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

I move, That the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill be now read a third time.

The Government’s objective for the tax system is for it to be as fair as possible. We think that the system should treat taxpayers fairly so that different taxpayers with similar amounts of income pay similar amounts of tax. We want the system to act neutrally regarding economic activity. In raising revenue, the tax system must seek to minimise compliance costs. It’s also fair that people pay tax at the rate intended under our progressive income tax structure. These are worthy aims. The proposals in this bill are guided by, and aim to achieve, these goals.

Members will be aware of the simplification programme being run at Inland Revenue (IR). That programme will go a long way towards improving fairness by helping make the system easier to use and understand. At the same time, while the hood is up, so to speak, on IR’s technology system, the bill provides an opportunity to introduce changes to address longstanding problems awaiting the advent of better technology. Already, most of IR’s services and functions have been transitioned to a new, simpler set of procedures, allowing a greater level of self-management and greater control and generally better outcomes. Next month it will be the turn of KiwiSaver and student loans.

The main feature of the KiwiSaver proposals in this bill are: one, a proposal to improve the speed that employer contributions are paid to scheme providers by allowing Inland Revenue to pass KiwiSaver employer contribution amounts to scheme providers based on pay-day filing information; two, changes that ensure Inland Revenue pays interest on employer and employee contributions from the employer’s pay day until the contribution is afforded to the member’s scheme provider; three, reducing the KiwiSaver provisional period and holding period, meaning that new KiwiSaver members’ contributions will be with their scheme provider sooner; four, reducing the time frame for the transfer of members’ information and funds between providers; five, removing the three-month grace period for people invalidly enrolled in KiwiSaver to gain residency; and six, requiring employers to provide information to Inland Revenue on the employees’ income to help ensure employers are deducting members’ contributions at the right rate.

The bill also proposes that people with life-shortening conditions such as, for example, Down syndrome should be able to withdraw their KiwiSaver funds before the age of 65.

This bill also deals with an issue related to KiwiSaver—the prescribed investor rate. When investors are on an incorrect prescribed investor rate, or PIR, either too much or too little tax can be paid. When too much tax has been paid, there is no legislative provision that exists allowing the overpayment to be refunded. The bill addresses this issue by allowing automated refunds of overpaid tax through the simple and efficient means of a square-up process.

Student loan changes: the main proposals relating to student loans are providing certainty to borrowers by limiting the situations where changes would be made to a borrower’s payment obligations prior to 1 April 2013; renaming the student loan repayment holiday to “temporary repayment suspension” to reinforce that repayment obligations have simply been suspended; allowing employers to be notified of an employee’s loan balance when their student loan is close to being fully repaid—this will reduce the chance of overpayments for borrowers who are close to repaying their loan; and treating overseas-based borrowers who are unable to meet their repayment obligations as a result of serious illness or disabilities as physically in New Zealand so that their loans will not be subject to interest.

Research and development: the third main component of this bill relates to R & D tax credits. The main proposals in this bill relating to this are making R & D tax credits more broadly refundable, with a cap based on labour-related taxes paid by the firm each year; excluding entities that derive mostly tax-exempt income from the research and development tax credit regime, as they already derive significant benefits from the tax system; changing the in-year approval regimes to provide more certainty for taxpayers undertaking R & D, that their activities will be eligible for the credit; and smaller amendments designed to clarify aspects of the regime to improve its sustainability and make things simpler for customers.

Other matters contained in the bill include three changes to employee share scheme rules. The bill proposes to extend the definition of “market value” for these rules so that employers can more easily value the shares they give to employees under the share scheme.

The two other changes relate specifically to exempt employee share schemes—schemes which allow the employer to grant the employee some shares tax-free. Under these rules, the employee normally has to hold the shares for three years before disposing of them, or else they become taxable again. But the bill proposes that if the employee has their shares bought back from them during that time in a takeover or other corporate reorganisation—an event which is obviously outside of their control—the shares won’t become taxable.

The last proposal gives employees the flexibility to let an employee keep their tax-free shares if they leave employment voluntarily, which is not possible under the current rules. This better aligns the New Zealand employee share scheme rules with the Australian rules, which is a boon for trans-Tasman companies offering share schemes.

A longstanding area of uncertainty for taxpayers in relation to donation tax credits and gift deductions has been the treatment of debt forgiveness. The bill proposes to clarify that gifts made by the way of debt forgiveness will not qualify for donation tax credits or deductions. The proposal ensures that donation tax credits and gift deductions are limited to gifts of cash or repayments made by methods such as bank transfers, credit cards, or cheques.

To continue with the theme of charitable giving, the bill proposes updating the list of donee organisations in schedule 32 of the Income Tax Act 2007 to include a number of charities from the 2019/20 income tax year, including the renaming of the Medicine Mondiale charity to the Sir Ray Avery Foundation. The bill contains a number of minor remedial changes to improve clarity.

