Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill

on behalf of the Minister of Revenue: I move, That the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill be now read a second time.

The policy proposals in this tax bill have two objectives: to support the simplification of the tax system and to support business. These are important objectives for our economy and for our society; so I am very grateful to the Finance and Expenditure Committee for their recommendations on this bill, which in my view strengthen and improve the proposals.

For the benefit of the members and people listening, I’ll give a quick recap of some of the main proposed measures in this bill. Members may be familiar with the simplification programme being run at Inland Revenue. If they’re not, they should be. Already, most of the IRD’s services and functions had been transitioned to a new, simpler set of processes. And indeed yesterday someone said to me how good it was now to deal with IRD. This year it will be the turn of KiwiSaver and student loans. Information will be processed more quickly and will be more accurate. My daughters with their student loans will be grateful for this improvement.

I’d like to thank my colleague the Hon Kris Faafoi for introducing this important addition to this bill, and to Tim and Joan for advocating for this change, which will improve the retirement years of many Kiwis. I’m also pleased that this bill contains provisions to allow Inland Revenue to refund investors who have paid too much tax on income from their portfolio investment entities, or their PIEs, as they’re known. The ongoing simplification of the tax system now allows Inland Revenue to see more clearly when a person is on the wrong tax rate. When investors are on an incorrect prescribed investor rate—or a PIR—too much or too little tax can be paid. There has been no provision under current legislation to allow refunds to people who have paid too much tax on their PIE income. And this Government is about fairness. That’s why we’re making these changes. I’m pleased to be able to inform the House that this bill sets that right.

In designing a solution to this problem, we wanted to ensure we had a clean, simple and, above all, fair system that would address both the over and underpayments. Members will be pleased to hear, therefore, that this bill now includes provisions for a square-up process to ensure that investors pay neither too much nor too little tax.

The beauty of this solution is that in keeping with the IRD’s automatic refunds process, PIE investors will not need to do a thing to get a refund; it will all be done automatically for them. But prevention is better than cure, so the bill also allows IRD to contact the investor’s PIE fund to put people on the correct PIR so that there are no over or underpayments in the first place.

Student loans: a very important area for not only the students but for their parents and, indeed, often their grandparents. Shifting now to the other main focus of the bill, this bill contains several measures to improve and simplify the administration of the student loan scheme, including treating those overseas-based borrowers with a disability or serious illness as New Zealand - based so they don’t have to pay interest on their loan. It will also allow Inland Revenue to notify a borrower’s employer when the borrower’s loan is close to being fully repaid. This will enable employers to make final deductions to reflect the remaining loan balance, preventing overpayments by the borrower.

The Finance and Expenditure Committee has recommended a number of changes to the student loan proposals in this bill, following further advice from officials in consultation with affected employers. This includes a proposal to reduce the threshold for making student loan repayments on other income, such as investment income, from $1,500 to $500. Now that most people have their tax returns automatically completed by Inland Revenue, the compliance costs for filling tax returns are minimal or even non-existent for most people, so there is no longer a need for such a high threshold.

IRD research and development refundability: this Government wants to grow our economy and improve living standards and wellbeing by building a productive, inclusive, and sustainable economy. For businesses, research and development is recognised as a key indicator of innovation, which enhances their ability to succeed in changing and dynamic markets. More broadly, R & D enables the diversification of the economy by encouraging new industries and companies, new jobs, and new ways of doing business. So we have committed to increasing R & D expenditure to 2 percent of GDP over the coming decade of the 20 years that we should be in Government. This bill continues that focus. We want to support more business expenditure on R & D, whether these businesses are in profit or loss.

When the new R & D legislation was introduced last year, it proposed that as well as offsetting against a taxpayer’s tax liability, R & D tax credits could be refunded up to $255,000 for companies that have at least 20 percent of their salary and wage costs dedicated to research and development. This was always intended as a temporary measure while a more comprehensive refund scheme was developed. That new, more comprehensive scheme is now contained in this bill. Under these proposals, taxpayers will be able to claim refunds up to a cap based on the amount of labour-related taxes they have paid in New Zealand, such as PAYE or fringe benefit taxes. It will also make refunds available to a broader range of businesses. These changes will allow us to provide more support to more businesses while protecting against the risk of fraud. The bill also contains a number of smaller improvements to further enhance the R & D scheme. Once this taxation bill is passed, I believe that we’ll have an R & D tax credit scheme that we can all be proud of.

Other amendments: the bill also contains a range of other amendments and improvements necessary for the smooth operation of our tax system. Many of these amendments align the law with the original policy intent. There are also several remedial changes to the provisional tax rules which simply clarify existing rules. We’re also making some changes to the employee share scheme rules to improve their workability for businesses, including those with Trans-Tasman schemes.

In conclusion, these then are the main features of this bill. The objectives of the bill are firmly aligned with the Government’s aspirations for the tax system, for the economy, and for our society. There are many, many areas of legislation that we have to improve after nine years of neglect by the previous National-led Government; we are working through these systematically to ensure that our taxation system and our system of providing Government services are fair to each and every New Zealander. This piece of legislation will be one more step in that right direction. It is therefore with pride that I recommend this bill to the House for its consideration.

It’s a pleasure to be talking on this, the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill second reading. And, of course, it was wonderful watching that member Damien O’Connor give his speech—and he read the whole thing entirely. I’m just wondering why Mr O’Connor has had the pleasure of talking about this bill. Does that mean that there are no other people in the Labour Party or whatever from the Government side who are available to give this speech, who actually attend and have been a member of the Finance and Expenditure Committee for some years? I just find it startling that we have to rely on a person from the West Coast who represents the agriculture industry to front up in a speech that he has never had anything to do with.

💬 Hon Dr David Clark: Has to be a Minister. What does the member mean? It has to be a Minister.

