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

I move, That the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill be now read a second time.

This omnibus bill simplifies and modernises New Zealand’s tax system, in particular for individual taxpayers. I’m therefore very grateful for the significant contribution made by the Finance and Expenditure Committee (FEC). The committee has made a number of worthwhile enhancements to the clarity and practicality of the bill.

When I introduced the bill in June last year, I talked in detail about the measures to simplify tax obligations for individual payers, especially the year-end income tax filing. In the quest to simplify tax requirements and processes, it is crucial to uphold the integrity of the tax system. I’ll therefore take this opportunity to talk about enhancements to the Tax Administration Act regarding the Inland Revenue Department’s ability to collect, use, and disclose information, which I’m pleased have been carefully considered by the Finance and Expenditure Committee.

Information collection and use: now, information is critical for the efficiency and integrity of the tax system. As part of providing better, more efficient services, there are occasions when prudent information-sharing is desirable. The public expects Government agencies to serve them efficiently and with care, particularly those agencies that manage sensitive and personal information. Inland revenue already shares information with other agencies, and these arrangements generally work well. The bill modernises and clarifies the rules to better provide for confidentiality and sharing in the future and more clearly balances the trade-offs associated with information sharing. These proposals will make the information-sharing rules more efficient and transparent and better focus the confidentiality rules to clearly protect taxpayer information and more clearly set out any expectations.

The bill also has two important improvements on how inland revenue collects information. Firstly, it will clarify the legislation that information collected for one inland revenue purpose can be used for that department’s other functions. This means that people won’t have to provide the same information more than once to different parts of inland revenue.

💬 Angie Warren-Clark: Brilliant.

Brilliant—easy. Secondly, it provides a regulation-making power for repeat collection of third-party data sets. While inland revenue can currently collect this information, the new rules will provide greater transparency where collection is done on a regular basis. The changes to how inland revenue manages information strike the right balance between careful stewardship of taxpayers’ confidential information and improved customer service.

As the Minister for Small Business, I am pleased that the bill also proposes a new type of binding ruling called “a short-process ruling”. The new type of ruling is designed to be more accessible to small to medium sized businesses and individuals. This initiative responds to concerns raised by the small to medium enterprises that the current binding rulings regime was inaccessible and expensive. Binding rulings provide taxpayers with certainty about how inland revenue will apply the law to their specific circumstances. Currently, binding rulings can be prohibitive to many smaller sized entities due to time, cost, and expertise required to apply for one. I should note that binding rulings are, as mentioned, binding on inland revenue, but they are not binding on the taxpayer.

The ability for a wider range of taxpayers to obtain binding ruling advice from inland revenue will help more taxpayers get their tax positions right the first time. Therefore, the bill proposes to extend the ability to obtain binding rulings where the tax at stake is no more than $1 million to taxpayers who are in a practice who are excluded from this currently because of the complexity of the process and the fees charged. Well done, FEC. FEC has recommended increasing the turnover threshold for entities that can seek short-process binding rulings from $5 million to $20 million. This amendment will open up this regime to many more medium-sized entities. The process for applying for a short-process ruling will be simpler. Applicants won’t have to provide draft rulings or state the taxation law and propositions of law for which the ruling is sought.

Let me talk about KiwiSaver. The Government is keen to encourage people to save for their retirement, so I’m delighted to put forward some improvements to KiwiSaver that were based on the Retirement Commissioner’s December 2016 review of retirement income policies. FEC has generally supported the proposed changes to the KiwiSaver regime, which I will go over briefly. Two contribution rates of 6 percent and 10 percent will be added to give savers more flexibility and control over their KiwiSaver so they better adapt their level of savings to their personal circumstances.

We’re going to open KiwiSaver up to over-65-year-olds. The Government recognises there is no reason to limit access to a low-cost investment vehicle to those under 65. The bill removes the lock-in period for KiwiSaver, which currently affects members who joined KiwiSaver between the ages of 60 and 65. This lock-in period was introduced to prevent people in the 60 to 65 age bracket from joining KiwiSaver to receive the $1,000 kick-start payment and then withdrawing their funds soon after. Members may recall that the kick-start was repealed in Budget 2015, and this bill remedies an oversight at the time concerning the impact of the repeal of the kick-start payment. So there just is no sense to have the lock-in period in place. Without this kick-start, it makes sense to enable savers to withdraw their funds when they reach the New Zealand superannuation age regardless of how long they have been a KiwiSaver member.

We also propose changing the name of “contributions holiday” to “savings suspension”.

💬 Hon Phil Twyford: Good move.

Good move—thank you. This is not just semantics. It may seem it is, but it is not. This name change more accurately describes what actually happens when a member takes a break from contributing to their KiwiSaver account. The savings suspension period will also reduce from five years to one year. It is not a holiday; it is a suspension from saving, and it should be called what it actually is.

💬 Hon Phil Twyford: Exactly.

Yes.

💬 Hon Kris Faafoi: Good move.

Thank you—thank you. Thank you, that’s my legacy. FEC agreed that taking a five-year contributions holiday can have a significant impact on members’ long-term savings. For many members, five years is longer than necessary for their financial position to improve to a point where they could resume contributing to KiwiSaver, and the one thing we know about KiwiSaver is that it will make retirement a lot more comfortable for every single Kiwi. What we also know is the sooner that Kiwis can contribute, the better off they will be in the long term.

FEC has considered these proposals, and they agree that they make sense if we want to encourage people to save more for their retirement—well done, FEC, again. When contributing to the KiwiSaver proposals, FEC proposed a further amendment to allow over-60s who join the regime before 1 July 2019, and are subject to a transitional lock-in period, to exit the lock-in period and make withdrawals upon reaching 65 years of age. I’m happy to accept this additional proposal into the bill.

There are a couple of other measures. The bill also adds 13 charities to the list of donee organisations with overseas purposes to Schedule 32 of the Income Tax Act 2007. It allows taxpayers to switch to the accounting income method from either the standard or GST ratio methods at any time during the income year. It recalibrates the use-of-money interest rule so interest on late payments is applied more fairly to taxpayers. It merges the adverse events Schedule intended for farmers struggling with an adverse localised event with the main income equalisation scheme. It proposes a new tax treatment to support bloodstock investment in New Zealand. It closes a loophole in the Goods and Services Tax Act as it relates to not-for-profits, and it implements a number of minor but important remedial changes to a number of Acts, including the Income Tax Act 2005, the Tax Administration Act 1994, and the KiwiSaver Act. Finally, the bill also sets the annual rates of income tax for the 2018-19 tax year, with no change from last year.

In conclusion, I would like to advise that FEC have removed the proposals that would allow inland revenue to make small changes to tax law to correct legislative anomalies. These changes are really important to get right, and they have been redrafted since the introduction of the bill. In order to allow full consultation with the Legislation Design and Advisory Committee and the public on the redrafted proposals, I intend to add them to the next taxation bill.

I’m very pleased to commend the bill to the House, and I look forward to its enactment. Thank you.

Members, before I call the next speaker, I just need to slightly correct the wording of the motion moved by the Minister. The motion is that the bill be now read a second time. So the question is that the motion be agreed to.

Thank you, Mr Assistant Speaker. Very good. It’s nice to be following the Minister of Revenue. I’ve got to say, it’s a slimmed-down version of the Minister. Obviously, he had a very nice holiday. It’s good to be reporting back on this taxation—it’s a very long title. It’s very noisy over the other side there, too. It’s the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill, second reading.

Of course, there is much that is good about this piece of legislation, this bill, and I’m going to talk about it, but, of course, we cannot support it because it continues to enshrine the situation where New Zealanders are subject to paying too much personal tax. The key issue is it sets the tax rate for the 2018-19 year, and that’s the bit we do not like.