In conclusion, these are the main features of this bill. In bringing this bill to the third reading, I would like to thank the Finance and Expenditure Committee for their work on the bill and their valuable contributions, especially the chair, who did a fantastic job with this bill as well. Thank you very much. I would also want to thank the policy officials and drafters for their work—first class, as always. I commend this bill to the House.

Thank you, Madam Speaker. It is a pleasure to be talking on the third reading of this bill. We have indicated that we are going to support this bill, because it’s a series of changes to the taxation system. As many of us have noted before, the system that New Zealand has in place in terms of managing our tax system is the envy of the world, but it does require vigilance around how we administer it and make sure that it is working to its full potential.

This bill actually has a lot of very good elements to it. I’m just going to pick up on a few of those. But the first one is around the application date for KiwiSaver members. Clause 14(1) would allow KiwiSaver members to change their contribution rate by giving notice to both their employer, which is the current situation and, under this bill, to the Inland Revenue Department (IRD).

This just gives a great deal of flexibility around people who want to change and make sure that they’re on the correct rate of tax that they’re paying in respect of their portfolio investment entity (PIE) income, which, normally, are types of investment that would include KiwiSaver.

There was a little bit of concern about the compliance costs on employers in terms of the IRD, which would then notify them and they’d have to action it. So the date for the commencement of that was pushed out to 1 April 2022, or an earlier date as set under an Order in Council.

The other one is the requirement for employers to provide information to IRD. The big issue here is the requirement and the objective to make sure that people are paying their appropriate employer superannuation contribution tax, and this is something that takes place at the employer level when tax deductions are made. Under the new system that the IRD are implementing, the Business Transformation system, there is greater ability to make sure that people are paying their right tax and for the IRD to work out whether, in fact, they are, and to amend the situation on an almost real-time basis, as opposed to waiting until the end of the year and having to make a subsequent adjustment. I think, again, this is a good, practical measure to make sure that people are paying no more tax than they ought to, but are paying the sufficient amount of tax that they should be.

The other aspect relates to the custodian issues. Now, custodian activities take place in New Zealand. They are, basically, entities—and Public Trust is one of those—that act as a sort of intermediary between an investor, and in many cases those are foreign investors, and the entity that invests money. It might be a sharebroking firm or a fund manager, or whatever. These financial institutions have a great deal of responsibility and obligation, but the issue gives rise particularly where you’ve got foreign companies involved in investing into New Zealand, and it could be that they’re buying Government stock, as a typical example. They use a custodian service to help them manage their affairs in New Zealand, and they’re all legitimate and there’s nothing to be untoward in terms of their activities.

But for the requirements for the New Zealand custodian where they don’t actually have a lot of knowledge about the foreign investor, this bill tries to cut a pragmatic course through that, and the fact is it says that the New Zealand custodian institution would only need to report that a return has been made to a foreign entity or a foreign custodian service and not need to report the details of the actual payments or the end investor. Now, it sounds a little bit strange, but what it does do is it then highlights to the IRD that a payment has been made and for them to be able to pursue that and be able to track down what the ultimate beneficiary of that payment is and what the nature of that relationship and transaction was.

The other issue I want to raise is around R & D tax credits. Unfortunately, one of my colleagues will not be able to speak on this matter, and she’s had a great deal to do with that. I’m not highlighting that she’s not here, but I just highlight the fact that she has made a contribution around that, and she’s asked that I speak to this in terms of the issue around the research and development.

There are two courses under this bill. One is around people who traditionally do a lot of R & D, and they are called a significant performer. Then, there’s a class of people who do research and development who don’t normally do it in the ordinary course of events. The issue we’re worried about is the compliance cost to get this general approval if you don’t do more than $2 million worth of research and development every year, and we believe that in some cases that might actually outweigh the value of the tax credit received. A regime known as the criteria and methodologies approval was created for businesses in the significant performer regime to make sure that there was also the ability for that portion to be able to get approval quicker and easier, because one of the issues around this is making sure that we get research and development and funding into those entities who need it, and to get that funding very quickly and appropriately and in the right framework.

But the last thing I wanted to turn my attention to is the issue around the non-refunding of money from people who have overpaid tax on their PIE investment funds. There are approximately 950,000 people in that category in New Zealand. They have paid, as at the end of the financial year just gone last year, about $50 million, and that figure will be accumulating even in this current financial year. So we were very, very concerned that these people should receive a refund. We spent a lot of time in the committee of the whole House talking about this, and I actually put up a Supplementary Order Paper.

When we originally took up this issue, and I took this issue up with the Minister in question, the first reason given as to why the Government would not refund this $50 million or so back to the lower-paid members of our society who have overpaid their tax on their PIE investment income was that there was a systems issue and it couldn’t be done. However, when I spoke to the Commissioner of Inland Revenue, she made it clear to me that that was not the case and the system could cater for that. So the next time we took this issue up with the Minister, the excuse was “Well, it requires a legislative framework.”, and that’s why I went to the extent of writing the legislative change. It’s literally two clauses which would have meant that this could have occurred very quickly. So the excuse around there being a need to determine and prepare a legislative change, I actually solved for the Minister, so that defence fell away.