And so—and there we are, we’ve got Dr David Clark in the front there. I thought he was an associate finance Minister; maybe he could have stood up and given us a good resume of this bill.

Anyway, contrary to that last little flick from the Minister talking about nine years of neglect and how they’re fixing up the tax policy, and, gee, they’re doing a wonderful job! Well, for just a bit of history, normally all parties when they’re in Government pass about three tax bills every year. When we were in power we did it; you’re in power, you’re doing the same thing. This is one of a series of bills that we put through this House to make sure we have a robust, excellent tax system, and I’m looking at those officials on the right-hand side. New Zealand has one of the best tax systems in New Zealand, and this is part of the ongoing process of doing that.

So this bill is wide ranging—this bill is wide ranging. It’s got five key points. First of all, it’s got the KiwiSaver, and I’m going to return to that because it’s quite significant.

We’ve got a number of student loan changes, and there are, essentially, five of those, which I might just try and recap. The first one’s giving Inland Revenue the ability to write off student loans taken out before 2000 if there are extenuating circumstances; clearly if people are trying to avoid their debt, they will have to pay it back, but there are occasions when it needs to be written off for valid reasons. The second one is limiting changes to the borrowing repayment obligations prior to April 2013, and it’s all to do with residency issues. Allowing employers to be notified of employees’ loan balance near the end of the repayment period so that we don’t see employers deducting their last student loan repayment and then for the person to have to go to IRD and get that money back—so making it simpler. Also, treating overseas-based borrowers with serious illnesses and disabilities as physically in New Zealand.

One of the key things that were discussed in this whole process was a very good amendment put up by our good candidate for Wellington Central, Nicola Willis, to do with some good issues around people with congenital diseases, and I think it’s excellent. I know Mr Lawrence Yule—or maybe Nicola—is going to talk about that shortly, and that is very much a part of what we’re talking about here.

Renaming the student loan repayment issue: everyone talks about it being a holiday, and we were very clear and keen—all members of the Finance and Expenditure Committee—that we got the language right.

We do not want people taking perpetual holidays in terms of making contributions to their KiwiSaver, because it’s essential that everyone in New Zealand puts money into their KiwiSaver and saves for their future. There were a whole lot of changes to employee share schemes, and particularly where young start-up companies, because they can’t afford to pay market wages because they don’t have the cash, what they do is they often offer shares to those people, their employees. So when you go through capital changes and takeovers and that sort of stuff, what that would traditionally trigger would be that those type of schemes would have to account for that capital gain.

So this bill, very appropriately, deals with that, and gives a lot more flexibility around those people in terms of when these businesses evolve over time and take on new shareholders. I think it’s an excellent proposition, and it’s about supporting our capital markets in New Zealand, which need lots of support.

There are a whole lot of changes around granting overseas donor status, and there are a number of new charities brought into play. There was an issue around the jurisdiction and the determination of the commissioner. So often the commissioner is approached by people seeking clarification for a tax matter, and she will—the current commissioner, who does an excellent job—often give determinations. What this bill has is an ability to make sure she doesn’t get locked into those determinations. So there’s appropriate give and balance in the system that she can give them, but if she retracts them, people who have sought advice are not then detrimentally affected by it. Again, a very appropriate solution to an issue.

There were also issues around withdrawal of these non-binding rulings, which I spoke about. There are attribution rules, which are when people use a company to basically undertake services, it only has one source of income. These are referred to as attribution rules. Again, this bill deals with that quite comprehensively.

There are thin capitalisation rules, which is where companies—overseas companies, traditionally—use this approach, where they borrow more than what would be traditionally acceptable in terms of financial leverage, and they use that because the borrowing costs become tax-deductible. It’s a way of minimising their profits in New Zealand. There are, again, some very good changes in this bill to deal with that issue.

The other major thing, and Parmjeet Parmar has a lot of expertise on that, is around research and development, and, again, making research and development much more accessible.

Now I want to turn back to KiwiSaver. This is the travesty. We just heard the Minister before talk about KiwiSaver and wax lyrically about what they are doing, what this bill does for KiwiSaver. This is a travesty because that Government—that Government that seems and wants to talk about representing the poor of New Zealand, the dispossessed, and being seen as the caring Government—has basically taken and expropriated about $42 million in the 2018/19 tax year, and again a similar amount, probably $75 million, roughly, from those taxpayers who have inadvertently been paying too much tax on their PIE investment income.

A PIE normally would be some form of KiwiSaver investment account, where you’ve legitimately put it with a KiwiSaver, or where you have an authorised fund manager to manage your funds. In this situation, there is about $75 million in an account held by the IRD. I put up an amendment to say the Government should be paying that money back to these people, often the ones on the lowest amount of income. This Government—this Government—refused not only for the 2018/19 year but for the 2019/20 year, the current year. Originally we heard: “Oh, we can’t do it. We can’t do it because the system doesn’t allow for it.” Well, actually, the commissioner confirmed that she could do it; the systems do allow for it. So then I questioned the Minister of Revenue in the House here, and then I heard: “Well, it’s a major legislative barrier.” Well, actually, I wrote this amendment; I wrote the legislation that would enable it to happen.

All that needs to be done is attach it to a piece of tax legislation, and guess what we have in front of us—guess what we have in front of us! A piece of legislation. So we heard the Minister say, “Oh, we’re going to make this effective from the 2021 year going forward.” That means the Government has basically stolen about $75 million from the lowest-paid investors of this country, taxpayers, and they’re going to keep the money—they’re going to keep the money. That is wrong. The whole principle of tax is that you should pay your fair share, and no more.

I found a wonderful lady who had come from Uruguay, who was an economist. She had inadvertently been overpaying on her PIE investment funds. She had tried to get the right rate from the investment fund; they refused. It was only until she changed provider, and then she got the right rate. She cannot get her money back from the IRD. It is outrageous—it is outrageous. It is wrong. This bill should be addressing that issue.

