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

I’m not going to go through the title of the bill again. Mr Chair, you’ve eloquently outlined the title of the bill—long as it is. There’s a lot in the bill, and we are here at the committee stage during the first call. The last time I stood I was talking on the KiwiSaver enhancements: the lost opportunity that this bill has not taken up, by doing something that should have been done or could have been done in this amendment bill.

There have been a couple of things that are good. I particularly like the holiday period being reduced from five years to one year, and the renaming of it to talk about a saving suspension, and that’s all about getting people involved in KiwiSaver. KiwiSaver is a good platform and it encourages people to save for their superannuation, and their first home, in fact. But I think there has been a lot of opportunity that could have been taken up. As we know, not enough people are in KiwiSaver. In fact, the people that should be in KiwiSaver many, many, many of them are not in KiwiSaver, and that’s simply because there is an option for them not to participate. It’s almost too easy to opt out and thereby not save for their future retirement needs.

So there could have been more work done on the KiwiSaver enhancements. I’ll give you an example: let’s just talk about the five-year lock-in period. So a couple of things the KiwiSaver enhancement also does is remove the five-year lock-in period—that’s a good thing. It allows the over-65s to opt in to KiwiSaver—that’s also a very positive change—and then it allows larger contributions to be made to the KiwiSaver: the 6 percent and 10 percent contributions. But that’s only going to be used by those that can afford to put in the 6 percent or 10 percent contribution, and that’s all very well and good, but I’m more concerned about those people who are not even in the KiwiSaver scheme. I’m concerned about those people who despite a legislated minimum wage increase, for example, are still not putting funds into the KiwiSaver.

By not putting funds toward or participating in the KiwiSaver, they are leaving money on the table. They’re leaving money on the table for the employer to keep for themselves. The business is not obliged—if the KiwiSaver participant does not join in, then obviously the employer has got the anticipated contribution of that KiwiSaver participant ready to be put into the scheme. But if the individual is not participating, then of course there is no obligation for the employer to put that anywhere except in his bottom line.

So there’s a missed opportunity here for participation rates to be increased in KiwiSaver, and there’s a lot of work that could be done around that. I’m not suggesting a $1,000 rebate or a $1,000 incentive, which the previous Government took away, because that was, again, not targeting the people that are most in need—the people that should be in the KiwiSaver programme that are not in the KiwiSaver programme. So, you know, for example, hypothetically, if the KiwiSaver was compulsory, that would enable—

CHAIRPERSON (Adrian Rurawhe): Can I just ask the member to come back to Part 1 of—

Well, I’m talking about the KiwiSaver opportunities—the KiwiSaver enhancements—that are available to this bill.

CHAIRPERSON (Adrian Rurawhe): We are debating the rates. I mean, that’s in Part 4, but if you can—

All right, I’ll come—OK.

CHAIRPERSON (Adrian Rurawhe): —at least relate those comments to Part 1.

All right. Well, I think I’ve made my point. There’s a missed opportunity here for the KiwiSaver to be enhanced further than this bill has done.

The next point, obviously, is the setting of the income tax rates. This bill sets the rates for the year, and, again, it’s a missed opportunity. There was an opportunity for the Government to back up, to reinforce, and to adopt the thresholds that we had initiated, but the Government did not. The Government did not. They maintained the old, old rates. That, essentially, has taken away $1,000 out of taxpayers’ pockets. So that’s another missed opportunity. So, again, this bill—though it does some good things—is a bill of missed opportunity.

Now, there’s an amendment, I believe, under the name of Amy Adams, which I won’t go to, but I’m sure other members will. But my second point here is around the rates that are actually being set. They are, effectively, higher than they would otherwise be. They are, effectively, higher than they need to be, because there are surpluses up the wazoo for this Government to go and spend, invest, or waste without having these rates that are in place and that are being set by this amendment bill today. There was an opportunity to give taxpayers money—their money; remembering that it’s their money—for themselves to spend as they wish. As I say, the Government of the day—the Labour Government—has not taken up the opportunity to change the thresholds that were in place prior to this bill.