Last week, when we were talking about this in the committee of the whole House, we heard a new argument from the Minister, which was around saying that it was an administration issue and it was a captain’s call for the commissioner—and it was, essentially, one around prioritisation. I do not believe that the Government could not have directed the commissioner, or there is an inability to make this payment. What this bill now caters for is that it is going to take place, but not until the 2021/22 financial year, and by a stroke of a pen and this bill today, we could have changed the commencement date and backdated it to the 2018/19 year. It is literally that simple.

The thing I find most disturbing is that through that whole debate where we were talking about making a tax refund to those earners on less than $48,000—because only they are the ones who have overpaid, not people in the top tax bracket, like us; those poorer members of New Zealand society—I did not see one speech given by the Labour Party members during that debate, nor the Green members, nor New Zealand First. They were absolutely silent on this issue. This is about protecting the rights of the lowest-paid people in New Zealand.

It warms my heart—it truly warms my heart—to see the members on the opposite side of the House so concerned about low-income New Zealanders. May I suggest that they could extend that concern to all low-income New Zealanders? That would be a pleasant change from that side of the House.

I do want to pick up this issue that Andrew Bayly, the previous speaker, has just talked about to do with the portfolio investment entity (PIE) rates, and it relates to a very fundamental principle in our tax system, which is that our tax system is based on self-assessment. It underpins our system. Each of us in this room may not be aware of it, and many of the people listening on this Wednesday morning may not be aware of it, but when we complete our tax returns, we are, in actual fact, assessing our own tax and then presenting that to the Commissioner of Inland Revenue, who agrees or disagrees with it.

It is a fundamental principle that each person completing their tax affairs works them out for themself, whether they are a business person claiming deductions, a wage and salary earner, putting in for various donations and the like. We work it out for ourselves and tell the commissioner what we think we ought to be taxed according to the laws. So when people sign up for portfolio investment entities, one of the things that they are required to do is to assess what their own tax rate should be and report it to the PIE, who then deducts the tax and pays it over accordingly. So going back and refunding based on misreported rates would actually break that principle of self-assessment. Now, perhaps there could be a case for doing that, but if there has been a case for doing it with respect to portfolio investment entities, it has existed for years and years and years and years, and, in fact, it existed under the previous Government and it was not fixed then. I do not understand why.

The fact is that in this bill we are fixing that problem going forward. So from now on, we will be able to fix that problem, and we’re doing it under the law, we’ve put through a legal change to make sure that we can actually do it going forward. So that is this Government taking responsibility going forward, which the previous Government did not.

However, I just want to talk about the nature of this bill. It really has three main issues and two major focuses. With respect to the rules around KiwiSaver administration and student loans, what we see is a number of administrative changes which are making it easier for people to comply with the law and making it easier to get the tax law right. So I see these as very positive changes. When it comes to the research and development issues, there are some compliance issues in there, but there is also some very positive assistance for firms who are starting out and engaging in research and development; in that space, cash flow is king. One of the things that this bill does is help those firms with their cash flow by giving them easier access to credits for the work they have done on research and development. So it assists those firms and it assists us in increasing the amount of research and development that is done in this country.

This is a good bill. I’d like to thank the Minister and the Finance and Expenditure Committee for the work they have done on it and for the committee of the whole House for the work that was done in that space as well. I’d especially like to note, on the select committee, the previous speaker, Mr Andrew Bayly, who is always an excellent contributor on that committee, and all the members of the committee who worked hard to get this bill right. I commend this bill to the House.

National supports this bill. It’s part of a detailed piece of tax legislation that the House deals with on a regular basis. Of course, we’re meeting at the moment under extraordinary times when a lot of New Zealanders are desperately worried about the health implications of COVID-19 and also the economic consequences. So this is probably not top of mind for most people at this moment, but it’s an important piece of legislation none the less. The only point I’d make around tax generally is that, as the previous speaker mentioned, cash flow is king. And so there’ll be a lot of businesses right now trying to figure out how they’re going to pay the bills over the next few weeks, next month, how they’re going to keep employing people, and the absolute priority for everybody across this House is to do what we can to lessen the chances of job losses over the next couple of months. Wage subsidies that have been announced yesterday will help—albeit this side would have gone further and faster on that front.

In terms of this bill, specifically, the only point that I want to make is that the kind of attitude expressed through this Government in terms of dealing with the 550,000 New Zealanders who have underpaid their portfolio investment entities tax. It would basically be primarily people in KiwiSaver who—and I’m thinking of young people particularly—will not be earning much and on a low tax rate, and because of, you know, a moment’s inattention, I suppose, when they signed up to the scheme, or they didn’t even sort of have the issue raised, they have found themselves on a 28 percent tax rate for their KiwiSaver profits when really they should be only paying 10.5 percent. So they’re paying more tax than they should have.