There were some moments of gold—pure gold—in the speech given by the member who has just sat down, Andrew Bayly. Here is one of the moments of gold: he said, “New Zealand has one of the best tax systems in New Zealand.” Well done, Mr Bayly. I quite agree. But I also agree with what I think he meant to say: it was one of the best tax systems in the world. Indeed, we do have a very good tax system.

The other moment of gold was when the member who just sat down berated us for not fixing a problem that has been in place last year, the year before last, and the year before that and the year before that and the year before that and the year before that and the year before that and the year before that. It’s a problem that has been in place for a long, long time. Who is the Government that is fixing that problem that has been there through the years of neglect? We are. We are fixing that problem. Going forward, we will be able to ensure that people pay exactly the right amount of tax on their portfolio investment income. This Government on this side of the House is fixing that problem.

Another moment of gold, though—in fact, it was quite extended in the speech from the previous speaker—was where he talked through the various measures that the bill is taking and, in fact, agrees with them, as is commonly the case with tax legislation. It is broadly agreed across the House because it is about getting the tax system right.

Indeed, that was the approach that was taken by many of the submitters to this bill. So as the chair of the Finance and Expenditure Committee, I want to just refer to some of the people who came and made submissions to us, and to thank them for their work. We had Chartered Accountants Australia and New Zealand, the ANZ bank. We had Kensington Swan, now Denton Kensington Swan, KPMG. We had the Corporate Taxpayers Group, Ernst & Young, Deloitte, the Financial Services Council of New Zealand, PricewaterhouseCoopers, Tax Management NZ, Russell McVeagh, and so on. All the people who often put in submissions on tax bills, and their suggestions were listened to carefully, and where it was sensible to do so, implemented. Why? Because there’s a broad agreement on what we should do with the tax system in this country.

However, there was one submitter who I think caught the imagination of the entire committee and, indeed, I think, of the Parliament, and Mr Bayly has already referred to him indirectly, but I would like to name him and his mother by name. The most compelling submission we received was not actually on this bill, it was on a previous one, but we brought the work into this particular bill. His name was Mr Tim Fairhall, and together with his mother, Joan Fairhall, he made a submission to our committee.

Mr Fairhall has trisomy-21, which we often know as Down syndrome. He’s a lovely man; cheerful, happy. He holds down a job at his local supermarket. Like many Kiwis do, as part of holding down that job, he has been putting money into KiwiSaver. But as it turns out, trisomy-21 can shorten people’s lives. It’s a congenital condition, and people often have shortened lives. Most of us will collect our KiwiSaver when we turn 65. Mr Fairhall may not live that long. So together with his mother, he made a compelling presentation, saying that he should be enabled to access his KiwiSaver funds before the standard retirement age of 65. Why? Because of this congenital condition that will shorten his life. We agreed.

So what happened was the committee reviewed his evidence, and then Kris Faafoi, the Minister, decided that we should actually do something about it. So thank you to Minister Kris Faafoi for responding in advance to the submission, and thank you to the committee who listened with such respect to Mr Fairhall.

And he has in fact brought about a significant change in the way that we administer KiwiSaver legislation in this country. So to those who say that nothing ever changes at select committee, that they just get to say their words and then the MPs ignore them, well, I tell you, here is the evidence that that is not the case. Mr Tim Fairhall achieved the end he wanted, and I think we’re all grateful to him.

This is an excellent bill, full of the standard sorts of measures that occur in tax bills. Of course we can refine it further, but it is good legislation which has been through a good process and I commend it to the House.

Thank you, Mr Speaker—

💬 Hon Member: Take your time, Paul.

Sometimes it pays to take the appropriate amount of time to come to the right conclusion. And on this matter, I’m glad to say that National supports this bill: the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill.

The primary point I’d make first is that there has been a long tradition of parties across the Parliament working together on tax reform in order to maintain the high-class tax system that we have here in New Zealand: low rate - broad based tax system that brings the money in that we need to provide the public services that New Zealanders look forward to and expect. We work constructively together on many of these such bills and we continue that work today.

There is one particular point of contention over this bill that my colleague Andrew Bayly alluded to in relation to what can only be described as a slightly sneaky approach taken by the Government in relation to mistakes made by the 550,000 people who weren’t taxed at the right rate for their KiwiSaver. And we’re thinking particularly of young people—young people who’ve been working hard and have got their little KiwiSaver account. They’re not making much money, but if they haven’t pushed the right button at the right time, they end up being taxed at 28 percent, which is well above the rate that they might normally be taxed at—it might only be 10.5 percent, 10c in the dollar if they’re earning a very low income, they’re doing part-time work, they’re toiling away at the cafe or working at the Pizza Hut, or something like that, trying to make some money in order to get themselves through university or trades training or some work, and are getting taxed too much on their KiwiSaver contributions.

Now, the approach that Stuart Nash has taken has been heads you lose, tails I win. That’s such as to say that if people have paid too little tax, he will come and collect it, and if they paid too much tax, tough luck, you’re not getting it back. We don’t think that’s right because we think Kiwis deserve the opportunity to get taxes that they’ve overpaid by mistake back, when that situation has been rectified. So I stand here in support of Andrew Bayly: a very strong and effective member of Parliament based in Hunua who is making a great contribution. So we support him on that.

The other broader point I’d make is that we’re standing, of course, at a time when we’re talking about tax and the tax system and the wider burden that New Zealanders are feeling around the cost of living and the pressure that they’re feeling on their pockets. This is a party—the National Party—that is concerned about that and wanting to put more money in the pockets of New Zealanders and are very open to offering ongoing tax relief. Nothing mentioned in this bill, but something that we have indicated that we’d be keen to do is to regularly adjust the tax thresholds for inflation, because if you don’t do that with inflation, people’s incomes rise and they’re dragged into higher tax rates and they end up paying more tax. If you get away with that for a long period of time then people are paying a lot more tax and you find that somebody on the average wage in New Zealand of around $64,000, $65,000 is paying 30c in the dollar on a substantial part of their income and is getting very close to the top tax rate at 33 percent. So you’ve got to adjust those things, and that’s something we’re going to do if we get a chance in Government.