The other parts of the bill that I’d like to just touch on very briefly relate to the Working for Families abatement rates and thresholds—again, another missed opportunity. Abatement rates, as we know, are a massive disincentive to work. They incentivise people to remain in the status quo—the situation that they find themselves in—because for every dollar that they earn, the abatement rate is so high that it sort of says to them, “Well, I’m not even going to bother getting out of bed.” In fact, you can paint a situation where an abatement rate is actually where you earn a dollar and you owe the Government more than the dollar. There are situations where abatement rates are so aggressive that it encourages people to stay in bed or on the couch, and that is exactly what we don’t want to do. We want to have abatement rates and—

Mr Chair, thank you very much. It was interesting hearing Alastair Scott talk about KiwiSaver. I look forward to his contribution on Part 4, which I think deals with KiwiSaver, and in terms of abatement rates, that was quite interesting, as well. But that’s also another section of the bill.

My understanding is that we’re doing this part by part. If they wanted to do the bill as a whole, then I’m sure we can consider that. But this is just about the annual rates that Mr Scott said were outdated. Well, they have been there since 2010, so if the Government of which Mr Scott had been part of, the previous Government—if they had wanted to change it, you had a long time to do it, son. You didn’t do it. They haven’t been done. We think they’re pretty good at the moment, but what we have done is we have asked the Tax Working Group to take a look at this and take a look at the fairness, the balance, the integrity, and the structure of tax in general.

So, as it is—where it stands at the moment—is that these are the rates. It’s one clause. A simple clause—very easy. Let’s keep the debate on to that, or we’ll have to close this down. Thank you very much.

Thank you, Mr Chair. That’s very helpful of Minister Stuart Nash to tell us what to do. I’ve got to say, it’s a pleasure to be talking on the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill, in my first opportunity. Yes, we are talking about tax, and we’ve got a Government that loves taxing people.

💬 Ian McKelvie: They’re loving it—love it.

Loving it. So it’s great what the Minister just said, because he thinks the tax rates are OK. Well, I don’t think they are, actually. The tax rates enshrined in this bill are higher than what we would have done if National tax rates were absolutely implemented after the 2017 election promise. So it’s interesting. What is enshrined in this bill? So, the tax rates are set for 10.5 percent up to $14,000; $14,000 to $48,000, 17.5 percent; $48,000 to $70,000, 30 percent; and thereafter, 33 percent. So, if we’d gone back and done what National should have done, and which all New Zealanders would benefit from, we would have had much more leniency for people who are subject to increasing wages—that actually happened under a National Government.

The abatement rate, or the threshold at which the increased taxes would have occurred, is not $14,000; it would have been $22,000 for the first rate of 10.5 percent. That’s quite a significant increase. That’s actually an $8,000 increase. So for that first threshold—all those people in New Zealand who earned up to $22,000, rather than $14,000, would have been much better off. Then, the second rate, where you tipped up to the next rate of 17.5 percent, rather than it being $14,000, it would have been extended to $22,000 to $52,000. So for many people—and the Labour - New Zealand First Government loves talking about these lower-paid people, and we do need to look after them. That’s why we would have said that for the majority of those people, they would have had to pay only a marginal rate of 17.5 percent, versus the lower rate of $48,000, under these current proposals put in this bill. And, of course, it cascades right to the top.

So if you asked me about tax rates and about improving the lives of New Zealanders, Minister Nash, it is about these things. These are the things that would have been better for New Zealand: $1,000 for all those New Zealanders would have been much better. Then, of course, we talk about accommodation, Working for Families, and all those other things that are the real things that help people. But what we ended up with in this thing—enshrined in this legislation and this is why we oppose it—is actually a higher rate of tax for those people. That’s why we didn’t want it. Then, on top of that, we’ve had the Government—New Zealand First - Labour - Greens—impose $2.6 billion of new taxes since they’ve come into office. It’s taken only 15 months for them to do that, even though they campaigned on not introducing a new tax during their first term of Government.

Then we’ve heard today at question time about the other ranges of tax currently being thought about. You know, we talked about the agricultural taxes, the emission taxes, the fertiliser taxes—all those just go on. I think there are six of them. And then, of course, the capital gains tax. This is a Government that loves to tax—loves to tax. That is the problem with this situation and that is why Part 1 of this bill is so patently wrong, because it’s unfair for New Zealanders. It’s unfair for those vulnerable New Zealanders who are earning the lower amount of income in New Zealand. We actually wanted to do something concrete about it.