I was listening to some of the speakers before in the Prime Minister’s debate, going on about, you know, the new tax arrangements that are going to come in. Someone quoted $385 that’s going to benefit New Zealanders. Well, if this bill had encapsulated the stuff that the National Party had proposed, this would’ve meant that, on average, every New Zealander would’ve benefited by a thousand bucks—just over a thousand bucks—not that miserable $385 someone spoke of.

And when it comes to our superannuitants, they love talking about that winter payment, which, in my view, was slightly misleading, because the view was that everyone was going to get eight hundred bucks. Well, actually, it wasn’t, because the way it was calculated, there was only, I think, two and a half months, and so, on average, it was much less than 300 bucks. So for superannuitants, they were disadvantaged even worse. So this bill sets the rates for 2018-19, and it’s not right.

That brings us to the point about capital gains tax, which I just alluded to briefly before. That’s going to be another situation where we’re going to see this Government—this Labour - New Zealand First Government—piling on the taxes on those hard-working New Zealanders. It’s wrong.

Anyway—anyway, let’s talk about the good stuff. It was nice that the Finance and Expenditure Committee worked so collegially last year to bring about some of these changes, which, I must admit, did have their initial genesis under our Government, but it’s nice to see it coming to fruition, like all tax bills. I think the first thing is the issue round information sharing. Many of us have experienced the frustrations of having to provide your information to the tax department and to other Government departments on multiple occasions. One of the things about this bill, as the Minister spoke about, is the sharing of information amongst other parts of IRD, and also there’s some special arrangements with other departments. I think that’s a good thing, because we need a tax system that serves the people, not the other way round, and it’s part of the Business Transformation programme, the big IRD tax programme that’s been under way for, what, three years, 3½ years—a billion-dollar project. I think this is all about making it much easier for New Zealand and New Zealanders to go about doing their stuff.

I think, on that very issue, there is an issue about filing of returns, and this bill actually helps with that in terms of how people have to file their returns. So the issue is—and it’s under clause 21—that where you have reportable income—and “reportable” is defined as wages, salaries, or interest. If that is a pretty simple arrangement, and you don’t have it with a whole lot of other income sources, then, effectively, what’s going to happen under these new arrangements is that the automatic filing of that—the tax department will now move to a situation where they will assess your appropriate tax rate. We have many instances of where that’s wrong and, certainly, the issue of secondary tax, which we know is the bane of most people’s lives, particularly those with two jobs, is a real disincentive. So some of the streamlining of those processes of the IRD is a good thing and, I think, to be welcomed. As the IRD roll out their programme, this will come to the fore and we’ll see much of the benefit of that.

The other thing is the issue round tax write-offs, and, in many cases, people do file returns and they have a small margin of error in them. We talked about this extensively in the committee. So what we’ve said, for those with that reportable income, the definition I talked about before, if you have an error, or a benefit of some sense of less than $50, then the IRD will automatically pay that back to you or write off that debt. On the 2017 estimate that the IRD did for us, that’s going to benefit roughly 580,000 people. That is a huge gain, and part of that’s in making the system so much simpler.

There’s also the issue of correcting and finalising information on tax returns. Clause 21 also allows people to correct information provided to the IRD, and this is an issue we talked about—the threshold. At what point can you say, “I made a legitimate mistake, and I shouldn’t be penalised.”, and at what point should you be subject to a framework where you should incur penalties? One of the changes was that we increased that threshold in the committee and moved it from 1,000 to 10,000, or less than 2 percent of the tax or the GST amount of your total earning of that in the course of that year. So we increased that threshold, and I think that’s a very good thing. We also put in place this issue round no interest or penalties to apply to those with reportable income. So these are all good measures.

The other aspect I think, as a committee, we all felt strongly about is the issue around trying to get binding determinations from the IRD. Many of us have—at a personal level, but, certainly, at a business level—issues where you do not know whether they are tax deductible or not. So we wanted to facilitate. We wanted to promote that system so that people could proactively go to the tax department, have that conversation with them, and get a binding ruling. I think the outcome of that has been a good one in that what we did—the original proposition when the bill came to the committee was that it had a threshold of $5 million or a total tax bill of $1 million. So if you were under those thresholds, you could go and get a binding ruling.

We talked about it quite extensively—and I see the officials here—and so we increased the threshold where if your turnover was under $20 million, rather than under $5 million, as well as your tax liability being less than $1 million, then you could access and get a binding ruling from the IRD. That is a good thing—that is a very good thing.

The other thing that we talked about was the issue round ACC payments. We had a number of submitters come and see us and talk about the issue of where they had had an injury, they had got some treatment, and then, in many cases, the ACC, for process issues or as a result of other things that had happened, actually gave them money in the next financial year which related back to the previous financial year. Of course that meant, for all intents and purposes, that they technically hadn’t declared income—although they probably didn’t know about it—but also it just created a tax obligation which became very difficult. So the agreement in the bill for a schedule of payments such as that paid by ACC to these people that are indisposed was that any of these backdated payments from ACC could be treated in an easier manner and much more efficiently so it didn’t disadvantage those that were indisposed.

I think those are all good things. The other thing I think—well, actually, I’m coming to an end, but I know my colleague’s going to talk about the bloodstock issues, and also the KiwiSaver and the charitable status. These are other issues that were important in this bill, and I’d like to thank the committee, but I think we’ve made some progress towards improving the tax situation.

Tēnā koe e Te Māngai o Te Whare. I’m delighted to speak on this excellent bill, the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. As I’ve said to other people, when I’m talking about tax, I’m in my happy place.

There are a number of aspects of this bill that I would like to talk about; we’ll see how the time goes. The first aspect I would like to talk about is just this phrase: the “Annual Rates for 2018-19” part of the title. As has been alluded to, this is a simple constitutional requirement. Every year, Parliament has to pass the rates of taxation. It has to happen within a certain time frame, so every year you will see a bill coming through the House called the annual rates for 2018-19, or 2019-20, and so on, to which other matters are attached as well in the particular bill. This bill fulfils that particular constitutional requirement. So when we pass this bill, we are doing what we need to do in order to keep our tax system running effectively, and because we keep our tax system running effectively, we also keep our Government running effectively, paying for all the goods and services that we enjoy in this civilised country. So that’s a simple constitutional requirement.

The second aspect of this bill that I would like to talk about—and to talk about why this particular bill is important and important to so many New Zealanders—is to do with secondary tax. Now, as any person who works in tax knows, or anyone who mentions the word “tax” and implies that they have a little expertise knows—when I say that I know about tax, so many people, so many of my constituents, say to me, “When are you going to get rid of secondary tax?” or “Secondary tax is the bane of my life.” or “Secondary tax is so unfair. Could you please just get rid of secondary tax? It would be good to do it right now.” This bill does make considerable progress towards ending the perceived secondary tax problem, and I say “perceived” for a particular reason. It is because secondary tax ought not to be a problem.

Let me explain why this is the case. I think it’s important to explain this because so many people don’t quite understand secondary tax, and I’m hoping that if we can explain it, then people will understand why this bill fixes the problem. I want people to imagine someone who has two jobs, earning about $250 a week each, and that person will get two payslips every week, as you’d expect from two jobs. But on the first payslip they get, after tax and ACC and so on, they’re going to end up with about $220 in their back pocket. They’ve earned $250, they’ve had tax and ACC deducted, and they end up with about $220 in their back pocket from their first job. But then they get their second payslip.

💬 Kieran McAnulty: What happens?

