Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill

When we were last debating the first reading of this bill, Andrew Bayly had the call, and he has three minutes and 29 seconds remaining should he wish to take it.

Madam Speaker, I would like to talk on this bill, and I was talking on it, as you correctly referred to, last week, and I basically summarised it, but I think, for many people today, if they are tuning in—and perhaps for some of my colleagues, more particularly across the way—that it might be useful just to help summarise what’s in this bill.

The first thing I’ve got to say is that National will be opposing this bill, and the reason for that is that the first and primary objective of this bill is around setting taxation rates for the coming financial year. Whilst there is no change in the rates specified in the bill, we are concerned that New Zealanders are paying too much tax that has occurred as a result of inflation, and the result of that is that their wages go up in line with inflation, and they also slowly creep up and eventually go into a higher tax bracket. This has been a problem for some period of time, and National actually took the bull by the horns and announced that we are going to inflation index incomes for New Zealanders every three years to reflect the impacts of inflation. That’s a $660 million package that will save New Zealanders $660 million a year, and that is why we’re opposing it—because we would have liked to have seen this in this bill.

Also we are very concerned that this Government, whilst it’s stating it’s not going to increase direct taxes, has a history—a long history—of introducing indirect taxes, and you only need to live in Auckland to know what that means, whether it’s an increase in fuel tax or the other—and I think there are about seven of them that the Government has introduced over the period of nearly three years in Government, and we think that’s wrong. Shifting tax from a direct tax base to an indirect tax is the same thing, and I think that issue needs to be exposed more often, and that is why we’re opposing this bill.

So this bill is wide-ranging, particularly around research and development and the write-off of feasibility expenditure. It makes provision for a $10,000 write-off if you’re looking at a new venture. Obviously, in the select committee—this is the first reading, obviously—we will be looking at that threshold of $10,000 to make sure the rules will be workable and whether, in fact, that derives significant value for businesses. It includes a number of changes around property, particularly where there’s common shareholding, it picks up the issues around leases, and it also deals with making sure that transactions are accounted for between seller and purchaser in the same way. And so it’s going to be an interesting process in select committee.

This is an excellent bill, and I commend it to the House.

This is not an excellent bill and I will not be commending it to the House, but I have little bit more to say about it than that member, Deborah Russell, just did. Thank you for the opportunity to speak on the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill at its first reading, which the National Party will not be supporting. I just want to continue on with some of the comments that my colleague Andrew Bayly was making in relation to how this piece of legislation, essentially, cements the Government’s tax policies for another 12 months, and how those policies are harmful for New Zealanders as we recover from COVID-19.

One of the key issues that this bill does is it sets the taxation rates for the coming year. It sets the income tax rates, and it continues them at their current rates, which they have been at since, I believe, 2010 when the tax reset was made by the John Key National Government. Since then, we’ve had inflation of around 13 to 15 percent, which means that incomes have continued to grow and people are paying higher taxes, but their income is being, essentially, deflated due to inflation. This is what is called “bracket creep”, and this is an issue that the current Government has failed to address and is continuing to fail to address by this bill. As New Zealanders’ incomes grow and part of that increase in income is a reflection of the fact that we have inflationary pressures—

💬 Kiritapu Allan: I raise a point of order, Madam Speaker. I note that there is a stranger in the House. I’m not sure if there has been any amendment from the ruling this afternoon, but there was a particular member that was not to come into the House.

ASSISTANT SPEAKER (Hon Ruth Dyson): Dr Smith, are you still meant to be out on leave?

💬 Hon Dr Nick Smith: Well, Madam Speaker, that’s my difficulty. I phoned and asked what time I’m allowed to return to the House and nobody will tell me. I think I’m entitled to know, as a member.

ASSISTANT SPEAKER (Hon Ruth Dyson): OK. If you wouldn’t mind adjourning to the lobby and I’ll get an answer for you directly.

💬 Hon Dr Nick Smith: That would be helpful.

ASSISTANT SPEAKER (Hon Ruth Dyson): Thanks, Dr Smith.

Thank you, Madam Speaker. I just want to continue with the points that I was making around bracket creep, which is a significant issue in this piece of legislation, and an issue that this Government continues to fail to address. It’s an issue that we addressed in the 2017 Budget. We did pass important legislation which would have changed the brackets for tax rates in New Zealand to ensure that the brackets were increased so that New Zealanders were able to keep more of their hard-earned money. Not only has this Government removed and cancelled that tax relief but they’ve continued to increase the taxes that New Zealanders pay throughout their lives.

We’ve seen the regional fuel tax put in place in Auckland. We’ve seen taxes increased three times on fuel across New Zealand, with the next increase coming on 1   July—another increase to punish motorists without any delivery being done on any additional transport projects in New Zealand. And just this week we’ve heard that the light rail project in Auckland is not going ahead, despite the continual increase in taxes that we’re paying for petrol across New Zealand. This is a Government which approved light rail, a Government which then approved the higher taxes to pay for it, a Government which has then cancelled the light rail, and now they’ve kept the taxes in place. So we’re paying more and getting nothing, and that’s the problem with this Government—they have a failure to deliver on their promises.