Now, we’ve only just recently got the ability, from an administrative point of view, to correct that and the Government seems to be adopting the philosophy of heads I win, tails you lose. That is to say that if you’ve underpaid, we’ll take the money off you straight away, but if you’ve overpaid we won’t give it back to you straight away; we’ll wait a couple of years. We don’t think that’s right. We think they should be moving more quickly to give that money back to New Zealanders. They’re paying more tax than they should and that makes a difference. It’s only a small difference, but it makes a difference and it sends an important signal. So we’re disappointed that they haven’t supported Andrew Bayly’s Supplementary Order Paper 477 on this topic, which would have said “Let’s pay it back now.” That’s the only point I’d make on this, but otherwise we commend this bill to the House.

I’d say to the member who’s just resumed his seat, Andrew Bayly, that there’s a famous English saying, and the saying runs along the following lines: that when opportunity arises it can maketh the man. I think it doesn’t enhance the dignity of this House or the debates by veering off and making gratuitous bouts of critical kōrero about the Government’s response to the virus. That is not what this bill is about, and it’s actually been enhanced by the select committee, which is good to see, by the most powerful select committee in the entirety of Parliament, the Finance and Expenditure Committee. Of course I’d say that, because I used to be its chair. The reality is that the bill has been approved by the efforts of the select committee.

I just want to direct our attention to research and development and the improvements that have been made there, because unless we continue to upgrade not only our physical capital but our human capital and, obviously, human capital through improving the administration of our loans scheme—and then financial capital, improving the efficiency and the clarity around our KiwiSaver scheme, and physical capital through ensuring that research and development continues in what will be a trying set of circumstances for our fellow Kiwis.

I make the reference to the fact that the committee improved matters, because so often is the case that select committees can be rubber stamps. I suffered that problem when I sat on the select committees when the country was led by John Key. For far too many occasions those select committees had good ideas, submitters turned up but they were knocked out of the park and smashed in a capricious fashion under the last regime. So to see that the current bill has been improved by the efforts of the select committee—I want to acknowledge the members of that select committee and also I want to acknowledge that there were opportunities during the committee stages of the House to improve matters.

I think this behoves well and I hope to see that spirit of comity more frequently from the other side of the House, given the nature of the challenges we have as a country before us, but I’ll have more to say about that in my general debate speech later today. Thank you very much.

The Hon Judith Collins.

Thank you, Madam Speaker. What an excellent choice, might I say. Look, this is a bill that the National Party supports. We are disappointed that the efforts of our colleague Andrew Bayly to right a wrong for those, particularly KiwiSaver, investors, who have been overtaxed and actually were often not aware of what the tax rate should be—that they cannot get their money back.

I was disappointed that Dr Russell, who spoke just a few speeches ago on this matter as chair of the FEC, or Finance and Expenditure Committee, chose to make, I thought, quite gratuitous and unfortunate remarks by saying that the National Party didn’t fix the system so that these payments could be made. We spent a billion dollars of taxpayer money fixing the IRD tax system and computer system, which, by the way, we had also inherited, but we all know that computer systems do not last for ever. The Inland Revenue computer system was, I was told when I was their Minister—and getting the funding, along with my colleagues, to fix the system to enable the payments to be made—the oldest of all of the Government’s computer systems.

And that is one of the big problems is that when you have these systems, all the various changes that are made by various Governments to the way that payments are made, all these sorts of things, they all have to be coped with by a computer system that was dating back, I understand, from the early 1990s. So it’s a wonder it didn’t crash. It was very fortunate, and I thought Dr Deborah Russell, MP for New Lynn at this stage, made an unfortunate contribution. I generally get along very well with her and I generally have a great deal of respect for her chairing of the committee.

I’m also disappointed that the Government has not taken up the opportunity to tell us yesterday—unless I missed it in the documents that were sent to us as MPs about the Budget package, which, by the way, wasn’t sent to us as MPs, and I still haven’t received anything from Grant Robertson’s office about what I can tell my constituents and where they can get help, other than to be told this morning, when I rang his office, that Business New Zealand has all the details, you can get them from them. That is outrageous. Most businesses are not members of Business New Zealand. It is by far those larger businesses that are. People need to know now about their KiwiSaver. They need to know now what’s happening. They need to know now about their wages. Many people expect that their MPs—being locked in here during this extraordinary sitting of Parliament—would actually have that information. So I would say that there is a lot more that needs to be done about informing people.

We also have a situation where the financial advisers are the people who often deal with KiwiSaver for not only businesses but for individual people. The financial advisers have asked the FEC to extend submissions out on the Financial Markets (Conduct of Institutions) Amendment Bill. This is a bill that, obviously, deals with how they operate, and this is very appropriate for KiwiSaver and other matters like that. The committee this morning, under the chairmanship of Dr Russell, chose not to grant that extension of up to a month. That is a disappointment.