Well, it’s really interesting what happens. They’ve earned $250, but unlike their first job, where they ended up $220 in their back pocket, in their second job, they only end up with $200. “That doesn’t seem fair.”, they say. “Why do I end up with $220 from my first job and only $200 from my second job?”, and they see the problem as being with secondary tax. They know that they’re paying secondary tax on their second job, and it looks like they’re getting hit with much more tax on their second job. That’s not fair, and that’s the secondary tax problem. People think it means that they get taxed more and that they get penalised for having that second job.

💬 Kieran McAnulty: That’s a disincentive.

It is a disincentive in the person’s mind—and that’s where it’s effective—from taking a second job.

What people don’t really understand is that that tax that is deducted is not actually their income tax. What it is is a down payment on their income tax liability for the year. It means that as they go through the year, paying their taxes, they pay pay-as-you-earn, or PAYE. It’s like paying a little bit of their tax bill liability every single pay day. The problem is, if you didn’t take out the secondary tax at a higher rate, then at the end of the year the person would end up with a stonking great tax bill.

Here’s how this works. Look, if you earn about $50,000 a year—

💬 Todd Muller: Can we have a PowerPoint?

—then your tax liability is about $8,000 a year. That’s just the way the maths works on the tax rates, Mr Muller. So, $8,000 a year from your job, but if you have two jobs worth $25,000 each, then all your employer knows about you is you have a job; you’re getting paid $25,000. If the employer doesn’t know that the person has a second job, then they just deduct tax as though the person was earning only $25,000 a year. Now, the tax on $25,000—plain and simple—is about $3,400. So, $3,400 from one job and $3,400 from the other job—that person ends up with $6,800 deducted.

If you earn all the money in one job, you get $8,000 tax deducted. That’s about the right amount. Earn tax from two jobs worth $25,000 each; if the employers don’t know about the two jobs, if they only know about the one job they pay you for, then each employer, correctly, deducts about $3,400 or about $6,800 in total. So you end up with the wrong amount deducted during the year. The person should be paying $8,000 in tax—that’s what you pay on $50,000—but the wrong amount has been deducted. So they end up with a tax bill of $1,200.

Secondary tax fixes that problem. More is taken out of the second job to reflect the fact that, in total, the person earns $50,000. But, even so, it seems unfair. Secondary tax means you do not end up with a big tax bill. The problem with secondary tax is sometimes the rate is wrong and it gets over-deducted. Now, that’s quite nice because the person who over-pays with a higher secondary tax rate ends up with a tax refund at the end of the year. Now, who doesn’t like getting a tax refund? Everyone likes getting a tax refund. It’s a nice lump sum of money. Trouble is, people have perceived it as unfair, and in order to get that tax refund, you have to do a tax return, and plenty of people don’t like doing tax returns or they find them scary. So perhaps the person doesn’t get their tax refund at all, or perhaps, even though the lump sum is very useful, that person could have done with the money during the year, could have done with it week by week, could have used it to pay the groceries week by week. Perhaps it would have been easier to get it paid week by week.

This bill helps to fix that problem. It helps to fix it because through this bill and through the Business Transformation at the Inland Revenue Department, every pay day, about the right amount of tax should be deducted for the particular individual person. Employers will be reporting on a regular basis to IRD, reporting every pay day to IRD. That will mean that IRD can accumulate all the information for a particular person on an ongoing basis during the year, and if IRD thinks that perhaps tax is not being deducted at the right rate, they can contact the person and contact the employer and offer what’s known as a tailored tax rate. If you get that tailored tax rate right, there is no secondary tax, there is no extra tax during the year, and there is no tax to pay at the end of the year. This bill fixes that problem, and that is one of the reasons why I support this bill.

I hope that everyone would support this bill. It’s a shame that the Opposition won’t. It’s a dense bill. There’s a lot in it. As a committee, we worked very, very hard through this bill, and people will see, if they read the revision-tracked version of the bill, there are many changes here, recommended by the Finance and Expenditure Committee. They were changes that all the members of the select committee agreed to. We worked hard on this bill, and I’d particularly liked to commend the leadership of Michael Wood, the chair of the select committee, and the people from both sides of the House who worked hard on that bill. From the Opposition side, I would commend Mr Andrew Bayly, who had great input into the bill, and, of course, there were people on our side of the House who contributed greatly to this bill as well. We agreed on so much about this bill. What a shame that the Opposition won’t support it for reasons, I suppose, because they lost. I support this bill.

Thank you, Mr Assistant Speaker. So some of that speech was OK. It was OK because—well, it eventually ended, but it was actually quite a good rendition of some of the issues around secondary tax, and I say that as the person who was the Minister of Revenue when all of this work was put together, apart from the increase in tax rates, which is why we’re not supporting an increase in tax rates. But we are, however, very supportive of all the work around the business transformation, because it was actually a National-led Government that gave the funding to the Inland Revenue Department that allowed inland revenue to undertake the Business Transformation project. I’d like to acknowledge the former Ministers of Revenue before me, particularly the Hon Michael Woodhouse and the Hon Todd McClay, for the work that they did in this area as well.

I would, as well, like to acknowledge particularly not only the inland revenue people and the experts who worked so hard on Business Transformation but also the private sector and particularly the tax accountants and tax lawyers who I’ve had so much to deal with as a lawyer but also as the Minister, who worked so hard to make sure that the issues around Business Transformation and a simplified tax system were able to be put into a bill. Even if it is, as Dr Russell has referred to, a dense bill, it certainly is a very thorough bill, and we are very supportive of the Business Transformation parts. Unfortunately, it has a fatal flaw around tax rates.

Let’s just have another little explanation around some of these issues. For instance, one of the issues that Dr Russell hasn’t canvassed is the issue around the aim, which is actually another name for a situation where small business in particular finds provisional and terminal tax really difficult to deal with. Many people who have been in small business or families who have been in small business will know that provisional and terminal tax payments as they are now are actually what seems to cause so many small businesses to fail in their second or third years, and that is really all about the fact that people are having to prepay their tax when they haven’t even earned it or received it.

There are not many people who are in a business where they know exactly how much money is going to be coming in the door, so there are often penalties to revenue if they don’t pay enough tax before they’ve even earned it. Then there’s the other problem, which is a penalty, really, if a business takes money or capital out of the business to put aside for tax, worrying that they need to have enough money for tax, and that means they often don’t have enough capital invested in their business. This is something that is crucial for business, and particularly small business, because larger businesses do have different ways of dealing with it. There are actually entire businesses set up around having tax prepaid by particular organisations that do this and then they charge for it. But small businesses find it much more difficult to cope with.

So one of the issues was how can we give taxpayers a system where they can in fact pay on almost a PAYE, or pay as you earn, system, like salary and wage earners. That is pretty difficult when you’re trying to deal with small businesses. A tremendous amount of work has gone into this from revenue, but also from the private sector that works very, very well with revenue. It’s great to have such a good relationship between the private sector and inland revenue around how we can actually have small businesses—say, a dairy owner, for instance—being able to pay their tax on a monthly basis, along with their GST, because GST is paid either on a monthly or a quarterly or a six-monthly basis, and people are able to allow for that because they know what it is they’re supposed to pay.

So in order to do this, this requires a business to be set up on a system like Mind Your Own Business or one of the Vero products and some other products which work well with inland revenue. Those products, as long as they’re kept up to date, can actually feed straight through to IRD and work out what people’s taxes are, on a monthly basis or whatever. That means that people’s profit and loss is being calculated on that sort of basis. Some people might find that concept quite, sort of, Orwellian, but the trouble is if you don’t do that, then you end up with the same system of people having to predetermine, or pre-guess, really, what their tax is, and then getting themselves into all sorts of trouble as they don’t pay enough or they pay too much.

