the New Zealand public that we wouldn’t continue with National’s tax cuts—which, to put Mr Falloon right, was targeted at high-income earners to make them better off. So, just to fact-check and bring this debate back to reality, those tax cuts, that we’re using to make sure that we’ve got the revenue to invest in all of those things that I’ve suggested, were to make sure that the National Party had a promise to high-income earners at election time to go out there and try and win an election—which, thankfully, they didn’t.

There are some even better things in this piece of legislation, and they are tweaks to KiwiSaver settings. Many members, I have talked to them about the changes to the contribution rates: we’re adding 6 and 10 percent. One thing—which is a small thing which I hope will make a big difference to the decisions that some KiwiSaver policy holders have now—is changing a small thing called a “contributions holiday” to a “saving suspension”. A contributions holiday sounds like something that you want to do, but I think about 42 percent of New Zealanders who are in KiwiSaver at the moment are on a contributions holiday. Mr Scott did put out a challenge to us, or put out the issue, about how do we get more people in KiwiSaver. The subsequent issue, also, is how do we get more people who are currently in KiwiSaver to put money into their accounts and actively manage it, to make sure that when they do turn 65 that, as well as the superannuation, they have enough money to get through retirement.

These are good changes in and around the KiwiSaver settings. I want to give credit to Diane Maxwell and her team at the Commission for Financial Capability, because those changes in this bill pretty much came out of a review that the commission did back in 2016. A point that I would like to make is that those recommendations came in in late 2016, and sat and gathered dust in the final year of the previous Government. So I’m happy that we’ve got this piece of legislation that follows through on some good advice from the commission that will make KiwiSaver settings better for New Zealanders and also follows up on our promise to make sure we’re investing in health, housing, education, transport, and other infrastructure projects that the previous Government wouldn’t have been able to afford if it continued on with its tax cuts for the rich.

Just before I call the honourable member, I just want to remind people—I’m sorry if you’re being distracted by the malfunctioning time clocks. Rest assured that my clock is working perfectly well at the desk here, and I will give members the required time bell.

Madam Assistant Speaker, it’s no problem. As you know, I’m one of Parliament’s old-timers, and I can remember giving speeches before we had any such technology in this House, and we got along just fine.

I rise on behalf of the ACT Party in support of this bill. I had planned to oppose it but I listened to the very wise and apposite speech by Michael Wood—not something I say every day, I must tell you—and I decided he had a point. This is not a bad bill. The modernisation that is going on—I wouldn’t quite agree with James Shaw that he stands proudly in awe of the New Zealand tax system; who else could really say that but James Shaw? But it at least starts to bring the IRD’s administration of tax up to where the financial sector, the private sector banking system, was maybe about a decade ago—that things happen efficiently and electronically, so one needn’t pay secondary tax, so one needn’t keep those pesky receipts.

And that was another fine revelation from Michael Wood. Who knew that a Labour MP actually voluntarily gives to charity without it being prised out of their cold, dead hands by the IRD? It is a good thing that we’ll be able to pay less tax when we give to charity without having to keep all those pesky receipts that accumulate throughout the year. So these are positive things and reason to vote this bill through so that my fellow Finance and Expenditure Committee members and I can scrutinise the bill, have a look at it, and see where it might be improved.

I follow on from my friend and neighbour the Hon Paul Goldsmith in pointing out one area where this bill could be improved—that ACT’s future support of this bill will depend upon being changed—and that is clause 3 of this bill, the clause that sets out the annual tax rates; unchanged, again. Let’s give a little bit of history. These tax rates and tax brackets have not been changed for almost a decade now, since 2010. Once again, exactly the same tax rates, and the working people of New Zealand will find that, through no fault of their own, inflation has pushed their incomes into higher tax brackets. They can’t purchase more, but the same purchasing power that they used to earn 10 years ago is now taxed at a higher rate, thanks to fiscal drift, or fiscal creep, and they find themselves increasingly in the top tax bracket. Nearly half of New Zealanders pushed into the top tax bracket—over $70,000 paying 33 cents in the dollar—because nobody, including the previous National-led Government despite the protestations of its principal partner the ACT Party, has bothered to adjust the tax bracket for 10 long years.

Actually, the ACT Party has a solution to this. We heard from members opposite that it’s great that we are taxing, because we can fund a whole lot of things—some of which are somewhat dubious from a public policy perspective, but, nevertheless, many things can be funded with these tax rates. Actually, we could fund all of the things that the Government wants to spend—and, in some cases, waste—money on and significant tax cuts. ACT showed this last year, that we could have a beautiful three-rate tax system of 10 cents in the dollar—that’s down from 10.5 cents—up to $14,000, 15 cents in the dollar all the way up to $48,000, and 25 cents in the dollar after that. What would be the fiscal impact of that change? It would fit easily within the $20 billion - odd of surpluses that these tax rates will give the Government over the next four years. We could have tax rates where nobody would pay more than a quarter of their income in tax, simply by giving back the Government surplus to the people who earned it.

So just think about it, fellows on the Government benches. I realise most of the members present are on the back benches and don’t have a huge amount of influence over these things but, nevertheless, maybe speak to Grant Robertson, the Minister of Finance, and ask him—

💬 Hon David Parker: More influence than you.

And here’s David Parker. He can affect things. David Parker—he’s got some influence. Think about it, David Parker. Let’s try having a top tax rate of 25 cents, which can be afforded within the surpluses put forward by Treasury, under the tax rates in this bill, and if the Government is prepared to give real tax cuts, real tax relief, let the people who earned the money keep it—

I apologise to the member. Your time has expired. Thank you.