It’s a disappointment because the National Party supported it, and so did ACT, because we understand that these are extraordinary times. As the Prime Minister said yesterday, “We need to be a little bit kind.” Well, how about being a little bit kind to the 1,600 members of Financial Advice New Zealand, who are the advisers trying to help people when they see their KiwiSaver savings go down through the bottom of the floor? So I think there’s no reason at all why a little bit of kindness couldn’t have been extended, and I would hope that the chair would take the opportunity, while we are still locked in Parliament, to be able to help us to make a better decision than what was made this morning.

I would also say, on this Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill, that I haven’t heard anything from the Government about those overseas - based New Zealanders who are paying back their student loans. These people are paying back—as we would hope that they would do. Many of those people have lost their jobs overseas. Many of those people are living, just as we all are, in uncertain times. We’ve heard nothing from the Government, and I ask the Government to answer this: is there any provision being made to give these New Zealanders, who are doing the right thing by their student loans, a holiday for repayments—something that they could have some time? Is there any provision being made? Are we thinking about them?

I don’t worry about those New Zealanders who have had their student loans, known the rules, gone off overseas, and never cared about us again. But I do say I think we need to be a little bit thoughtful about this. So I will wait with bated breath to hear from Grant Robertson’s office about what I can tell my constituents. I don’t think I should have to tell them they can go to the Business New Zealand website; I think I should have better information than that. I actually think that when we are being asked, everyone, to work together, to come together for the benefit of our country—and we all know that this is a very difficult time that we’re about to go through. Right now is not so bad, but it will be next week and the week after. We know that economically and health-wise, it will be a very trying time.

The Government needs to keep the Opposition not just informed but in the room, because it is very important, and not to complain about someone playing politics when, actually, we don’t even have the information. That is not right. What is playing politics is not giving us the information, and saying, “You can get it from some industry lobby group.” I’m sorry, that is not good enough. I would say to the Government, “All is not lost. They can repair this. They just have to keep us informed.” I will be expecting that the Minister of Housing will be wanting to talk with me about what steps are being made to help people through this difficult time, and to understand that there will be people who can’t pay their rent. There’ll be people who can’t do all sorts of things, and who need to be isolated—very, very difficult at this time.

So I expect a better standard from the Government on involving us. One of the ways to do this is to listen to the advice of our colleague Andrew Bayly on the KiwiSaver changes that we’ve asked for. Remember this: we’ve heard this morning from Dr Deborah Russell, the chair of the FEC committee, that these New Zealanders have, as she said, “Self-selected their tax rates”. Most New Zealanders don’t know the difference about how these things are going to change for them, because tax is a very difficult area. I know, as someone who has a tax degree and has practised in it, it is not something that we can expect everybody working in retail or any other business to just suddenly understand all the different rates.

Also, by the way, people’s employment situations change. Sometimes they get a pay rise, sometimes they lose a job, sometimes they get a better job. All these things can affect that tax rate. Of course people make errors. Should they be punished for it to the tune of about $70 million? I don’t think so. Not when we have the ability to fix it. We have the technical ability to fix it. We should fix it. Thank you, Madam Speaker.

Thank you, Madam Speaker. I’d just like to start by thanking the Hon Judith Collins for her contribution to general debate then. Seeing as we have veered into general debate about the announcement yesterday, I would just like to say that I think that Business New Zealand are actually doing a very good job of communicating to a very wide audience, and that Ms Collins should not run down the work that Business New Zealand have been doing to communicate with the public and with their constituents.

But to return to the actual matter at hand, which is the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill, as opposed to the COVID-19 response package announced yesterday, I would just like to put on record here at third reading a few points that are not often picked up here. The most important point is that this Government is committed to making the tax system as fair as is possible, and I think this bill does that in a number of ways.

There are three things that I wanted to draw attention to. One of which is the changes around aligning the rules around employee share ownership schemes, which I think is fantastic because the changes that this bill introduces, in fact, shortly will, once it becomes an Act, make it more likely that you will have greater use of employee share ownership schemes. In terms of including more people in the productive economy and so on, I actually think that that’s a very good thing to include not just your traditional owners but also employees as owners of the businesses that they work with. So I think that the set of rules around that changing are excellent. I just wanted to highlight that at this reading, because I think it’s important that people are aware that those changes are happening and that that then means that they can start talking with their employees about perhaps introducing those schemes or extending those schemes where they have them.

The second thing that I wanted to highlight in this is changes around the student loan scheme. There are a number of them, obviously, in this one, but there is a particular change that, again, hasn’t been often highlighted during the course of this debate that I wanted to draw attention to, which is around treating overseas-based borrowers who are unable to meet their repayment obligations because they are chronically sick or have a disability—to treat people who are overseas but have that set of circumstances as if they’re domestically located in terms of their repayment obligations.

Fundamentally, that makes life just a little bit easier for those people, because the obligations if you’re overseas are quite onerous, and if someone has a physical disability or a health condition that makes it very difficult to make those payments, then this helps those people out. Again, I think that that’s worth highlighting because people need to know that they can now avail themselves of that once it takes effect.