So this is crucial, I believe, for helping small business in New Zealand, helping particularly with cash flow and with capital, because we are very much remiss when it comes to having enough capital in New Zealand for business. It is really hard for a small business to get money from a bank. It is really hard. What a small-business owner will need to have, most likely, is a security over their home. Their home is often the one that gets sold when things go wrong, and those are the things—whether it’s that they haven’t paid the tax or something like that. This is a really good way of helping avoid that problem.

Of course, it doesn’t solve the problem if a business is just not successful; we understand that, but, actually, many successful businesses and business owners get themselves into trouble because of this problem, and I think just having this change will help. I do know that there are still some small businesses where people do everything very much on the basis of a handwritten or even a typed-up on the computer, Excel spreadsheet sort of system. That will still work for small businesses where there is no particular uncertainty around what their profit and loss is going to be. However, we like to hope that more businesses are actually growing than that, and we would like to hope that with people having to pay, businesses having to collect tax for PAYE for their staff, the student loan payments that they already do for their staff, the family support payments they already do when it comes to child support, any debts that are garnished against their wages—all of these things are payments that small businesses calculate, collect, and provide to the Government for free.

People should always remember that with small business: they are incurring, and business generally are incurring, a tremendous amount of cost in terms of time and in terms of being able to get things right, because if they get things wrong, there are penalties on them. They do all this and provide this service for the rest of us in New Zealand for free. That is something I’ve always thought, and I remember saying to revenue at one stage it would be really good if revenue was able to send out a note every now and again to people, at Christmas-time or some other time, saying, “Thank you for collecting tax for us for free.” I reckon that would be a good—I never quite got that done; I was only in the role for about eight, nine, or 10 months before the election. But I actually think that would be a nice thing, and I might suggest that to the current Government. Or not; we’ll wait till we’re back in charge, in which case I’m sure we’ll do it.

But, you know, it’s good to remember that. People forget that. So when we hear people slamming business, slamming this, slamming that, remember who, by the way, is collecting this tax. They collect the GST, they collect the PAYE, they have to pay their own tax, and they have to calculate what that all is. They do all these things and they sit there and no one thanks them. Well, I want to thank them, and I think this side of the House certainly wants to thank those businesses who comply with their obligations under the law. I just think we should be doing that, because no one asks anyone at inland revenue to work for free. No one asks us to work for free. These people work for free for us. In many cases, it’s taking them away from income-earning work so that they can help us with our work.

So it is actually a bill where most of it’s good. That’s why it would be wrong to vote for a bill where we’re putting up tax rates against the very people who, by the way, are collecting tax so that we can actually continue as a Parliament, that we can continue getting things done and services for it—

💬 Hon Andrew Little: They’re selling goods and services and collecting tax as a result. There’s nothing unusual about that. Good grief.

—so people are—I wish Andrew Little would speak more clearly so I could hear him, I really do.

💬 Todd Muller: He’s mumbling again.

Mumbling, yes. It’s the beard, Andrew.

I think it is important that we do remember that. This party will not be party to increased taxes against the very people who help do what we have to do, and I think it is really important that we do that. This is one of the things that we want to be able to do, which is to give more people more of their own money back and, by the way, along the way, to thank them for what they do for their country and for their community. Thank you very much.

Thank you, Madam Assistant Speaker, for this opportunity to speak on behalf of New Zealand First and on behalf of this great coalition Government.

Ms Collins, thank you very much for that contribution. I was sitting on this side of the House, and I hate to admit it to my colleagues, but I was nodding away for, what, 90 percent of the time, until she got to the ridiculous statement about—did she actually use the words “tax increases”? Which are not in this legislation, by the way. There are no tax increases, unlike when National was in power, when they actually increased GST, when they promised the nation that if they voted them in, they were not going to put up taxes, which is what happened. I’ll get back to acknowledging a former Minister. I think—correct me if I’m wrong, Mr Muller—Collins, Woodhouse, and McClay did some fantastic work on this legislation. So what we have now is a piece of legislation that is incredibly enabling.

💬 Todd Muller: It’s what you’ve come to Parliament for.

Exactly. That’s why we’re here. I was trying to reflect on the legislation votes of New Zealand First during that time. I was the revenue spokesperson for New Zealand First in Opposition, and I think we voted for all the revenue legislation that was coming through.

There were times when we were looking at the cost of the inland revenue digital transition system, because I think we’re going to get to $1.6 billion in terms of the implementation of that programme, and that’s quite a hard number to swallow, especially when you’re—well, this is exactly what this legislation enables. I apologise if I’m not making the link more overtly. This legislation is the enabling legislation that, along with legislation before, I admit, has been very much about enabling inland revenue with their digital processes, and moving into, essentially, the modern age.

It seems like really bad timing, actually, but I do—despite the farcical performance from the National Opposition yesterday at the Finance and Expenditure Committee, which was embarrassing and it was incredibly disappointing. But today, for example, we had another session which was rostered on anyway, and I just want to acknowledge those members opposite, because we were having a similar discussion with the officials on the issues that we saw being presented by submitters at the time. So it was a collegial select committee this morning, and I just want to touch on that with this legislation, because I’d like to acknowledge the chair, and I’d like to acknowledge members from both sides of the House who very earnestly took on the advice of submitters and heard what they had to say.

I just wanted to touch on a few of those slight alterations. The first one that comes to mind is around the mis-reporting or mistaken reporting of income tax, at such a low level—I think $50—that the committee on both sides thought it’s not appropriate, it’s not even fair, to get too heavy-handed on persons—especially persons whose only income is from income-tested benefits—who have to pay a tax in an extra period in that income year. So that was one example of kind of a fair approach from both sides of the House.

Taxpayers’ tax information could be amended to include missing information, as well as to correct incorrect information. The short process on binding rulings—maybe KiwiSaver is the one more I’ll touch on: allowing individuals that are subject to the transitional five-year lock-in period to opt out of the lock-in period and cease to be eligible for compulsory employee contributions. I think the Minister of Revenue touched on this in his address to the House in his offering earlier today. I think it’s little things like that that can actually add up to individual experiences.

I’ll take the rest of the call just to address what it is the bill’s trying to achieve at a higher level. So what we’ve been dealing with was the Tax Administration Act of 1994, which had set out rules and processes for collecting and distributing revenue. What that piece of legislation was about was efficiency, efficacy in collecting and distribution, and the rules and processes around it. This Business Transformation project of the Inland Revenue Department—it’s a programme that provides an opportunity to step back, which is what we did, in reflection, and look at the processes involved and see how it could be modernised. So the work to review and modernise these settings focuses on the core dimensions of the original bill, the Tax Administration Act.

Perhaps, with the short time I have left, I’d like to touch on—with your patience, Madam Assistant Speaker—the secondary tax issue, which Dr Deborah Russell touched on in great detail in her contribution. It seemed to me, with many of the Rotorua electorate who would come into my office, that one of the banes of their lives was having literally two or three jobs just to get by, and then the unfortunate circumstance of having this secondary tax issue where they were literally paying a higher tax rate, knowing that their actual total income tax was below the next threshold in the tax regime. So they were paying, throughout the year, a higher tax rate, and they were having that money taken out of their income of their second or their third job. That is incredibly hard to deal with for a lot of people from all across New Zealand, but in my home town of Rotorua, that was a common conversation.

So with the transformation process, what inland revenue has been able to do with increased capacity for digital technology and an interface with what we would call clients, I suppose—taxpayers—is determine tax rates while having a good and fair idea of their incomes for the period. Knowing that, they can give advice to the taxpayer on the appropriate tax rate on multiple jobs, and so, essentially, as Dr Russell set out for us in the House in quite explicit detail, which lost some of the members opposite, it meant a fairer system where people who have two or three jobs are now able to rely on inland revenue and their assessment of income and know that they’re paying the appropriate rate.