Then, also, if you look at the people like those students trying to earn their bit of money to go to university, those young families who haven’t yet got a family and who therefore can’t access Working for Families, and those superannuitants who don’t get any tax breaks, they are the people that are disadvantaged under these new tax arrangements being proposed in this bill, because they’re the people that don’t get any credit. They’re the people that miss out on these so-called tax breaks. We heard about the superannuitant winter tax payment of $800 that was promised under National. The Government tried to put in place new arrangements and $230 went through in the year just gone by. But the fact is, they’re already in—we’re going to see a bill coming into the House. It was noted earlier before question time: that, in fact, we’re already going to have another go at trying to get the winter payment legislation correct, because it was hurriedly put through. It’s inappropriate—

No, we’re on the taxation bill, not that bill. You can’t anticipate what’s coming up. So carry on with the taxation bill. [Bell rung]

Thank you, Mr Chair, for an opportunity to speak on this bill. Normally, in the normal course of events, the Opposition would support these annual tax rates bills. We’ve usually got a large number of little technical tax matters that need to be dealt with across the House. But these are not normal times, sadly, because we won’t be supporting this bill, because the main thing it does is it sets the tax rates for this year and they are not the tax rates that New Zealand would have had if the National Government had been re-elected and the adjustments of the thresholds had been made. So, as we had legislated, the income tax thresholds would have changed so that the average New Zealander would have paid about $1,000 a year less tax. So, instead of only the first $14,000 of income attracting 10 percent tax rate, we would have extended it to $22,000. So for the entire first $22,000 that anybody earned they’d be paying a tax rate of only 10 percent. Then we extended the next rate up as far as $52,000, so for that next $30,000 you earned, from $22,000 to $52,000, you’re only paying 17.5 percent. That’s good low taxes, adjusting for inflation, and we haven’t seen that because of this bill.

The first thing that this Labour - New Zealand First - Greens coalition Government did—or the New Zealand First and Labour coalition Government with the support of the Greens—was cancel those tax cuts and stick with these meaner adjustments that they have put in at the moment. Why did they do that? Well, the first reason was they said that the last thing they wanted was for rich New Zealanders or wealthy New Zealand families to get a tax cut. Funnily enough, the second thing they did was give those very same wealthy New Zealand families $6,000 worth of free university education, which seemed to me to be somewhat contradictory in stance.

I suppose that is the key issue here: that we are not getting the tax cut because this Government has not got in control of its spending. It keeps spending—wants to spend more and more on very poor quality spending decisions. So we’ve got the free fees at the university, which has led to no more students going to university. So you’ve paid an extra $2.6 billion or whatever it is to buy something that you’re already getting—which are students going to university. In the meantime, all that money going into student support is not going into the quality of institutions, and our universities are falling down the international rankings accordingly. So we’ll all have free access to third-rate universities if we’re not careful. And so those sorts of poor decisions are what are driving this tax bill that we’re talking about here.

Of course, the other area of loose spending is presided over by my colleague on the other side of the Chamber, Shane Jones and the Provincial Growth Fund—the $3 billion that they are flinging around the countryside in a rush to get it all out the door before the next election. In terms of quality of spending, what we’ve seen is that it’s turned into the second sort of cut if you missed out on the Budget. What I’m focused on here is the quality of spending which is driving the desire for more tax, which has driven the fundamental decision of this bill, which is to deprive New Zealanders of the tax cut that they were going to be getting and to repeal those tax cuts and put in these—

CHAIRPERSON (Adrian Rurawhe): Order! If the member can concern himself with the tax rates—the annual rates—rather than what it’s being spent on. That will come up in later parts of the bill—unless you relate what you’re saying to the annual rates in Part 1.

Thank you, Mr Chair. The only point I’d make is that you only need to have these rates brought in because of decisions made by this Government. So I’m just explaining the existence of these rates that we are debating at the moment. These rates wouldn’t be as they were if it weren’t for the fact that this Government has got a very poor control of its spending and that has led to the decisions that we have confronted in this bill, which is why our hearts are broken that we can’t support this bill that in many other respects is doing worthy things, and the Minister can no doubt point at a number of little issues around the role of tax intermediaries and everything else in this bill which will make a slight difference to make the lives of taxpayers easier.

But we can’t support it because, at its core, it’s more proof of the rapacious nature of this Government in terms of collecting tax. So, on that basis, we do not support this bill, and we’re very much looking forward to hearing from the Minister as to how he justifies not adjusting for inflation in the tax rates that we are debating here today. Thank you.