The third one—and this has been highlighted previously, and it does actually restore a bit of faith in the parliamentary process because it did come through as a result of a submission in the select committee stages, and there aren’t actually that many bills that do see significant changes as a result of the select committee process, sadly—is the changes that allow people with a life-shortening congenital condition to draw down on their KiwiSaver funds prior to the age of 65. So, again, in the spirit of fairness and equity, the ability—you know, introducing that provision, I think, creates an additional economic circumstance for people with those conditions, which should help them out. And that, again, is only fair and a very good idea, so I’m really pleased that that provision was introduced during the select committee process.

The bill obviously does a great many other things which have been well traversed in the House. Obviously, there have been a number of other issues that have been traversed in the House that had nothing to do with this bill. But those three things are things that I think are very commendable, and I wanted to make sure that people are aware of them so that they actually do get taken up.

I do want to thank the select committee—I was not on the select committee for this bill—I think they did really good work. I’m delighted that we’re now able to pass this bill into law, and I commend it to the House.

Thank you, Madam Speaker. I actually would like to just address James Shaw and his comments about Judith Collins. I listened to her very closely, and I didn’t get a general debate speech at all. In fact, I found it very informative on tax and on this bill.

With that said, I’d also like to address the life-shortening conditions and the ability for people with those conditions to withdraw their funds or get access to their funds from KiwiSaver earlier. It actually started life as a member’s bill, which was by Nicola Willis, and was put in the ballot and wasn’t actually drawn. She actually negotiated with the Hon Kris Faafoi to try and get something done, but it was completely ignored. Fortunately, the Government saw sense and adopted it and made it into a Supplementary Order Paper which has been included in the bill. So good on them for doing that because it is a very good move.

I think the issue for me in this bill is very well highlighted by Andrew Bayly under his Supplementary Order Paper (SOP) 477, which was unsuccessful. The investment funds under the PIE rates—and Dr Deborah Russell highlighted this, that, you know, our tax system is based on self-assessment. That’s true. It is up to those taxpayers to self-assess and to get the right rate. But, however, then to take the next step and say that if you get it wrong, that’s your problem, well, that would be true, but if you get it wrong in that you underpay, they do come after you. And there were 550,000 Kiwis who did underpay to the tune of $50 million. IRD, at this moment, are getting that money back. They’re out there and they’re going to be able to go back and get their money back.

However, the 950,000 Kiwis who overpaid, who paid too much—and as my colleague Andrew Bayly quite rightly said—and are on the wrong rate are people who are the on the bottom of the ladder and could actually do with this money, but they are not going to get it back. That is very unfortunate. The system’s all there. All it needs is this SOP to have been adopted and put in this bill. In these times, these very times when COVID-19 is such an issue for us and is going to be very tough, particularly on the lower-income brackets, those people could have done with that refund, and they’re not going to get it. And I think that that’s very short-sighted on the part of the Government.

I don’t know why they’re doing that, when, on the other hand, they are announcing packages to help people. This would help people, a significant number of people, and would give them back what they actually deserved to have. They paid it in error. They made a mistake. Yes, they made the mistake. But those people that made the mistake the other way, they are being chased by IRD to get their money. The people that paid too much are not getting it back, and I think that’s wrong. Thank you.

The next call’s a split call—Greg O’Connor.

Thank you, Madam Speaker. I think many of the speakers this morning have spoken and alluded to the current economic situation, and I think it’s good that they are, because this will bring many New Zealanders who will be anxiously looking at their KiwiSavers a new realisation of what is actually going on in their portfolios. I think the timing of this bill is excellent, because as they readjust, as they become better informed, for many who will not even understand what a PIE is—their portfolio investment entity—all of a sudden it will become quite significant, particularly as incomes may start to change.

So this bill is timely, it is a good opportunity for people to ensure that they’re not only aware of where they are with their investment portfolios but actually planning for the future. Therefore, I recommend this bill to the House.

If the House will indulge me, this is the first time I have spoken in the House in some time, and I do want to acknowledge the grave situation we face as a world and a country as coronavirus spreads. I simply want to say that we can help keep ourselves safe. I know many New Zealanders are undertaking significant efforts to do that. We do also have some of the most incredible doctors and nurses and medical professionals in the world, and I simply want to say that we back their efforts, we back those businesses who are trying to get through this, and we will indeed get through this.

This is a good bill. The reason it is a good bill is because it does the kind of fixing up and remedying of little issues that can happen in the law that don’t account for circumstances that we then see down the track. The particular circumstance which I want to focus on in this contribution is that of those people who, for reasons which are, fundamentally, unjust, have previously been prevented from accessing their KiwiSaver funds before they die. This is something that I don’t think lawmakers had anticipated, but as it has played out, we’ve been able to respond to it. Other contributions in this debate have talked about it, and the clear example that brought it to light, as is so often the case, was the advocacy of Joan Fairhall and Tim Fairhall. Tim, who’s Down syndrome, is likely to live for less time than most people, and has feared that he would be unable to access his KiwiSaver funds that he has worked hard for many years to contribute to and to grow. This problem was made apparent to the lawmakers of this Parliament, and the lawmakers of this Parliament set about thinking about how we could confront that situation.