What’s important to note also is, I think, from memory, 750,000 people do not claim tax rebates which they are entitled to, and the automation and the updating of the system means that, actually, inland revenue should be paying out these rebates automatically. It’s an amazing transformation process, and, ideally, what we will see in the not so distant future is, actually, because of the efficiency of the system, the information gathered, and the way people’s information can be processed, we should see a great decline in rebates themselves and claims themselves because the system itself better reflects people’s circumstances in a much more timely fashion.

So there are no tax increases. Let me just qualify and point that out for the members opposite and those people listening at home. This is a very good piece of tax and revenue legislation, which I am happy to stand in the House to support. Thank you, Madam Assistant Speaker.

Thank you, Madam Assistant Speaker. Well, when you get to the stage of Thursday afternoon and you’re following Andrew Bayly and Judith Collins, you really think there’s nothing left to say. But I have got a little bit to say. I’ve got a little bit to say and a little bit of comment to make on the last speaker, Fletcher Tabuteau. But I wanted to comment on Dr Deborah Russell and thank her for probably the best lecture I’ve had for nearly 50 years. I listened to all 10 minutes of it, and, actually, I’d have to say, in my university days, I never would have understood anything as good as that. And, of course, Deborah Russell is ex-Rangitīkei.

I guess I stand to—not to support this bill, because we are of course unable to support the bill because of, I guess, the tax changes that, effectively, it signalled. Tax in New Zealand is quite a big item, and our leader, in recent times, of course, has signalled where we intend to go with some of these tax issues. Tax is a big issue for most New Zealanders because there are many, many New Zealanders earning in that $40,000 to $50,000 to $60,000 range, many of whom are paying way more tax than they should be, and very shortly the average wage will be on the maximum tax rate. So there are some significant issues in that area, and that’s one of the reasons we can’t support this bill.

I want to talk about one or two other things, and then I want to get on to—it won’t be quite a lecture of the Deborah Russell mould, but I want to talk about the bloodstock taxation stuff towards the end of my short contribution.

KiwiSaver I think is really interesting; I think it is a great product. I’m very supportive of the changes, and I, of course, fall into the age bracket where I could join KiwiSaver under this legislation. It would be wonderful. I am actually a member of KiwiSaver, but I could also withdraw my KiwiSaver had I ended it within the last five years. Interestingly, that’s something that you get quite a lot of comments through the electorate offices about, because people have been trapped in this, getting into KiwiSaver at age of 63 or whatever and not being able to get out until they’re 67 or 68, and that’s been the challenge for them. So the changes to KiwiSaver are, I think, very sensible.

Interestingly, during the course of the submissions on this bill, we had a young man and his mother come in—well, he wasn’t particularly young. I, in my spare time—and I think I’ve said in the House before—chair an organisation called Special Olympics New Zealand, which is a sporting organisation for the intellectually disabled. He came in to submit on the fact that he didn’t have a life expectancy the same as everyone else does. He’d joined KiwiSaver, very sensibly, had a pretty good saving; I think he told us he had about $8,000 or $9,000 in his KiwiSaver. What worried that family and worries many families in New Zealand—they join KiwiSaver, but they’re never going to get, necessarily, to 65 years of age. It was quite an interesting—well, it was a very interesting, very compelling submission. As it happens, it won’t get changed in the course of this bill, but it was something we learnt and something I’m sure that a Government of the future will pick up. It is a challenge of KiwiSaver, because there are many, many people also in KiwiSaver who get to a point where they suffer from hardship, and justifying that hardship’s difficult. The reason I use that as an example is because justifying the hardship and justifying the fact that you might not live till you’re 65 are equally fraught sort of issues. So it’s quite a challenging issue, and it will be a challenging issue for the legislator when it gets on.

I just wanted to talk about a couple of things that Fletcher Tabuteau talked about a minute ago. I myself think that the transformation is a great thing as well, and I think it’s going to be very useful for New Zealanders. The challenge we’ve got is that most New Zealanders have never contacted the IRD, and if they got a letter from the IRD they’d be absolutely terrified of it. I think it’s going to take almost a generation to work through, just like it’s taken a generation of us to work through some of the technology challenges that we face nowadays. It’s going to take a long time to work through some of this transformation. It won’t be picked up as quickly as the IRD would like to think it will be, and one of the reasons it won’t be is because most people—well, no, not most people; many of the older community in New Zealand and, certainly, many rural people in New Zealand don’t have access to the types of communications that are necessary to make this system work properly. That will be a little bit of a challenge for the Inland Revenue Department, I think, in the future; it will also be a challenge for our taxpayers, but, none the less, when it’s implemented it will be extremely successful.

The other thing I like, and I think it’s very good, is the idea of small-business men going to inland revenue to get a short-term process ruling on how taxation law applies. Very intimidating for many small businesses, very worrying for them, actually, and, even for some professionals in industry—quite worrying as to how you should apply some of these tax rulings. I think that’s also a great bonus for all New Zealanders. So there’s been some pretty good stuff happen in the course of this bill, and so you’d wonder, I guess, that I’m talking about it so favourably and, in fact, we’re not supporting it.

I want to now talk about, though, Supplementary Order Paper (SOP) 135, and I’m not talking about it because I want to criticise it, but I want to talk about it because it points out the fraughtness of trying to get a piece of legislation through that’s actually going to work. This legislation is the piece of legislation that was, I think unfortunately, called the “good-looking horses” issue in the course of the Budget, but it was introduced to try and enable people buying into the horse-breeding industry to access the tax system in the same manner as those already existing in the industry. So, in other words, current breeding programmes or current breeders have access to tax just like any other business does, but people buying into the industry didn’t, and this was put in place to try and enable that. Now, it was set at a level—I think $404,000 for a colt and $460,000-odd for a filly, something like that; I might have it the wrong way around, but it was something like that—and we heard at the time that it was going to cost about $4.8 million in year one. Now, we’ve just, of course, been through the first of the yearling sales. Probably almost half of the horses that will be sold in New Zealand this year have been sold, and by my reckoning, there might be three horses that might qualify for that tax deduction—they might not. In fact, I know that a fair portion of them won’t qualify. It’s a bit of a “might”.

Now, instead of a $4.8 million tax cost so far, we might be looking at $100,000. So what I’m trying to point out is the fraughtness of introducing legislation like this—and I’m not criticising it, because that’s the Government’s wish to put that bit of legislation; that’s right. It just hasn’t achieved what it set out to achieve—it can’t possibly achieve what it set out to achieve because there just aren’t the number of horses going to qualify in that bracket. I think there were only 24 or 25 horses sold in that bracket in New Zealand. The bulk of them went overseas, and so they were never going to qualify anyway. If you wanted to incentivise more people to get into that industry, you would have to lower that threshold significantly to make it work. Now, I think it would be to our advantage to do that, because if you think about it, it’s got to be a pretty brave business person who’s going into a new business who’s going to shove up $404,000 first up to get their business going; they’re going to have plenty of other costs before they do that.

The other interesting thing that I think was of concern to some on the committee and, certainly, was a concern to some of the officers was that people would then get close to the threshold price and want to ratchet up their price to get over the threshold so they’d claim the tax deduction. Now, by my reckoning, there were three horses that were sold in this last year’s yearling sales—and you’ve got to bear in mind there are 1,200 horses going through the ring. There were three horses that were sold just below that threshold, all to New Zealanders, none of which went over the threshold. So what I’m saying is there was no threat that someone was going pay more—well, it turned out there was no threat—just to qualify for the tax deduction. So it just shows how, when you try to introduce a piece of legislation to incentivise something, it really is very difficult to make it work.