Thank you, Mr Chair. I was going to say it gives me pleasure to take a call on this bill, but it doesn’t really. The Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill—it’s a fairly big title for a very small bill. I wanted to make a few comments on the tax rates, because I’m certainly a little disappointed that the Government has changed a policy that the previous Government had in place to give every New Zealander approximately $1,060 in tax relief. I was thinking to myself that there was a little irony in Minister Jones barracking my former colleague—my present colleague. I was going to say “my former colleague”, but he’s still here. Ha, ha! I haven’t got rid of him yet. But I thought there was some irony in him barracking my colleague about his comments on the tax rates because, actually, tax rates have a great incentive on people. I have noticed a lot of comment from this said Minister with respect to having difficulty getting people into work or to go out to work. Of course, if you disincentivise people from going out to work by taxing them too much, they certainly won’t go out to work.

I think that people have a much better feel for themselves when they go out to work and they know they’ve earned the money they’re going to get in their pocket and not been given it by the Government. The essence of the changes to the annual rates of taxation brought in by this Government were that they were, effectively, swapped for a different form of paying a person but using the Government purse to pay them as opposed to letting people earn their own money by operating on a much higher tax rate. I think tax rates are absolutely key to giving people the incentive to get out to work. And certainly, in those lower-income areas, a little tax break goes a long, long way.

I don’t accept the argument that the Government put up around the tax rates where they talked about people on very high incomes—in fact, they used MPs’ incomes most of the time—as the opportunity. The MPs, of course, only got the same tax break as a person on a much smaller tax rate because inevitably, with a scaled tax system like we have, you’re going to have that sort of effect that’s going to impact on every taxpayer, and you can’t do anything about that. That’s just how it works. Of course, that is the fairest type of tax system to operate under. So because we operate in what I think is a pretty good tax system, it does give people incentive to work. It does operate in a manner that—at the lower ends of income—gives everyone the same amount of tax back.

So I was a little disappointed when the Government changed those tax rates. I do think that there’s a lot of things in this bill that are certainly worth supporting. But, of course, in Part 1, we’re talking about those annual tax rates. I certainly can’t find my way clear to support it on that basis. There will be one or two other bits later in the bill that I will find difficulty in supporting too, but that’s for very different reasons.

So I’m very disappointed that we’ve seen the annual tax rates change. I’m also very nervous about some of the things the Government are looking at with a view to what they call “Making the tax system a fairer system.” I think the fairest system we can have, with respect to tax, is the less taxation we have the better. I’m sure that the ultimate aim of this side of the House is to make sure people take home as many dollars as they possibly can. And it’s important that they do, because it does incentivise them to get off the couch and go out to work. If we want to get our young people out to work, the better we can pay them, the more likely we are to get them out to work, and particularly when you get to—

Chlöe Swarbrick: That’s why we’re raising the minimum wage.

No problem with that—and particularly when you get to some of the more challenging, I suppose, work that we do in New Zealand, particularly our rugged, rural lifestyle because, whether we like it or not, our environment is pretty rugged. So every incentive we can give those young people to get out to work is most important.

So with those few words on the annual tax rates, I’ve probably made my contribution to Part 1 of this bill, and later in the discussion I look forward to making some further significant inputs to that discussion. So thank you, Mr Chair.

Mr Chair, thank you for the opportunity to make a brief comment. I think the debate is moving along and we’re receiving a lot of similar material, but there are some points I want to make.

The first is I want to affirm the point made by the Hon Paul Goldsmith earlier on in the debate where he said it was important that we focus on low-quality, public expenditure, and I think the public who are viewing this debate might be asking that very same question after listening to the previous three Opposition speeches, because those speeches displayed absolutely no understanding of actually why this part of the bill is important.

Part 1 of the annual rates bill sets and validates the annual rates for the year up to 1 April, and as such they are a critical part of the Government’s revenue stream, and for any member to come to this House and make an argument against the annual rates that are set out in that bill, but to actually make no suggestion as to what they would do differently were that revenue to be changed, is not only a hollow argument it is an irresponsible argument. So members on the opposite side of the Chamber who have argued with some passion and ideological fervour that the rates should be lower would have been responsible members had they stood up and then said what they would cut when they cut that revenue.

That would be the responsible thing to do, because here’s something that members of the Opposition need to actually know: there isn’t literally a Scrooge McDuck - style vault that sits there underneath this House after the revenue has been collected and just builds up and builds up. Every single dollar of tax revenue that is collected through this annual rates bill gets used. It gets used in our justice system, our transport system. It gets used to build our schools, it gets used to build our hospitals, and it gets used to build houses. It also gets used for things like—

💬 Hon Dr Nick Smith: And slush funds.

Yes, that’s right, Mr Smith—developing our provincial economies that were run down for so many years, and I look forward to members on that side of the House in rural electorates campaigning against the projects funded by the Provincial Growth Fund in their districts in the election next year. I look forward to seeing that happen.