The final point I wanted to make is in relation to that, that tax relief’s more important now than ever. We’ve got this real economic challenge that we’re all facing at the moment with the coronavirus and the impact that it’s having on the New Zealand economy and around the world. A lot of people were worried about that. A lot of people are worried about their KiwiSaver investments right now. They’ve seen the prices come down. They’re anxious about it. We’ll support the Government in anything that they do to reassure New Zealanders at this time. If they do sensible things, we’ll absolutely support it. But what we need most clearly right now is a good, clear economic plan to show New Zealanders the way to get back to growth and to have a clear set of responses to help those businesses that are struggling through this difficult time. So we’re conscious of that this evening, but on the details of this bill, we support it. Thank you very much.

Thank you, Mr Speaker. I’m standing on behalf of New Zealand First to take a call, actually, on behalf of Fletcher Tabuteau, who isn’t able to attend this wonderful evening of comradery and convivial relationships across the House. Although, at the end of Mr Bayly’s contribution, I couldn’t work out, and I was looking around quite perplexed and puzzled because I think everybody on this side of the House was confused whether you were going to be supporting it or not. You certainly came out of the gates pretty passionately, which would suggest that you weren’t supporting it, but that’s been articulated now. And we now can see that the National Party are actually going to be supporting this bill, which gives me some heartfelt excitement that we can actually work together collegially to come out with the outcomes that are going to benefit all New Zealanders.

From time to time I do sit on the Finance and Expenditure Committee. It’s a select committee that I think is very well chaired. I think it’s a great team that come together to come out with good outcomes for all New Zealanders. The contributions that Mr Bayly makes inside that select committee, I think, are worthy, although his contribution today, I thought, was a little bit lacklustre—too much passion and not enough information.

The number of things that this bill does is quite simply three things—well, it’s twofold really. It simplifies the tax legislation, it modernises the tax legislation, and it makes the tax system fairer for all New Zealanders. And when you start talking about tax, it’s not particularly the most sexy subject of all.

💬 Hon David Bennett: Does the alarm go off when you go through the door?

When your contribution comes, Mr Bennett, I’m sure that you’ll be putting some people to sleep with your soporific tones, and we’ll be looking forward to what you have to say!

I’d like to also take this opportunity to congratulate the Minister of Revenue, Stuart Nash, and, of course, Kris Faafoi, the Minister who has put through Supplementary Order Paper (SOP) 293, which I think is a fantastic piece of work, and it’s come in at a timely place to certainly discuss those things. Look, this omnibus bill covers over, essentially, three parts of the Act. It deals with the KiwiSaver Act, the student loan scheme, and various taxation Acts, which encompasses a simplifying of taxation to make it easier for people to understand, and I’ll run through those five points briefly.

But the first thing it does is it allows KiwiSaver members to change their contribution rates through their scheme providers or through the Inland Revenue as opposed to just having to do it through their employers. The second thing it does is allow the Commissioner of Inland Revenue to change the tax rates applied for portfolio investors in a greater variety of circumstances, rather than leaving the onus solely on the investor. The third thing is to broaden eligibility for refundable research and development tax credits. This is something that is going to help stimulate our economy, get particularly small and medium sized businesses, which will benefit hugely from this opportunity, to invest into getting better returns for their investment, and start “R & D - ing” themselves into better growth yields, better export opportunities, and to grow the bandwidth within their organisations. And fourthly, it exempts overseas-based borrowers with serious illnesses or disabilities from being required to pay interest on student loan repayments.

Now, the SOP that’s been put forward by Kris Faafoi is, I think, a very tasteful part of what this collegial Government is all about, and that’s looking after those people with those congenital conditions where their life expectancy could be somewhat reduced. In my family, we are gene carriers of cystic fibrosis, and we’ve got members of my family that carry that. That’s a disease that is a double recessive, which can actually be passed on when two people carry the genes on to each other, and you’ve got a 50 percent chance of being passed on. So I have a family member that suffers from cystic fibrosis, and it’s one that, I think, being captured into this bill, would enable them and anybody with one of these congenital diseases—multiple sclerosis, I believe, is also captured on there. We’ve talked about Down syndrome 21, which I think is another fantastic opportunity where those people will be able to get hold of their KiwiSaver before the 65-years-of-age requirement.

So all these things, I think, are proof that this Government is working well. It’s great to see that, across the House, they see the sense in this bill moving forward. It’s a piece of legislation that I’m absolutely convinced in the future will be here and remain, unlike when the previous Government removed the KiwiSaver kick-start programme retrospectively and took the thousand dollars away from the incentive to get new young people and people newly involved in the workforce that opportunity to get going. KiwiSaver is something that we must cherish in this country because, of course, the large amounts of people that are going into retirement versus the number of people that will be working to pay for their existence is becoming well and truly out-balanced. The KiwiSaver is a positive step forward, and these five points that this bill addresses are a wonderful thing. We commend this bill to the House. Thank you.

Before I call the Hon Judith Collins: Mr Bennett, some of those interjections were objectionable. Be quiet.

Thank you, Mr Speaker. I’ve been listening intently to this debate, and I was a little bit disappointed with some of the contributions from the other side. I thought Mr Clayton Mitchell was reasonable, but I was disappointed that the Minister who chose to speak on behalf of the revenue Minister, the Hon Damien O’Connor, and Dr Deborah Russell, the chair of the Finance and Expenditure Committee—I thought they were a bit mean-spirited, actually, and I thought they were very rude about the contribution of my colleague Andrew Bayly, MP for Hunua.