So other than all the complications of SOP 135, there’s some very good stuff in this piece of legislation, but as I said earlier at the beginning of my speech, we can’t support this piece of legislation, simply because we believe that people should have their own money to spend and that they’re better at spending money than the Government is, effectively. So that’s my lot, and I commend it to the House but can’t support it.

Thank you, Madam Assistant Speaker. I rise to take a call on the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill—a snappily titled piece of legislation which, belying its dry kind of title, is actually pretty significant because it actually impacts the lives of every single New Zealander. I just wanted to pick up on a point made by the previous speaker, Ian McKelvie, about the reasons why the National Party are voting against the bill here at this reading. The underlying philosophy that they have is that individuals can spend their money more effectively than the Government can. If you’re to follow that line of argument, then, by definition, tax should actually be eliminated entirely, along with all public services, because if an individual can spend their money more effectively than the Government, then there is clearly no need for the Government, which provides public services such as education, mental health services, environmental protection, transport, housing to people who can’t afford it, and so on. So I think it is kind of an absurd proposition to hold, the idea that you would suggest that you should eliminate all tax on the basis that how we work together as a community is not as effective as how a group of atomised individuals can operate.

I was reading a contribution online from a small-business person, a plumber, who, in relation to this bill, actually, had said, “Well, you know, I don’t feel that I need a tax cut.” He said, “I realised what the difference was between what I was being offered at the last election by the National Party with the package that they were putting forward versus getting rid of those changes that are outlined in this bill.”, which is that that little bit of money that he would have gotten back, actually, when you add it to that little bit from his neighbour and everyone in his street, enables teachers to get paid more, more nurses to get hired, more police to get hired, better public services—Better Public Services, of course, being a catchcry of the previous Government. That was actually something that he felt was more valuable than him being able to buy another cup of coffee every week.

As my colleague Chlöe Swarbrick said in her speech sometime in the last few days, in our work, when we go out and we talk to people about this, people have never actually said to us, “We want a tax cut.” What they have said is that they want a better quality of life, that they want better public services, and that they want more effective transport to get around their congested cities, particularly in Auckland. They want to be free and to live in a country free from homelessness, to be free from endemic child poverty, and to be free from the kinds of hospitalisation rates that we see in this country from entirely preventable respiratory diseases because we have such poor-quality housing. So rates of tax, as outlined in this bill, are really significant because they enable us to confront child poverty, they enable us to reduce hospitalisation rates for infants, and so on.

I thought Mr McKelvie’s contribution was very considered, very thoughtful, and, as he said, there are a lot of good things in this bill but, ultimately, the National Party feel that they cannot vote for it because they feel that we should get rid of tax entirely and return everything to the individuals who make up our society. I can’t support that line, which is why, of course, we will be supporting it.

Having said that, there are some things here that I do want to draw specific attention to which I’m really pleased about, one of which has been referenced before, of course: that’s around the simplification of the tax system. Again, as Mr McKelvie pointed out, the Business Transformation programme that the Inland Revenue Department are engaged in is very significant. It’s a massive investment. It runs across multiple years. It is fraught with risk and difficulty, as these kinds of projects are, but the results—what we’re able to do as a result of this programme—are extraordinary. Some of them are reflected here in the bill, particularly the ability of people not to have to fill out a tax return because we’ve been able to automate the calculation of their tax paid and then, essentially, also automate any kind of return or difference between what was actually paid versus what they need to pay.

The fact that you can do that for pretty much three million people and eliminate the need for three-quarters of a million people to ever have to fill out tax returns again—I know it sounds like a small thing, but it makes life for people, and particularly for small-business people and solo operators, so much easier and free of that kind of anxiety of having to interact with a system that they’re not familiar with and that causes quite a lot of stress. So it’s one of the things I just wanted to highlight in particular, because I think, in many ways, that will be one of the things that people in their everyday lives, as a result of this bill, feel have gotten better. For that reason alone, I think that the National Party ought to vote for it, because they’re all about—well, they say that they’re all about—small businesses and making life simpler and better for people, particularly when it comes to interacting with Government.

The other thing that I wanted to draw attention to is some of the changes around KiwiSaver. I know that this came up in the Finance and Expenditure Committee and with a number of the submissions, and I also know that the Retirement Commissioner had made a recommendation specifically to include the additional 6 and 8 percent contribution rates to provide a bit more flexibility for people. Again, I think this is one of the ways that this bill will make the lives of ordinary people better, because it gives them more options and, I think, gives people more reason to participate in the KiwiSaver scheme. At the moment, the existing options that they’ve got in terms of those contribution rates might just kind of bounce them out at that decision point, whereas if they see that they’ve got those additional options, they feel that, actually, it becomes more worthwhile.

So I do think that there’s a good chance that we’ll see KiwiSaver contribution and participation rates increasing as a result of that particular change. KiwiSaver is a fantastically successful scheme—like, wildly successful—and I think this just makes what’s a really good scheme even better and gives people more reason to participate. Likewise, scrapping the five-year contribution rule for people over the age of 60; I think that that will, again, increase the chances that people will choose to participate in the scheme, even for periods of time shorter than five years, because they will see the value of it. So those changes, I think, really do kind of add to the success of KiwiSaver.

So there are three main reasons why I endorse the bill, those changes to KiwiSaver being one; the simplification and the ability for literally hundreds of thousands of people, millions of people, to have that kind of automated interaction and to take that stress out of it; then also, finally, to return to my first theme, the changes to the actual tax rates, which mean that we can actually fund the kinds of public services that create a better quality of life for New Zealanders, which they clearly wanted and voted for in the last election. So for those reasons, the Green Party will support this bill as it continues its journey through the House, and I commend it to the House.

Madam Assistant Speaker, thank you for this opportunity to speak on this long-winded titled bill, the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. I’m going to touch on half a dozen things but, first of all I’d like to make a couple of comments vis-à-vis James Shaw’s speech.

I suspect there’s a leadership issue in the Green Party. There must be—there must be. He’s been talking about increasing taxes. Here’s a guy who’s an environmentalist, and he’s talking about increasing taxes, not taxing the taxpayer enough. He’s talking about capital gains tax (CGT)—must have capital gains tax. He’s appealing to his members, who are the left of the left, and so I’m suspecting that there must be an issue inside the Green Party, and I imagine we’ll hear a little bit more about that down the track.

It is ridiculous that we need more taxes; we have surpluses. The Labour Government has inherited surpluses coming out of its ears. There is no need for further taxes, and that is why we support and legislated earlier for tax cuts by changing the thresholds. That is why Simon Bridges has recently announced the movement, by indexing the tax thresholds, to give more people their money in their pocket, because, after all, it is their money—it is their money. The sanctimonious attitude that comes from James Shaw to say that New Zealanders need to be taxed more for his purposes, to do what he wants, is outrageous.

We have to remember that we are spending taxpayers’ money. About a third of every dollar in the economy is spent by the Government. It’s far too much; it’s outrageous. In my view, people should be left to look after themselves, their communities, and their families, and they’ve proven—

💬 Hon Andrew Little: So James Shaw was right?

—and they know how to look after—we don’t need Andrew Little’s help in looking after our family, or James Shaw’s sanctimonious attitude to say, “We need more tax to do the stuff that we want to do.”, despite what the individual might want to do. It’s quite amusing. You might recall—

ASSISTANT SPEAKER (Poto Williams): All right, Mr Scott. I think we can come back to the bill.

Well, I was just going to say: James Shaw’s maiden speech—look back on it. He reflects on markets. He actually quotes Margaret Thatcher, and I can’t understand the flip-flop that he talked about this afternoon.