And the other thing that the revenue that is drawn down from the annual rates set in this tax bill goes to achieving is things like investing in the New Zealand Superannuation Fund and things like paying down New Zealand’s debt. For those members who argue against these annual rates, if they want to argue with any real conviction or any real consistency, they need to stand up in this Chamber and tell us what it is they would cut. Would they repay debt at a slower rate? Would they cut housing? Would they cut education? Would they cut health, because every single—

💬 Matt King: Fees free.

Fees free—what an excellent example from the member from Northland, because, despite all of their protestations, that party has not yet made any commitment to actually remove the policy should they have the choice were they in office. They are all care and no responsibility.

CHAIRPERSON (Adrian Rurawhe): Order! I’m on my feet. Thank you. I’ve given warning to the Opposition side. Now I’m going to give the same warning. You can argue about the annual rates. You can mention, in passing, about what the Government intends spending it on, but getting into detail from either point of view around the expenditure is not part of Part 1. We’re talking about the annual rates, so to both sides of the committee—if we can concern ourselves with the annual rates in Part 1. Thank you.

Thank you, Mr Chair. So in respect of the annual rate, I think probably the points that I’ve made stand on their own merits and I think the argument from both sides of the committee may well have gotten to a point at which we’ve covered much of the material. I will conclude simply by saying that the annual rates set out in this document support extremely important areas of expenditure and investment from the Government. They are set at a responsible level to build an economy that can be conclusive. And I commend this part of the bill to the committee. Thank you, Mr Chair.

I’m going to join with my National colleagues and question why this Parliament would want to impose the level of income tax that is proposed within Part 1 of this bill. I’d, firstly, remind the committee that this bill in this part proposes an income tax rate of 33c in the dollar for those earning over $70,000. Do members opposite really believe that $70,000 is a high income that warrants the highest rate of tax in New Zealand? We’ve got many nurses, doctors, policemen, very average hard-working New Zealanders—in fact, we are approaching the ridiculous position in New Zealand where people earning the average income are having imposed the highest tax rate, and members on this side of the committee say that is wrong. What is wrong with this part is that the Government is benefiting from fiscal drag—that is, that with inflation in our economy running at about 2 percent per year, even people when their standard of living is static are facing the prospect of more and more of their income being taken in taxes by this Government.

Now the member Michael Wood challenged National members in saying that the only way that you could agree to lower rates of tax would be lower levels of expenditure. That is incorrect. National left this Government with a legacy of huge surpluses. There is not a Government in the history of New Zealand that has been bequeathed a set of Government books as good as what National left for the incoming Government: surpluses looking out into the future of $8 billion a year; in this financial year over $3 billion. So for members opposite to argue that none other than these tax rates are appropriate for the workers of New Zealand is factually wrong and is around the Government building up a war chest to be able to buy votes rather than being genuinely concerned with our position on this side of the House—and that is that Government should in tax take no more money than what is absolutely needed to provide good quality public services for New Zealanders.

I look, for instance, at the rates that are being confirmed in Part 1—clause 3—of this bill, where a New Zealander who is earning just over $21,000 a year is being proposed to be hit with a tax rate of 30c in the dollar. I remind the Parliament that the very first thing that this Government did when it came to office was remove the tax relief that members on this side of the House had passed in Budget 2017, and I believe the onus is on the Minister in the chair and on members of the Government to justify why people earning those very modest incomes should be having to give up 30 cents in the dollar on their income when the Government has the fiscal room to be able to provide tax relief. We say let those hard-working, ordinary Kiwi families keep more of what they earn; that before we start doling out a whole lot of benefits—a whole lot of bribery to try and get voters suckered on to support the current Government—shouldn’t we just let Kiwi families and Kiwi workers keep more of what they earn?

I also draw attention to that lowest rate—the 10.5c rate—that, again, members on this side of the House supported changing and lifting that income threshold to take into account inflation, so that Government is not benefiting from fiscal drag. So my question for the Minister in the chair is: why not adjust these rates relative to inflation? We insist on benefits being adjusted for inflation, we insist on all sorts of Government funding being adjusted for inflation, why not give the average Kiwi battler, the hard-working Kiwi, a break on their tax and ensure that those thresholds that are provided for in this clause—that threshold at $14,000, that threshold at $48,000, that threshold at $70,000—why should that not be adjusted for inflation so that the average Kiwi worker is not being socked with more and more tax, as is the habit of this Government?