I have had a small role in this in that when I saw that injustice, I quickly rang Joan and said, “Well, let’s make a bill. Let’s see what we can do to fix this, because it’s just wrong.” And I did draft a bill. Today, I’m pleased that this piece of legislation will pass and will mean that my bill is no longer necessary. It means that we won’t have to have the delay of waiting for my bill to be drawn from the ballot, and, in fact, people like Tim Fairhall will be able to make an early withdrawal of their KiwiSaver funds.

I want to commend the House on coming together to make this amendment, because too often in this Parliament, things can become about who thought of the idea first, and we can have silly games. Actually, let this be an example of how we can make faster change when we cooperate and take suggestions from both sides of the House.

So, here today, we should acknowledge that for Tim this is important but also it is important for a wider group of people, because there are many in New Zealand who have life-shortening conditions who will, for some reason or another, want to access their KiwiSaver funds before they die—to enjoy them. I think it’s particularly useful that this bill doesn’t preclude those people continuing to work while they use those KiwiSaver funds. There had been a suggestion from the Minister that they should have to retire from paid work in order to access their KiwiSaver funds. Of course, that would have been unjust because those of us who are going to live long lives—or wish that we will live long lives—are able to keep working once we access our KiwiSaver funds. Why should it be any different for people who, for circumstances outside of their control, may not be able to lead those long lives?

So I am pleased that Tim cannot only, under this bill, access his KiwiSaver funds and take that overseas trip that he so wants to take to see his brother and to see his friends but that also when he returns he can keep working at Countdown, because that gives him great purpose and great joy. Actually, from everything I’ve seen and heard, it gives the people who shop at Countdown and his co-workers great pleasure and great joy.

I also just want to take a moment to commend the role of the advocates in our community who make us lawmakers aware of these loopholes and problems in our law that sometimes we can be blind to. In this case, Tim has been his own wonderful advocate. His mother, Joan, has been absolutely ferocious and ongoing in her advocacy, and, to me, is a symbol of what a mother’s love can achieve, which is not only highlighting the case of her son and the greater injustice that that presented but also making a change for many others by simply appealing to the compassion and empathy of lawmakers. I will never forget going down to the West Coast, a year and a half ago now, and spending a few hours before Christmas with Joan, Tim, and his dad, and the look in their eyes when they said to me, “Nicola, just do what needs to be done. Get this done. Make people listen. We need to make this change.” Well, today, Tim and Joan, we’re making this change. Parliament has worked together for the better of us all. Thank you.

The next call is a split call. David Seymour.

Thank you, Madam Speaker. I rise on behalf of ACT in opposition to the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill.

There are parts of this bill that are well worthwhile, it has to be said. There are areas where the bill allows greater use of better electronics and databases by the Inland Revenue Department. It allows the modernisation of tax compliance. While that does create problems for some people who feel left behind by technological change, it also means that New Zealand and its taxation system are moving forward to a more efficient and more productive future. That is well and good. There are also changes being made to KiwiSaver that, as the previous speaker, Nicola Willis, explained very well, will make that scheme a more accommodating and compassionate scheme—once again, much better for New Zealand.

But I oppose this bill on behalf of ACT because, unfortunately, all of those changes are ultimately putting a band-aid on a huge problem. The problem is that our taxation system—while the introductory statement on this bill talked about maintaining our broad based-low rate taxation system, the truth is that we have a tax system that is vastly more complex than it needs to be, and the costs of that are threefold. First of all, by having four different rates of taxation and a different company rate—that’s five rates and the same rate for trusts—we spend most of our time in the Finance and Expenditure Committee trying to design rules to try to stop people from shifting income between different tax years and different entities to minimise their taxation. That is the administrative and compliance costs on the part of the Government and the taxpayer, respectively, that we impose on this country as a Parliament by maintaining a system with four different tax rates on income for individuals and a fifth rate for companies. It needn’t be so.

The second cost that is imposed by this overly complex taxation system is that we send a message that can be best summed up as tall-poppy syndrome in the tax code. We tell children in New Zealand to work hard, pay attention in school, do their homework, get qualified, be diligent, and be nice, in order that they can earn more money. And then this Parliament turns around and says that the consequence of that, when it comes to taxation, is that if you start earning more, your tax rate on income will be more than tripled, from 10.5 percent at the bottom to 33 percent at the top. The contradictory message that this Parliament sends to New Zealand, with an overly complex taxation system, is a cost that we will never be able to estimate, but we know it’s large.

The third cost that this five-rate taxation system imposes is that it makes us uncompetitive as a country. New Zealand is now the most highly taxed nation in the Asia-Pacific region. I know members on the left wing of politics love to compare us with low-growth economies in Europe—then we don’t look so bad. But in the Asia-Pacific region, where New Zealand belongs, we have the highest amount of tax, relative to the rest of our economy, of any other country.