I say that because I was the Minister of Revenue who, along with my predecessor in that, got the billion dollars for Inland Revenue to update its systems so that we could actually put in the systems that this bill enables in terms of the law. It really is amazing to listen to the Government’s side—other than Mr Mitchell, who was reasonable—be so nasty, when, actually, we’re supporting this bill. We have enabled it to happen—physically enabled it to happen. And what we have got, in fact, now, is a Government contribution which should be enough, should I be so mean-spirited, as to make us want to vote against it. But we’re bigger than that, and we actually are, as electorate MPs primarily, very concerned about the people who are overpaying their KiwiSaver taxes. When Mr Bayly spoke about the fact that there were, last year, 550,000 people who underpaid their PIE tax, which is mostly that, while 950,000 overpaid that tax and they can’t get a refund—he has the solution, he has the legal solution.

And now Inland Revenue, after the tremendous work that we did in Government to give them the system that could handle it, are able—they should be able—to get that money back. But no, the Government doesn’t want to support it. Primarily, I think, it’s because it’s giving back people their own money. And also, as Mr Bayly pointed out, a lot of the people whose money has been wrongly taken in the tax take, they are often people who are living on often quite a modest wage, modest salary, don’t have extra money to throw around, and this would make a difference for them. So why can’t they have their money back? It’s their money. They didn’t get a choice about whether or not it was paid. It was taken without their permission, just taken out of the investment, and they deserve to have it back.

I don’t understand why the Government won’t agree to it. They’ve certainly agreed to and have supported and now adopted the work in the amendment of our other colleague, Nicola Willis, to enable people who have life-shortening illnesses or diseases to be able to get their KiwiSaver money out first. But why not people whose KiwiSaver accounts have been overtaxed? Why can’t they get their money back? They can certainly, as a Government, get these people who have had their taxes underpaid—they’ve sent them tax bills for it. Well, why can’t they send it back? I don’t understand that. Why not? The answer is because they’re so mean, they don’t want to give back people’s money.

Now, our tax system works on the basis—and, as a former tax lawyer, I think I can speak with some authority—that most people pay their fair share of tax without anyone having to make much of a fuss. The PAYE system works very well for wage and salary earners, and most of us have that system, obviously. But, also, a lot of people, in their investments, their tax is taken out with withholding taxes and various other things. It’s only fair that people know that the Government will do the right thing by them when they overtax them.

If any business overcharges someone money when they shouldn’t, say, $10 for a product, they take a $20 note, they don’t give back the other $10 that they know that they should give back, that is called theft. That’s the way it is. And if somebody, for instance, goes into a jewellery shop—I say that just because I like jewellery so much—they buy an item, the shop assistant sells them the item at, let’s say, $1,000 when the correct price is $10,000. They then make the mistake. The person who takes that jewellery at $1,000 knowing it’s $10,000—if they do that, that’s actually theft, because they have wrongly taken something which they knew they were not entitled to. People should think about this. If it’s OK for people who operate within—you know, the people who are not the Government, without the resources—to be liable when they owe money, shouldn’t it be the same for the Government?

There’s always been this exception for the Government agency of Inland Revenue because Inland Revenue’s computer system was so old, was so decrepit, that everything in Government we tried to do with it would have crashed it. Everything was always: is it going to succeed with this change in something, or will it crash? That’s why we got, in the toughest of economic times that we inherited in 2008, enough money later on in our term in Government to be able to spend a billion dollars, or close to that, in upgrading the entire computer systems of IRD.

So I just say to the Government, it’s not too late for you. It’s only the second reading of this bill. It’s not too late for you in the Government to think a bit more carefully about this. If it’s all right to pick up Nicola Willis’ amendment from the National Party and then try to claim it as your own, do the same with Andrew Bayly’s. Andrew Bayly won’t mind if you pick up his amendment or his bill that he put into the mix, and claim it as your own. Just give him a little bit of credit. Why don’t you do that?

Why doesn’t the Government do the right thing by these 950,000 people, last year alone, who had their tax on their KiwiSaver investments and other PIE investments overpaid? Why not? It’s a lot of money. It’s a lot of people. Oh, that’s a lot of votes. But if the Government, who has the ability to change the law, with us and our support and with the ability to actually implement it with the funding and the support that we, again, gave to Inland Revenue when we were in Government—why don’t they do it?

The only answer I’ve heard so far is that it was Andrew Bayly’s idea, not theirs, and why didn’t we do it in Government. Well, I’ve just told the people that. We didn’t actually have the mechanism to do it, because the system that we inherited in Inland Revenue—the computer system—was so overburdened that every time there was a change to anything, it was, basically, a matter of holding your breath to see if it all fell over, and that’s why we had to spend about a billion dollars doing it.

So my call to the Government is to think about the 950,000 people whose KiwSaver accounts and other PAYE tax investments have been overtaxed. Think about how they feel when they’re told “If you’re undertaxed, we’ll send you a bill, but if you’re overtaxed, we’ll do nothing—we’ll just keep your money.” That’s not OK, that’s not fair, and it’s not something that a Government that has the ability to do better—because of the system that has been paid for and implemented to help them do it better—should do, because that can actually enable them to do it. So my plea to the Government is to get off your high horses and think about the fact that this is something we can work on together to fix for 950,000 New Zealanders.

Thank you, Mr Speaker, and good evening. Given the tone of the last speech, I thought I might start by attempting to restore the Hon Judith Collins’ faith in democracy, because she clearly started with a great complaint about the state of political discourse and the spirit of bipartisanship, and so on, that we are supposed to be entering into this particular piece of legislation on KiwSaver, student loans, and remedial matters.