I move, That the question be now put.

Thank you, Mr Chair. I listened to that speech by Mr Wood and I just thought it was a bit rich when he talked about the Opposition not being prepared to put up an alternative case, because I thought I had outlined what we did propose, and which was overturned by the Government when it came into power, with regard to changes to the personal tax rates.

Just talking about tax, the thing that most worries me is the lack of imagination shown by the Labour - New Zealand First Government, because we’ve heard ongoing comments about increasing taxes—and we already know that the Government have imposed $2.6 billion of new taxes since they came into office—and the second thing is that they haven’t been clear about the debt levels, other than saying that they want to keep them at 20 percent, even though they at one point dropped to 19.9 percent just last year. So the way that Governments get out of that sort of spending bind—and we’ve got a free-flowing Government spending a billion for the provincial fund and a billion dollars for Winston Peters’ foreign affairs portfolio to name just two—is either to increase taxes or to increase debt, and that is the travesty we’re talking about.

So, to the personal tax rate. We have been very clear. We have already come out as an Opposition—and our leader, Simon Bridges, has been exceptionally clear—around the thresholds, and that is a $600 million package. But we believe it’s right, by making sure that the thresholds at which increasing levels of tax are paid by individuals are indexed to the Consumers Price Index, and that is a very clear statement from us and one very unusual for an Opposition only 14 months into Opposition, but we believe it is that important at a personal level that people aren’t automatically being shifted into higher income tax brackets just through inflation and that that is patently unfair, and that is the imaginative thing that we’ve already talked about.

The thing about this tax package—and this is why we don’t support it—is that it is unimaginative; it’s very unimaginative. For instance, where is the conversation around tax on companies? There’s just been nothing about tax. All we’ve done is continue the same debate at 28 percent, and the issue about that is that companies are the driver of the economy of New Zealand. They are the employers and the future employers of young people and older people who want to work, who want to have a secure lifestyle, who want to be able to borrow money to buy a house, and who want to have all the benefits of being able to afford to pay for their families, and all those associated benefits that you get from having a secure job. And the thing that worries me most about the tax arguments that’ve been going on—not only the one we’re having today but also in the wider context of all the tax debate that’s been going on—is the inability of the Government to recognise what is the driver of economies, and that is businesses.

When you say the word “businesses”, what you are talking about are individuals who are prepared to take the risk of investing in businesses, whether start-ups or buying businesses, or even buying new pieces of equipment or taking on new staff, and that drive around that at a personal level also comes back to personal tax rates. So you can overlay all the business risks, and you can do all those sorts of things, which are naturally part of the assessment of whether you’re going to mortgage your house and take on debt to be able to buy businesses and employ people, but the core is that the tax issue is quite important not only at a company level but at a personal level, and that’s the thing that worries me most about this New Zealand First - Labour - Green Government—that they seem to be oblivious of the importance of these people who take on the risks. We’ve got 530,000 businesses in New Zealand. You’d think we might have had a conversation around company tax rates. That’s been absolutely silent and, unfortunately, we’ve got a Government made up of people with probably very few members who have actually worked and owned their own business, put their own money on the line, gone through the process of understanding what it is like to pay wages, deduct all the taxes that need to be paid to the IRD.

And this is all part of what’s in this bill, because another part of this bill, when we move on to it, is all about the complications of the new PAYE system that this bill is introducing. And I’m going to return to this as part of this tax conversation, because it’s vitally important and I think one that’s been very, very much missed in the conversation to date.

Thank you, Mr Chairman. Good to take a call on this Part 1 of this Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. Often, these bills come to the House and they’re reasonably non-controversial affairs, picking up a number of bipartisan changes that need to be made to tax administration and reconfirming the rates, and quite often you will see Opposition support for them. But with this bill, we can’t do that because there are a number of quite serious changes, and my colleague Andrew Bayly has discussed some of those, and, as he says, there are others that we’ll discuss when we get through to the significant restructuring of the PAYE system and how that will work.