The mere fact that this bill is called the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill in itself highlights the point that, actually, there should be two bills. There should be two bills here, because part of this bill is fantastic, and part of it we, philosophically, on this side of the House, object to, and that is our right to do so. The good parts of this bill are changes that help taxpayers. They are changes that reduce compliance costs and the amount of time taken to complete taxation returns; they automate tax refunds and—something that I find particularly pleasing—they cut out third parties which at the moment have set up business models based simply on what IRD will soon be able to do. So agents that use technology to give you a tax refund but actually take fees for doing so—many of those will be taken out of business in the simplest form.

I also acknowledge the changes to the donations legislation. This is modernising the environment—no different to what members of this House actually do with expense claims. They’re lodged, photographed, and sent in, and they’re all done appropriately. I also think the tailored taxation codes are going to make a fundamental difference to how people deal with taxation when they have multiple income streams, or when their taxation position changes.

There is also an ability for proactive changing of the tax codes to represent people’s particular circumstances, and, importantly, the Retirement Commissioner’s views in 2000 and 2016 have been brought into this by raising the possible contribution rates and the fact that 65-year-old people can enter KiwiSaver. I also agree with all members of the House that the savings suspension in terms of its minimal time—reduced from five years to one—and its title is appropriate.

But I do really want to go on to what Deborah Russell said right at the beginning of her contribution to this House: that this was a shame. We are vexed by her objection, because that very Government, with this very Prime Minister we have now, promised no new taxes—no new taxes—but on 1 July, what did we have? Regional fuel tax implemented in Auckland. So of course we object on this side of the House, because what you said you were going to do, you’re not actually doing.

ASSISTANT SPEAKER (Poto Williams): Not me.

Sorry. What the other side of the House, or the Government, said it was going to do, it is not actually doing. It also removed legitimate tax cuts that were made by this side of the House when they were in power. They went through the Parliament, they were legitimised, and then from 1 July they were meant to come in. And despite what the honourable member Kris Faafoi said, most of our tax cuts were actually aimed at lower-income people. It wasn’t all for upper-income people; it was actually specifically targeted.

I also want to comment on what some of the expenses are and the choices that this current Government have made: $2.8 billion to students, not one extra student enrolled; $3 billion to the Shane Jones fund, and it’s going to be really difficult to spend that level of money; and a billion dollars to foreign affairs.

But I particularly want to comment because this is about tax rules and tax amounts for the coming year. From 1 July, Sunday, people in Auckland are paying 11.5 cents a litre more for their fuel. This Government has also signalled they will pay another 12 cents a litre for fuel over the next three years, and members on the other side—members of the current Government—said, “We needed to do all that because we’ve got to fund everything.” If that’s the case, why did you strip $5 billion—

ASSISTANT SPEAKER (Poto Williams): Order!

Why did the Government—

ASSISTANT SPEAKER (Poto Williams): Thank you.

—strip $5 billion out of the State highway network across New Zealand? Places not my own are going to pay more and get nothing. It’s outrageous, and you wonder why we on this side oppose this bill—because it’s all being put together in things we feel strongly about.

We have a philosophy in the National Party that people are better able to spend their money than any Government. That’s why we brought in tax cuts. And, actually, those tax cuts were cancelled. I also remind members of the Government benches, as you look at this new piece of legislation, remember, you talk about tax promises, or you talk about election—sorry, I apologise Madam Assistant Chair.

ASSISTANT SPEAKER (Poto Williams): Thank you.

The Government talks about election promises, but, actually, the Government forgot about one fundamental promise it made in that election campaign: there would be no new taxes. And from 1 July, that fundamental promise has been breached and broken, and that is why this side of the House is so upset at this piece of legislation. Thank you, Madam Assistant Speaker.

Thank you for the opportunity to be the final speaker in this debate on the first reading of the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. I am a member of the Finance and Expenditure Committee, and I look forward, as a member of that committee, to receiving this bill shortly.

I wanted to talk about a couple of things, because a lot has been covered already. We know that the intent of this is to modernise our tax system and that earlier in the year we passed the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Act 2018, and this bill is in addition to that. I wanted to focus on two parts in particular in here, where we talk about remedial matters that need to be addressed to take into consideration and incorporate the changes we’re making in the Families Package, and in particular with the Best Start payment. I’m really proud that on 1 July the Best Start payment has now kicked in for those families who have babies born after 1 July.

Now, there is a new clause in this bill which will deal with that new payment that we’ve got, and ensure that the policy which we intended, which was that from the time that paid parental leave expires, the Best Start payment will kick in—and that’s another thing that I’m very proud of, that paid parental leave has increased now to 22 weeks, as well. So those remedial change matters are dealt with at clauses 259 through to about 264.

The other part I want to talk about is the other end of life, where we are focusing on KiwiSaver, and that’s saving for our retirement. I’m very proud of the changes that we are incorporating into this bill to enhance the KiwiSaver scheme that we have, and those come as a result of the review that was done by the Retirement Commissioner, and that most recent review in 2016. Some of those changes have been summarised, but we’re introducing the additional KiwiSaver employee contribution rates of 6 and 10 percent; reducing the minimum contributions holiday period from five years to one year—and, actually, as a member earlier said, not referring to it as a contributions holiday but more a saving suspension; allowing over-65-year-olds to opt in to KiwiSaver, acknowledging that many of our over-65s are in fact still working as well; and removing the five-year lock-in period, which currently affects those who join KiwiSaver between the ages of 60 and 65.

I only intend to take a short call on this draft legislation. I commend this bill to the House, and I look forward to looking at it further at our select committee.