Anyway, the six points that I would like to make: generally, I support the bill—the points in the bill. It’s all about simplifying and modernising the tax system around the Business Transformation process. I like it. You know, I’m a pretty simple sort of guy. I think I’m reasonably modern. So you’d think I might even support all of the bill, but I don’t. I don’t because of the tax rates—and we’ve touched on it already—that are implemented and accentuated in this bill.

The good bits of it some people have talked about already. The information sharing—very useful, very useful. I still advocate for and look forward to the day where delinquent fathers who have multiple children, or multiple lots of children—not even multiple; any number of children—and disappear on them, as delinquent fathers, and do not pay their paternal obligations through the IRD—this information sharing will help, and the Business Transformation sharing will help, track those guys down, because, as others have said, it’s almost a real-time situation. At the moment, we can have fathers who go from job to job and are never really called up by the IRD and miss out and do not fulfil their parental obligations to their children. That will change, I’m sure, as time goes on.

💬 The KiwiSaver: the Minister said KiwiSaver is very good because it makes retirement easier for all New Zealanders. That’s not quite the case. Unfortunately, not all workers’ salaries or wages are in KiwiSaver, and I think there is still a lot of work to be done around that. In fact, most of the people who are not in KiwiSaver are the lower-income people because they simply cannot afford to contribute the 2 or 4 or 6 or—I think it’s even 10 percent that one can contribute now to the KiwiSaver scheme. So while it is an excellent tool for people who can afford to save, there’s still a lot of work to be done to ensure that those that are the most vulnerable at retirement should be able to contribute more easily.

The secondary tax: we’ve covered that off reasonably extensively with Deborah Russell’s contribution. I agree it is a problem. I’m forever explaining to people that the secondary income tax is something that if they overpay, they can get a refund on, and that they should still go for that second job because, at the end of the day, the total income is what is taxed, not just the secondary income. The secondary income is taxed at a higher rate, but it is balanced, and at the end of the year, it’s the total income that matters, and that’s really pleasing to see that this legislation enables that to happen.

The next point I would like to raise is around the volunteers. Again, this is a matter of simplifying and modernising, with the use of the technology as well. So this revolves around the volunteers. At the moment, volunteers, let’s say, are on a salary. They don’t need to put in a tax return—if you’re simply on a salary, that’s done automatically—but these guys who volunteer, who get paid an honorarium, that’s withheld at a higher tax rate, a little bit like your secondary tax rate. So to ensure that they’re treated fairly, they’ve had to put in a tax return, and as we’ve heard from a number of contributors this afternoon, people don’t. They just don’t bother. They’re just concerned that if they file a return, they might get a notice to pay a bit more. They’d rather just keep clear of the IRD—it’s a Government agency; you know, Big Brother. Whatever their reason is, they don’t necessarily want to interact with the IRD—unfortunately, because, in a lot of cases, they will be due a refund, whether it’s a secondary income or whether, in this case, they might be a volunteer fire or emergency service volunteer. So, again, that’s a good thing. That’s a very useful piece of legislation.

The other piece was around the brightline test where a property is bought off the plans. Prior to this legislation, the time would start ticking when the land was purchased. Now it’s when the contract is signed, if you like. So that brings the start date forward, if you like. It will compel the owner of the property to hold the property for longer, if you like, from the purchase date of the land, and that’s good, but remembering, of course, the brightline test is, essentially, a capital gains tax. The Labour Government moved it from a two-year brightline test to a five-year brightline test, and that has put a whole lot of landlords off investing in property. That has increased the cost of being a landlord. Obviously, if there’s going to be a possible or even an imminent tax burden, the landlord demands that cost of capital to be recuperated in some way, or they’ll leave. If they want to recuperate the cost of capital, they have to go to the tenant in increased rents.

Chlöe Swarbrick: Or they could sell their property.

Or they could sell the property; that’s another point. They could sell the property, but the problem with that—and this is part of the problem with the capital gains tax: if you do sell the property, you’re going to be liable for a tax bill. So that’s a problem when these landlords go to the bank.

So you go to the bank and say, “Look, Mr Banker, I want to buy another property.”, and he looks at your balance sheet. You bought a property 10 years ago; it’s worth $200 today—that’s about a 7 percent return compounded—and you think you’ve, sort of, doubled your money, if you like. But, unfortunately, the bank is going to say, “Mate, your property isn’t worth $200 because that $100 is taxed. So I can’t bank you on $200 worth of asset; I can only bank you on $166 of asset.” So what you’re going to find is that bankers aren’t going to fund it. That’s a problem because if the bankers aren’t going to fund the landlord, the landlord can’t build the next property or invest in the next property to house the tenant.

So I think we’ve got to be a little bit careful about the unintended consequences of some of these legislative moves—well, I’m talking about the brightline test in the bill at the five-year point, but particularly the CGT that’s proposed, and that is why we have to be careful about what we do here. So at the end of the day, I reject and oppose this bill.

I understand this is a split call. Kieran McAnulty, you have five minutes.

Thank you very much, Madam Assistant Speaker. It is my pleasure to stand here and prove to the nation that not everyone from Wairarapa is boring, and it is also my pleasure to come after Alastair Scott, because I’ve been coming after Alastair Scott for 18 months and it’s going very well indeed. But I wanted to speak in favour of this bill, just like everybody else that stood here to speak for this bill. Even on that side, they’ve all spoken in favour of it, but they’re not going to vote for it. On this side of the House, we are going to vote for this bill.

Now, I won’t go on and on like some of us have today, because, actually, there’s not too much more to say. I do want to mention one particular thing, and then I’ll sit down. The changes in here that look to address the issues surrounding our fire and emergency volunteers that go away, take time away from work, and get an honorarium to train up in Rotorua with the national training institute there, for the fire brigade—it’s a big ask and, at the moment, it is just a hindrance. To be honest with you, that is an absolute common-sense approach, and good on the Finance and Expenditure Committee. That was one day where National decided not to pack a sad. They sat there and they worked together as a committee and they came up with something simple. I commend the bill to the House. It’s a marvellous bill.

Well, that’s such a disappointment, because I don’t sit on the Finance and Expenditure Committee, and, obviously, it’s been lovely to hear how collegial they are most of the time—at least when the Government members don’t forget what time it is. So it’s been very interesting to listen to the debate this afternoon. I was hoping for something far longer and more erudite from the previous speaker, Kieran McAnulty, but alas, we will never get to really hear what he thinks about the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill.

If anyone is still watching, it is quite a remarkable bill to be talking about at the end of the first week, on a Thursday. It’s felt, in fact, at times over the last 90 minutes, that as more people have spoken, the oxygen in here has got less. But there have been a couple of contributions that I really do have to take issue with. The first one was the contribution from the learned colleague the Hon James Shaw and his interpretation of our opposition to the tax rates which are inherent in this proposed legislation. He then moved on to give us a philosophical view of the National Party’s outline with respect to tax.

As I was listening to him talk about the wonders of increased taxation, it reminded me that for the Green Party in particular, there is not a social ill, there is not an issue in society, that increased taxes and Government spending can’t fix. At the core of their philosophy—in fact, it’s ironic; when he was extrapolating that because we are a party that is proudly of the corner that less taxes and more efficient use of taxpayer money should be the primary driver of Government policy, he’s essentially arguing that, really, if you follow that logic through, from a Green Party perspective, why not a 100 percent tax and we can all sit back and relax in the delight that the Government can manage all of society’s issues on our behalf. So it was a very interesting contribution from Mr Shaw.