But the piece that I wanted to particularly raise in this first contribution comes back to what should be a reasonably formulaic part of the bill, which is confirming the annual tax rates. Now, in National we have a very strong and simple view that people should keep as much of what they earn as they can, and the Government shouldn’t be taking any more out of people’s pockets than it actually needs to effectively and efficiently provide the services to the public. Now, we can all debate exactly what that amount is, but one thing that I think this House should be able to agree on is that those tax rates, and the thresholds at which they apply, can’t be fixed in stone for all time. Like every figure in our economy or every figure in our society—whether it’s the price of a loaf of bread, your rent, your car insurance fee, your wages, the cost of a cup of coffee—everything moves, over time, with inflation. It’s well understood that for any cost to maintain its relativity, it has to move with inflation, and this House recognises that in almost everything it does. Almost every Government payment is linked to the Consumers Price Index and adjusted, whether that’s benefit rates or the superannuation rates or Working for Families—any number of payments, we make sure they’re updated for inflation.

Yet when it comes to tax rates and when it comes to tax brackets, the Government won’t move them for inflation. Now, why won’t it do that? Well, it’s pretty simple: because every year the effect of inflation means the Government takes a little bit more tax without anyone noticing. So rather than turning around and saying “Do you know what? We want to take more money out of your pocket, and we’re going to be honest about that and put up the taxes.”, they just say, “Why don’t we just let those figures stay frozen in time and then every year as the costs around us go up and the inflation pushes up wages and inflation pushes up costs, we’ll be taking a little bit more tax and a little bit more tax?”

I want to explain very briefly what I mean by that. When the existing tax thresholds were last adjusted, in 2010, there was about a $24,000 gap between the average wage and the top tax bracket. The top tax bracket at the moment is at $70,000; there was about a $24,000 gap, which meant that the average worker was well inside that. Now we’re down to a $7,500 gap, and, actually, in just a couple of years, the average wage earner will be on the top tax bracket because the Government has refused to move those tax brackets for inflation and refused to link them to inflation.

Now, National was the party that last adjusted the tax brackets. National actually legislated to adjust them again in 2017, but the first thing this Government did when it took office was cancel that. They said, “No, no, no, tax brackets shouldn’t keep up with inflation, because if we leave them frozen in time then we can take more money every year by stealth, without New Zealanders being aware that every year we’re taking more and more of their real spending power.” Now, that is just wrong.

In fact, the World Bank recently has come out in its report into Australia and said they should link their tax thresholds to inflation. I agree with them, National agrees with them, and we’ve announced, earlier this year, that our policy would be to do that. So when we are confirming the annual rates in this bill, this side of the House won’t agree to leave them frozen at 2010 rates and have the Government let inflation take more tax out of people’s pockets.

I’ve got an amendment in my name on the Table for this bill, looking to amend clause 3, which does the very smallest of adjustments and says, “Let’s adjust them for the last three years of inflation, let’s move those tax rates.” It’s only the beginning; fiscally, it’s not a huge amount, but when it becomes important is when that becomes the system under which we operate. Every three years, the tax thresholds should be adjusted to take account of inflation. If the Government is being honest with the people of New Zealand about what it is taking, the tax thresholds should automatically move with inflation, and then the Government can have an upfront discussion about what extra tax it wants to take.

So the amendment in my name would allow this Government to show good faith and say, “We should adjust those tax thresholds for inflation, we should move them up on a regular basis so that we’re not helping ourselves to more and more by stealth.” If the Government and the party on the Treasury benches want to give truth to their promise to be the most honest and transparent Government, well, here’s a great example of how they could do it. Be honest and transparent when you want to take more tax. Don’t freeze numbers at a 2010 level and let inflation do the work for you. We wouldn’t allow wages to be frozen at a 2010 level. We wouldn’t allow benefits to be frozen at a 2010 level. We wouldn’t allow the costs of anything we do to be frozen at that level, and yet this Government is happy to leave those tax thresholds frozen. If they don’t move, if they don’t accept my amendment to this legislation, then they are, effectively, saying to someone on the average wage that the Government thinks they should be paying the top tax rate in just a year or two’s time.

Now, I don’t think that’s right. I don’t think the average wage earner should be facing the top tax bracket. They wouldn’t have under National, they weren’t under National, and we’ve made it very clear that our policy would make sure that every single parliamentary term, tax thresholds are adjusted. Now, of course we can have a discussion, and we will, and we’re having them at the moment around what taxes should be, but they should be discussed and debated and put honestly in front of the people of New Zealand, not by freezing a rate because you don’t have—

💬 Hon Shane Jones: No, we’re investing in the regions: billion trees, jobs.

—the openness to actually say to New Zealanders what the tax rates will be. Now, Mr Jones over there is barracking away, which I find somewhat amazing, because it’s his wasting of money which is one of the core reasons this Government wants to take more tax off New Zealanders; $3 billion of pork barrel from that man is one of the main reasons this Government is looking to take more tax. If they just spent the money they had well, and didn’t have Mr Jones mulching seedlings because he can’t organise himself to even plant a few trees, then we wouldn’t need to take more tax.