One of the things that the Hon Judith Collins referred to, of course, was the significant investment in Inland Revenue’s Business Transformation programme that she kicked off as the Minister. I do want to compliment Inland Revenue on the work that they have done over the many years—which is still ongoing—for that programme. In the history of major Government IT business transformation projects, there is a litany of woe and disaster, vast, vast sums of money poured down a drain, and so on, and yet this one—the one that the Hon Judith Collins did authorise as the Minister—has been a resounding success, and continues to be a resounding success. It is an example to other agencies who are embarking on major, multimillion-dollars’—and, in fact, in some cases, many hundreds of millions of dollars’—worth of investment in IT systems, and, of course, that Business Transformation programme does enable many of the things that have taken place in this bill to actually occur. Credit where it is due, and so, therefore, I hope that Ms Collins is about to have a better evening than the one she’s been having to this point.

I spoke at the first reading on some of the fantastic things that this bill does, and, in particular, for people overseas on student loans and so on. I just wanted to highlight some of the things around KiwiSaver changes and the changes that have come through in the Finance and Expenditure Committee, because most of the speeches tonight were on the principles of the bill rather than on the changes that occurred during the select committee, and there have been a few. But in order to speak to those, I think it’s worth just remembering some of the key things that the proposed law does, the most significant of which is related to ensuring that with the prescribed investor rates, people actually get the one that they’re supposed to get, and that’s a really key function of this bill.

Some of the changes that have come through in the select committee are actually quite significant. They may sound technical, but the most significant change is the one that allows overpaid PAYE tax to be refunded in the 2020-21 tax year. One of the complaints that’s come through from the Opposition has been that people aren’t going to be getting those. Actually, what the changes in select committee mean is that people who are overpaying from 2020-21 will get their refunds back. I mean, that is pretty significant, given that there’s something like 1.5 million people who have the incorrect rate on their PAYE income. The bill as reported back also allows the PAYE income to be squared up—good evening, Madam Speaker—at the correct rate alongside their end-of-year process for income tax, and, finally, it gives Inland Revenue more powers to provide PAYE entities for the prescribed investor rate.

Now, all of that, I think, improves what the intention of the bill was to do, which was to simplify and streamline and to make life easier for KiwiSaver members. Given the highly technical nature of the bill and the amount of work that went into it prior to its introduction into the House, I just want to thank the officials, in particular, and the members on that select committee, who have done the work around that, because I think that what that collection of changes does is improve it even more.

But I did also just want to highlight, as a number of other speakers have done, the Supplementary Order Paper in the name of Kris Faafoi—Supplementary Order Paper 293—which is to allow early withdrawal for members with congenital conditions. That, I think, is a fantastic amendment, and it’s one of those things that has only come about as a result of the select committee process. Many of the other technical changes that I was just talking about before are things that, frankly, probably would have been discovered by officials as the bill sort of wound its way through the House, but simply as a result of the public engagement during the select committee process, it highlighted that there was an opportunity here for an amendment to enable people whose lives may be shortened by congenital conditions to be able to start drawing down on their KiwiSaver early so that they can actually enjoy the use of those funds in their twilight years.

That is a fantastic example of the select committee process and the parliamentary process working, and the reason I’m saying that is because the Hon Judith Collins seems so down in the dumps about the process and the parliamentary process and the spirit of the debate that I thought it was worth highlighting this truly heart-warming and incredibly useful and valuable amendment that has come through in the name of Kris Faafoi—Supplementary Order Paper 293—in order to deliver that outcome for people with congenital conditions.

So, again, I just wanted to thank the members of the Finance and Expenditure Committee, the officials who have worked on this, and, in particular, the people who took the time to come in and make public submissions, who created the opportunity to take what is already a good piece of legislation that makes people’s lives easier and makes their interactions with Inland Revenue easier and make sure that they can actually enjoy their retirement savings more fully and to extend that to a group of people in New Zealand who otherwise wouldn’t have the opportunity to make use of their KiwiSaver funds. So, in the spirit that Ms Collins was imploring us all to observe this evening, I commend this bill to the House.

I will make a brief contribution noting three points, many of which have been covered by the contributions of members of the National Opposition and by some Government Ministers. Firstly, this is a continuation of the modernisation of IRD’s technical ability. This has been a journey that has gone over more than the two Governments. It has been a substantial investment of tens of millions of dollars, and I want to take this opportunity to congratulate the IRD for the way that it has initiated the Business Transformation system. Not only has the system been very successfully initiated and settled, allowing legislation such as this to be before the House tonight, but, equally, the whole culture of IRD, to me, seems to have changed. The only thing they need to do is be prepared to answer their phones with a little more alacrity than they do at the moment.

I want to also comment on two Supplementary Order Papers. First, Supplementary Order Paper (SOP) 293, which is in the name of the Hon Kris Faafoi, and shouldn’t be in the name of the Hon Kris Faafoi. It should be in the name of Nicola Willis, the National member of Parliament—the most active member of Parliament in the whole of the Wellington region. She was aware of the issue regarding Tim Fairhall. I sat at the Finance and Expenditure Committee when this delightful young man appeared before the select committee. He’s a person that has Down syndrome. He’s still managed to work a full working week at the supermarket. He was impressive. He was articulate. He came before the select committee and said, “I’m unlikely to live to 65. My brother is in Italy. My best friend is in Canada. I want the opportunity to use my KiwiSaver to go before I die and catch up with my brother and my best friend.” Nicola Willis then prepared a member’s bill that was before this House, could have been accepted by this House—no, Labour decided to play politics with it. But the good news is that at least we have the amendment now to be voted on in the committee of the whole House stage, which gives Tim Fairhall his opportunity to use his KiwiSaver in the event that he doesn’t reach 65. So that’s a success.