Of course, as those who have listened today will have picked up, many aspects of this bill we support. Indeed, the pro-business simplification of the system enabling a business in particular to be able to do their job more effectively, in terms of interfacing with IRD, had its genesis in the previous National Government. The reason we oppose this bill relates particularly to the setting of the annual rates of income tax. The Government is right that it’s a rollover of what is currently in place, or was in place in the last financial year, but that, of course, is the core difference, because we had signalled and promised that had we got back into power, we would have made a threshold adjustment with respect to those rates, which I think, and we all think on this side, would have been welcomed. Indeed, close to 45 percent of the country believed, in voting for us, that that was indeed going to happen.

A lot of areas have been traversed. I won’t cover many, but I will touch on a couple. One is that I’m very pleased, from a previous small business perspective, that we are going to assist small businesses with respect to changes to the binding rulings regime. I have been a chief executive of a smaller business where we have gone through this process—or the business went through this process—and, certainly, providing some surety and more cost efficiency with respect to that engagement is welcomed.

Apparently, in this legislation, in the charities section, there are an extra 13, I understand, which have been applied to the list which is given charitable status. We support that, but it is added to the 2,500 that are already there. Certainly, from our perspective, we think there is opportunity to look into some of the issues with respect to those who are on that charitable status. I think there’s a feeling that not all of them necessarily should still be there, because their businesses and activities perhaps have moved on from being a true charity in that sense of the word. So we would encourage the Government to do some thinking in that space.

Interesting afternoon—my colleague Deborah Russell certainly provided a highlight with respect to secondary tax lecturing. I suddenly felt I was back at Waikato University, introduction to macroeconomics. It was very enjoyable. I hope you’ve enjoyed it at home, and I certainly, whilst commending the thinking behind this bill, for the reason outlined, cannot support it. Thank you.

Thank you for the opportunity to be taking a short call on the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. As most of the key areas in this bill have been well traversed, I’d like to focus quickly on information sharing and collection. This bill does a great job at modernising some of the current provisions in how we work.

Two important improvements of how the Inland Revenue Department collects information I’ll touch on quickly. First, it clarifies in the legislation that information collected for one inland revenue purpose can be used, in fact, for other functions, which makes it far easier for people utilising the system. They don’t have to provide the same information again and again. Secondly, it provides a regulation-making power for repeat collection of third-party databases. While inland revenue always can collect current information, the new rules will provide a greater transparency where this collection is done on a regular basis.

Finally, it’s interesting to see that what this also does is it provides for the New Zealand Police information sharing. Already, police are allowed to use it for the financial intelligence unit. It contains police who are non-sworn, and the current legal provisions are that you have to be a constable to do that. So it’s great that this bill enables that unit, which does great work in the anti - money-laundering space for people who are not sworn who work within police, to be able to utilise that for good purposes. So without further time on this bill, I’d like to commend it to the House.

I rise to take a call on the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. Aren’t I lucky, because this is the first bill that I will speak on in 2019. I’d like to wish Madam Assistant Speaker and the members of this House a happy New Year in this, a year that some have hopefully described as a year of delivery and which others of us are very aware is the year that the Government’s chickens come home to roost, because when you overpromise and under-deliver, New Zealanders have a habit of noticing and voting accordingly.

So when it comes to this bill, we have had members opposite throughout the debate saying, “Oh, well, if you support so many measures within it, why is it that you would oppose it?” Of course, they’re right. There’s a lot of great work that the former Government did to create this bill: work around secondary tax, simplifying the system, work around KiwiSaver, some of the bureaucratic things that are inherent in a tax system and that any Government should work to improve over time. But what this bill also does, which members on this side of the House here, the National Party members, cannot abide, is it entrenches in our tax system a set of tax rates that are higher than New Zealanders should be paying. They are so high that very soon a New Zealander on the average wage will be paying our highest tax rate. We in the National Party say that is not right, that is not appropriate, and it is not something that we are prepared to support.

We put to you that if this Government had not repealed the personal income tax cuts that National had legislated for in Budget 2017, then the average New Zealander today would be a thousand dollars better off. Members opposite can say, “Oh, well, you know, that’s just a technical issue to do with tax.” Well, a thousand dollars, to the average New Zealander, would make a great big difference right now, particularly as we see living costs rising across the country and people struggling.

Now, James Shaw, in his contribution to this debate, decided to talk about the philosophy of tax and where National stands, and I cannot leave those remarks un-responded to, because what he said was that National opposes any form of taxation, that somehow we don’t believe in the collective provision of services such as education and health. That is verging on misleading, and it is certainly wrong, because it was the National-led Government that actually invested the highest ever record levels of expenditure in our education system and in our health system.

What is true of the National Party is that we do believe that taxation must be taken to invest in collective services, where the Government can best provide those services for the betterment of New Zealanders. But what we also believe and what we hold fast to is that any good Government should be sceptical of the power of Government to spend New Zealanders’ money better than they can in their own families and for themselves.

At the margin, where we are making those decisions, we should ask the question, because otherwise you can get yourself into the kind of situation that Phil Twyford finds himself in, where he’s gone out there and he’s said, “Give me a few billion dollars, and I’ll sort out the housing crisis. I’m Phil Twyford—I can do it.” And then he said, “OK, it’s going to be brilliant because the Government’s going to be running the show.”, and what is the reality? The reality today doesn’t need to come from the way I describe it or the way Judith Collins describes it; we can rely on the neutral commentary of the Reserve Bank Governor, who put it very clearly—who put it very clearly. He said that for every 100 houses that are built under KiwiBuild, between 50 and 75 elsewhere won’t be built.

The reason I highlight this is because what it shows you is that when Government takes too much tax, the result is that Government gets sloppy with New Zealanders’ money—gets sloppy, does not get the results that New Zealanders deserve, does not have the impact on their lives that they expect, and that is not acceptable. That is why 45 percent of New Zealanders said, “We want a Government that’s prepared to reduce tax rates.”, because we as New Zealanders in this country are inherently sceptical of Governments who say they can spend their way out of problems.

So when we turn to this bill and we turn to this philosophical discussion that James Shaw put to us, we can see that it is right—it is right for National to be opposing this bill and to be opposing the cementing of higher tax rates than New Zealanders need to be paying. You only need look at the detail of the clauses in this bill to understand how tax systems creep into New Zealanders’ lives.

Actually, I’d like to commend Deborah Russell for the contribution she made in terms of showing us in quite detail, in a way that really did make me feel like a young schoolgirl again, being lectured by someone from quite on high. I wondered to myself: how do the people of New Lynn feel when they get these wonderful, learned lectures? But what she did do in her contribution, that I commend her on, is that she detailed just how complex dealing with the tax system can be for New Zealanders’ everyday lives, and what she showed us is that New Zealanders don’t like it when the taxman intrudes; when the taxman gets in the way of people’s ability to invest in their business, to grow their business; and when the taxman gets in the way of New Zealanders’ ability to make decisions to grow things, to invest in their own families.

This is significant, because the more we tax, the more that happens. So National, in saying that, yes, it’s good to be improving the details, as this bill does, still absolutely stands on principle to say that where we can reduce tax rates, we must. It is a disgrace that this bill further entrenches tax rates that we oppose.

💬 Hon Andrew Little: Here’s the hard right talking.

When we—oh, Andrew Little. The Hon Andrew Little says that it is hard right—it is hard right—for me to suggest that New Zealanders enjoy being able to earn their own money and make choices about how they spend it. They enjoy a Government that looks after their own money carefully, that spends it wisely, that watches those dollars, and that ensures that they get results for the additional investments they make. He says that it is hard right to have a Government that actually delivers rather than just talks about how much they’re spending. It is hard right to take issue with Shane Jones—

I apologise to the member. This debate is interrupted and is set down for resumption next sitting day.

Debate interrupted.

The House adjourned at 6 p.m.