So my challenge to the Government is this: how about you rein in the loose spending? How about you rein in the pork-barrel politics of Mr Jones, the failed fees-free tertiary policy, the 250-odd working groups that have cost hundreds of thousands of dollars? How about you rein that in, get a bit of competence in your management, and then let New Zealanders keep the money that they work hard for. Don’t sit there and let inflation put up tax every year by stealth, because they don’t have the honesty to be upfront with New Zealanders and say, “We want a bit more tax to fund Shane Jones, so we’re going to take it from you.” Be honest; put indexation into the legislation. My amendment is a very small step towards that, but without some signal in this legislation that the tax rates need to change for indexation, this is a bill we can’t support.

I just want to finish by saying this in respect of tax rates: if National was the Government right now, and the legislation we passed in 2017 hadn’t been cancelled to fund Shane Jones’ questionable spending habits around the country and his handing out of secret loans to private companies, New Zealanders now would be paying a lot less tax. What are they facing under this Government? More tax, higher rents, higher petrol taxes, impending capital gains taxes, and inflation eating away the core value of what they earn. That is not right, and that’s why this side of the House cannot support the annual rates in this bill.

I move, That the question be now put.

Thank you, Mr Chair. The Government seems intent on closing down this debate. Tax is something that’s vitally important to everyone, as we all know, and what’s interesting is we’ve covered a little bit about personal tax rates, we’ve just touched on corporate tax, but very little conversation about other aspects of our tax system. This is the thing I find so unimaginative about this Government, that when you start to look at the provisions in the Working for Families tax package, and also all the other aspects of tax and provision around that for those families, the thing that strikes you most, when you look at it, is how complicated it is.

Very few people, in my view, actually understand what those arrangements are. I think, again, here we’ve got a Government who hasn’t had the time to think about it, who has just simply rolled through with an existing sort of arrangement. The only thing that’s happened is that the current Minister of Finance has made the system even more complicated, and I think that was a bad move, actually. It was a very bad move because the arrangements now are complicated and complex. Most people don’t understand it and, in many cases, are not able to work out what their tax position is and what they’re entitled to do.

By way of example, the first one is the minimum tax credit. As some might know, this is to help families who don’t have an income or who have an income below $26,000. The thing about this particular one is that it’s not available to students and it’s not available to superannuitants. You’ll recall in one of my earliest contributions I’ve talked about the impact of the tax system at the moment and how it disadvantages students, it disadvantages young couples without a family, and it disadvantages the superannuitant, and here we are: we’ve got a family tax credit trying to work with those people earning less than $26,000 but one of the first exclusions are students and superannuitants, and I think that’s wrong. I’d think that if you’re talking about fairness and equity in the tax system—and we’ve got a Government great on rhetoric but low and slow on actual implementation around these issues—this is the first part of it. Those lower-income people in New Zealand, the most vulnerable people—this tax system should be designed to do more about it, and, of course, there’s been nothing stated about it and no one wants to talk about it at a Government level.

The second one is actually the family tax credit that applies where you’ve got children. Again, the rates—if you’ve got a child between just a baby and 16 years, you’re entitled—your first child’s about $4,800; it increases to $5,300 for the 16 to 18 years, at which point it cuts off, and, of course, it’s a slightly lower rate for your second child.

But it’s interesting, going back to what we were going to implement back in 2017, what we were trying to do is get rid of the complications round this, because there’s all these different thresholds at which the rate applies depending on how old your oldest child is, and all that sort of stuff. We were simply just going to take the highest rate and, basically, say that applied for the number of children and make it very easy so people could understand it, because not everyone’s an expert on tax. It meant that those families could actually go and be able to budget very clearly, and it’s something that’s just easy to implement. The complication around the implementation issue is massive.

But the one wonderful contribution that Mr Grant Robertson made in the Budget last year, of course, was to introduce the Best Start tax credit, which is just another layer. It deals with your first baby up to three years. It’s just another level of complication. What we need is actually a Government that’s going to be more imaginative about these aspects, and this whole issue is paramount, in my view. If you want to deal and help with families, this whole area needs to be de-cluttered, not made so complicated and people can therefore understand it and know what they’re entitled to. At the moment, we’ve just got a Government sleeping at the wheel. All they want to do is impose more taxes, and I think that’s wrong.

I move, That the question be now put.