The second SOP I wish to comment on is, of course, in the name of the excellent member for Hunua, Andrew Bayly. He has rightfully pointed out this capricious, greedy Government has noted that when PIE tax rates are incorrectly filled out, 550,000 New Zealanders have therefore underpaid their tax and yet this Government’s gone and grabbed that money off them. But by comparison, we have 950,000 New Zealanders who, through putting down the wrong PIE rate have actually been overtaxed to the tune of $42 million. And there’s an amendment advanced by Andrew Bayly which this House will have the opportunity to vote on. It is the opportunity to give back to those 950,000 New Zealanders that have accidentally overpaid their tax what is due to them. So I suspect the Government won’t support it; $42 million is important when you’re running at deficits, when you’re running a slush fund of $3 billion under the name of the Hon Shane Jones and attempting to buy a seat in Northland. And I’ll tell this House he won’t be successful at that. Not a chance. But there is a chance for the Labour Government to do what’s right with this legislation: to vote to support the amendment in the name of Andrew Bayly and give back to those 950,000 New Zealanders their overpaid tax, because it’s actually their money. It shouldn’t be used and frittered away by this Labour - New Zealand First - Greens Government.

In response to the pleas of the National speaker just before Mr Carter, the Hon Judith Collins, for this to be a more positive debate, I want to start with an acknowledgement and a thankyou to the National Party for making the central issue in this debate on the second reading of this bill the merits of KiwiSaver. That’s something that on this side of the House we’re very pleased to be talking about, because, of course, KiwiSaver is one of the legacies of Governments on this side of the House that has been opposed at every single point from its introduction by members on that other side of the House. And, of course, those were the members who voted in their previous term of Government to reduce entitlements to KiwiSaver as well. So I just want to say that it’s such a good thing to hear that they’re now so supportive of an enhanced KiwiSaver scheme as is being delivered by this Government through this piece of legislation.

I also want to just touch, more specifically, on the issue of private investor rates. And let’s just be really clear about this. This is an issue. This is an issue which has been around since 2006. It’s an issue which was around every single term, every single year of the previous Government’s nine years in office and they did nothing about it. This Government has fixed the issue within two years. Now, let’s be very clear about the facts on this as well because they are important. The first is that investors prescribe their own rate. That’s the way that the system has worked for a number of years. And what is accepted by the Government, and I think everyone who’s involved in this debate, is that that system doesn’t work well. There are many people who don’t necessarily realise that they’re on the wrong rate. Their income might have changed through the course of the year or a number of years, and they end up on a rate that is inappropriate for them and taxes them a bit more or a bit less than they should be taxed.

And what we know from the figures is that the amounts are not large. There are a large number of New Zealanders who have probably been overtaxed a little in this area; the average amount is around $50 per year. But, nonetheless, on this side of the House, we hold to the principle that you should be paying the correct amount of tax for the income that you’re on. The point remains that this Government is doing something about it. We are fixing it within this bill. That Government, that previous Government, did nothing about it for nine years, and we have just heard weak excuses from the former Minister of Revenue the Hon Judith Collins, who was actually the best Minister of Revenue under that previous Government. The bar was pretty low, but she was very active, and she’s right when she says that she got Business Transformation under way. But the suggestion that for nine years this issue could not be looked at—not even be looked at—because of the IRD’s IT system, doesn’t bear scrutiny.

That previous Government changed income tax rates, they changed GST rates, and they changed the system for child support. So this idea that policy was just frozen in stasis and no changes could be made in this area doesn’t hold water at all. They simply didn’t care enough about the issue to do anything about it. And so it is crocodile tears that we see on display here today, and I want to acknowledge the Minister of Revenue, Stuart Nash, for taking action on this, because on this side of the House, when we say that we believe New Zealanders should pay the right amount of tax, the fair amount of tax, we do something about it. We don’t just talk in Opposition.

Finally, I want to talk on another really positive point and that is the set of changes made in this bill in respect of people with congenital conditions being able to access their KiwiSaver funds earlier than would be normal. This is an important issue; there’s consensus about this. I don’t want to be churlish about it, but I want to be very clear about the process that unfolded. It started unfolding when I was the chair of the Finance and Expenditure Committee. Mr Fairhall came and gave a very good submission on this issue, and there was quite a bit of public interest in it, and I think everyone took the point. That was at the time of the previous taxation and remedial matters bill, probably about this time last year.

The select committee at that time in its report recommended to the Government that work be done on this area. There wasn’t time within the scope of that bill to deal with the issue. Minister Faafoi immediately picked that up, set up one of those dreaded working groups of experts, that that side of the House always criticises, to look into how to implement this so that there weren’t unforeseen consequences for messing with the KiwiSaver rules. They came up with a set of changes, they’ve been inserted into this bill by Supplementary Order Paper (SOP) 293, and we’re very pleased with that result. I think what we should be doing is simply commending Mr Fairhall for bringing this issue to the House, taking the action that is in this SOP and this bill, and making sure that we pass this bill so that we can have the strongest possible KiwiSaver system for all New Zealanders, something we’re proud of on this side of the House. Thank you.

This is a split call. I call Nicola Willis

This is a good bill and we support it. It’s an example of a bill that is much better for the select committee process that in this case inserted the changes of Supplementary Order Paper (SOP) 293, and it’s those that I want to focus on in this contribution.

💬 DEPUTY SPEAKER: Well, I just point out that this is a second reading, which is not where we discuss in great detail SOPs. I’ve allowed people to talk about them, but you’re heralding that you’re going to spend your five minutes on the SOP. That’s the committee of the whole House stage.

This SOP has been incorporated into the bill as a whole in the select committee process.

💬 DEPUTY SPEAKER: Oh, OK—OK.