So this Parliament is doing well by introducing some modernisation measures, some digitisation, and a little bit more compassion in KiwiSaver. That is laudable. But we are failing to address the real issue of an overly complex structure of tax that has three major costs for New Zealanders and makes us all the poorer. That’s why the ACT Party opposes this bill, because we need to do better. Thank you, Madam Speaker.

Madam Speaker, thank you for the opportunity to take a brief call on this bill. Look, the KiwiSaver aspect of it is a fantastic scheme started in 2007 under the previous Labour Government, and it is time to have a review and a bit of a tidy up of that scheme. So this bill certainly looks at that and we’ve heard a lot of those aspects articulated from various speakers.

The second key point that I’d like to touch on is the aspect around student loans, treating overseas-based borrowers who are unable to meet the payment obligation as a result of serious illnesses or disabilities as physically in New Zealand so that their loans would not be subject to interest. This is common sense and it’s about having respect for people and their individual situations.

I’d like to acknowledge the work that the Minister of Revenue, Stuart Nash, and the Finance and Expenditure Committee have done on this. I’d like to commend this bill to the House. Thank you.

Thank you, Madam Speaker. I don’t know whether it’s ever a pleasure to take a call on a tax bill, but it is a pleasure to take a call on the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill. But I wanted, before I started, to just make a comment or two on one or two of the other contributions that have been made this morning, because I find them rather interesting.

I, interestingly enough, agreed with a lot of what David Seymour said. But, unfortunately, what he said had no relevance to this bill at all, and I think that’s the challenge we’ve got. The bill, really, is about some specifics in the tax system, and I think that’s what we need to be addressing here. His comments were way outside the scope of this bill.

I also wanted to comment briefly on the speech of the Hon Shane Jones. He talked about the capricious actions of the last Government. So I took the opportunity to look up what “capricious” actually meant, and I thought, “Well, he’s really spent two minutes talking about himself.”—and, in fact, I think that’s all he did talk about.

Finally, I wanted to make a comment on the chairperson of the Finance and Expenditure Committee’s comments, because this is one of the few sectors of our economy that, effectively, brings their own bills to the House. In other words, Inland Revenue (IR) bring their own bills to the select committee and their own challenges and the problems that they’ve unearthed. They’re very seldom—other than, of course, for David Seymour’s comments a few minutes ago—the bright ideas of members of Parliament or Ministers because, effectively, the Inland Revenue come across problems and they come across them frequently and they have to resolve those problems. We have around four of these bills that come through the House on an annual basis, and numerous other bills related to the taxation department.

I totally agree with David Seymour: it’s hugely complicated. Understanding some of these bills is hugely complicated as well. But, none the less, they get a result that I think effectively achieves something.

I just want to comment briefly on the IR’s Business Transformation process, because it affects this bill, particularly with relation to the KiwiSaver and student loans scheme. But it’s also having a massive effect because we have a penchant in Wellington for introducing technology at a rate much greater than some of us can pick up. Again, that’s happened with the transformation scheme, and I get many people coming through my door and accosting me in the street, in fact, about the fact that they can no longer talk to a human being at the IR offices, and that’s a challenge in itself. The second thing is they can no longer walk in there with cash or cheque and pay them. For some people, that is intimidating.

I know it’s a challenge we have with many of the bills that come through this House, because we are moving to an area of new technology, and, frankly, if I could understand it, I’d like it. When I can’t understand it, it frustrates me, and I feel like throwing the thing at the wall. But that’s where a lot of people are at. That’s where this bill is at.

I just wanted to very briefly speak about the issue that Nicola Willis raised earlier, because it is one of the few times where you see a very good change made to a bill as a result of submissions to a select committee, and that was with respect to Supplementary Order Paper 293, which allows people with life-shortening measures to withdraw KiwiSaver earlier. I think that was pretty cool.

I think the rest of this bill has been very well covered by the earlier speakers in the House and that is all I wish to say in my contribution to the bill. Thank you.

In times of uncertainty, that the globe is currently facing, it is, I guess, for my part at least, quite pleasing when we as the House can come together and, I guess, speak with a unanimous voice in support of particular measures, particularly when it comes to financial certainty. And, albeit for one member, I’m pleased that this House is almost unified in our approach, that we will all be voting to support the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill today.

I want to acknowledge the efforts of the Hon Stuart Nash, and I really actually want to also acknowledge the stewardship through the select committee by Dr Deborah Russell. We have seen some fundamental changes to this bill since it was first presented to us in the Finance and Expenditure Committee, of which many of the members in this Chamber this morning have alluded to.

This bill brings clarity. It brings certainty. In matters that are so significant to all of us, that impact taxation and our fiscal security, this is the kind of clarification, simplification, that everybody is calling for right now. So, without further ado, I commend this bill to the House.

Bill read a third time.