So the bill now, as it stands, includes a section that closely mirrors the objectives of my member’s bill, which remains in the ballot today, because I want to see this bill passed, and when it’s passed I will withdraw that bill. That bill is the KiwiSaver (Compassionate Consideration) Amendment Bill and I lodged it in December 2018. I lodged that bill to remedy an injustice in the law which prevents some people from accessing the KiwiSaver funds they have worked hard to save. I, like others in the Parliament, had been moved by the submission of Tim Fairhall and his mother, Joan, who had pointed out that injustice in the law as it currently is, and as this bill will correct.

As others have discussed, Tim has Down syndrome. He, by virtue of that condition, is likely to have a shorter lifespan than most of us. He has worked hard throughout his life in his job at Countdown, and he has, like many of us, made ongoing contributions to KiwiSaver. So it was his position that he should be able to access those funds before he was 65 and yet the law, as it currently stands, prevents him doing that.

Of course, his fear was that he would not access those funds before he died. I went to visit Tim before Christmas in 2018. I went down to the West Coast, where he lives with his mum and dad, and we talked about why it was so important to him and others like him to be able to make withdrawals in these sorts of circumstances. He was really clear. There were experiences he wanted to have before he died, and one of those experiences was that he wanted to visit his brother in Italy and he wanted to visit his friend Thomas in Canada, and he wanted to see again Thomas’s son, Noah, who he hadn’t seen since he was three. As his mum, Joan, said, this is Tim’s money. He’s earned it; he’s saved it. He saved it with a particular goal in mind, and it’s important he has a goal to look forward to.

So I commend Minister Faafoi’s Supplementary Order Paper because it creates a new mechanism so that Tim and others with life-shortening conditions like him can make withdrawals and can access the funds that they have worked hard to save. Like my member’s bill, it creates a system that sits alongside the existing provisions which allow people to withdraw KiwiSaver funds for reasons of financial hardship or terminal illness.

I do want to point out that we could’ve done this a long time ago. When my bill was first introduced, the Minister was still saying this wasn’t the right thing to do, and this has taken time. We do, in this Parliament, sometimes take more time to decide to work together than we need to. But I’m not going to lament that much further today, because here we are, and we are doing the right thing. We are working together to pass a change that is just and that is right.

I want to commend two specific changes the Finance and Expenditure Committee has made. The first is they have changed what was suggested by the Minister, which was that people in these circumstances would have to attest to retiring from taking any paid income in order to access their KiwiSaver. That would’ve been wrong because that would have stopped Tim working at Countdown, if he was accessing his KiwiSaver funds, and, actually, he loves that job. A lot of people get a lot of purpose from their work, and I really commend the committee for seeing that it is just to allow people to withdraw their funds while also working.

I do pose a little concern that it restricts those who can make these withdrawals to those with congenital illnesses. I’d suggest to this House that there are others with life-shortening conditions who could potentially benefit from this clause and who would’ve been included in my bill. But let’s all in this House think about this: the joy-filled dance that Tim gave when he was told that these changes were being made. Let’s think about Joan and her support and her advocacy for her son and others like him and what they have achieved. Together, parliamentarians have done the right thing. As MPs, we have the power to make an enormous difference to people’s lives. The changes to the KiwiSaver withdrawal system do that. This is a good bill. It’s for you, Tim.

Thank you, Madam Speaker. This sounds like an amazing bill. Everyone here in the House is in agreement. I commend this bill to the House.

💬 Ian McKelvie: Madam Speaker—thank you, Madam Speaker.

I call Ian McKelvie.

The member for Rangitīkei, Madam Speaker. Ha, ha! I just want to take a brief call on this bill, and there’s a couple of comments I wanted to make before I started, one that one of the highlights of my time in Parliament was listening to the member for the West Coast giving a nine-minute rendition on a tax bill. It was extremely boring. The other couple of things I wanted to mention—and when you follow so many knowledgable speakers, there’s very little left to say, actually, that is credible. But I did want to say one thing, and that is something that’s frustrated me listening to the speeches from the Government tonight. All they can do is talk about how bad we were in Government for nine years. The great thing about that is that we won’t have anything to talk about in a few months’ time because they’ve only been there three and they will have done nothing at all. So I don’t think it’s really relevant that they should keep on criticising us for our nine years of failure when they have yet to prove they’ve done anything and might not last three. I think it would be better if they got on and talked about what they’re capable of doing.

Anyway, I want to get on and talk about this tax bill, because—

💬 DEPUTY SPEAKER: It’d be good—it’d be good.

I don’t want to talk about it for long, I’d have to say. Tax bills, interestingly, are a necessary evil, in my view, and they come through Parliament frequently. It’s very interesting, when you look at this bill; it’s amending some things that came through Parliament in the last tax bill. So that’s how quickly things need to be changed in this sector, and it is a very complicated sector. I think the thing that makes it so complicated is that the moment that we write a tax bill, someone’s found a way round it, and that’s one of the challenges of tax. They haven’t found a way round it; they’ve found a way that that tax bill doesn’t exactly do what it’s meant to do.

So it is a very challenging area. It’s an area that, generally, the House agrees on, and I think that the discussion in select committee on these tax bills is quite complicated and it’s at times quite interesting. I suppose that it’s also an area that you often think, “Well, I wonder how we can get around this?” So people, obviously, start getting around it from the day the tax bill’s passed. But they do do a lot of good work, and these bills do pull together a whole lot of issues that no doubt keep numerous accountants round New Zealand extremely busy trying to understand them.

But I think, on the whole, we support this bill. It does a good job. The Supplementary Order Paper 293 has been talked about more than I need to talk about it tonight. I think it certainly serves a purpose. I was chairman of the Special Olympics for many years in New Zealand, and we saw a lot of exactly the sort of thing that comes through there around the need to allow Tim Fairhall to draw his KiwiSaver early. I think it’s a good thing and a great credit to the Parliament that we’ve got it through. Thank you, Madam Speaker.

I commend this bill to the House.

Bill read a second time.