But not only have they increased fuel taxes—something they’ve done very effectively without delivering—we’ve seen the ring-fencing of losses, we’ve seen the Amazon tax, GST on overseas roaming, the extending of the bright-line test, increased WorkSafe levies, and of course, as I mentioned earlier, the cancelled tax relief which was very important to New Zealanders and something which the National Party has committed to doing on a regular basis, because inflation is something that doesn’t stop. It’s like rust; it keeps going, and our tax brackets should be adjusted on a regular basis to ensure that New Zealanders are paying a fair rate of tax on the income they earn, and are not being penalised by inflation.

This Government said when they came into office that there would be no new taxes—an absolute lie; something that they have broken seven times. Seven times they’ve increased taxes, and that’s something they have lied about. Of course, we remember the Tax Working Group—the Tax Working Group’s report is sitting on Grant Robertson’s desk gathering dust, but I’m pretty sure he’s opening it up again, and brushing that dust off as he prepares for the upcoming election, because we need to remember that whilst they have ruled out doing anything at this stage in regards to the capital gains taxes, or wealth taxes, or inheritance taxes, or all the other proposed taxes which they would love to put in place, they have not yet announced their policy for the upcoming election. I can guarantee New Zealanders that if this Government is given the opportunity to sit on the Treasury benches for one more term, that Tax Working Group document will not only have the dust blown off it but they’ll be implementing as much of it as they possibly can over the next three years.

So what we should be talking about as we come out of COVID-19 is not how we have, as the explanatory note of this bill says, a “framework [to] help ensure that taxes are fair and efficient, and that they impede economic growth as little as possible.”; we should be having a conversation about how our tax system can ensure that New Zealand’s economic growth can grow, we’re not impeding it, we’re growing it, and we’re giving people opportunities. We’re incentivising people to be able to grow their businesses, to try and keep jobs and keep people employed, and that’s exactly what the National Party is committed to doing.

That’s why we’re talking about how we can incentivise businesses, keep businesses going through giving them tax relief around GST—giving them a portion of the GST they paid last year back to them so they can have cash flow in their businesses at a critical time so that they can continue to pay the bills, they can continue to stay afloat, and that they can continue to keep people employed. These are the issues which New Zealanders care about right now when it comes to tax. How can a tax system work for them to help grow our New Zealand economy and to help grow businesses and to help grow jobs? This bill does not do this.

This bill simply implements the current tax rates, rolls them over for another year, and then makes a range of tinkering around the edges in the Tax Administration Act, the Goods and Services Tax Act, the student loan scheme, KiwiSaver, the Companies Act—it’s just tinkering around the edges, and it’s nothing, with no vision, no energy, no drive, and no vision for how New Zealand can truly recover from COVID-19. The National Party is proud to oppose this piece of legislation because it does nothing to help grow the New Zealand economy.

The New Zealand First Party, as an integral part of the great coalition Government, will support this bill.

Thank you, Madam Speaker. I thought the previous speaker, Shane Jones, would surely have taken a little more time. He’s known for his robust debates and hot air, and he’s managed to speak for 30 seconds, which—and also the previous speaker across the other side, Professor Russell—

💬 Dr Deborah Russell: Dr, not Professor—never Professor.

Dr—sorry, sorry. Dr Deborah Russell, chair of the Finance and Expenditure Committee—again, I thought she would have something to say on this bill. It’s a really very important bill.

This bill particularly, this omnibus bill, does a lot of things. Firstly, it does set the rates of tax for the year. Both previous speakers on this side have said that we like lower taxes, we like less tax, we want more money in people’s pockets, and the Green MP said, “Well, but you increased GST rates back in 2010.”, as Simeon Brown mentioned. But she forgets to realise that the marginal rates were cut at the same time, a tax take - neutral policy which incentivised people to work harder, because that’s what marginal tax rates are—all marginal tax rates determine the amount per dollar of gross earnings that is kept—and it also disincentivised by increasing the GST—well, it incentivised less spending. It disincentivised spending, because that’s what a GST is; it’s a tax on consumption. That was the purpose of that move, to increase the incentives for people to turn up to work every day to increase their money in their pocket so that they might then determine for themselves what they are to do with that money in their pocket. Of course, if one is to spend the money—you can either save it, spend it, or invest it, and, of course, if you wish to spend it or consume it, you would be taxed at that higher rate of GST on the day. Of course, the investing was not taxed—there was no investment tax—and there was, of course, no savings tax or taxes relating to those other two legs, if you like, of the three-legged chair. So I just wanted to clarify that.

My colleagues have talked about the effect of inflation and the increase in gross wages as opposed to real wages and the effects that static tax rates have on the real wealth of the individual, and as Andrew Bayly and Simeon Brown have traversed that, I will not repeat it, only to say that our policy is to inflation-proof the marginal tax rates so that only an increase in real wages would be caught in an increased marginal tax rate, not the gross increase in the person’s income.

Turning to the bill, it does a lot of things. A lot of it’s actually quite good. I’m going to go through a couple of things around the—well, where should we start? Let’s talk about the—and this is why I was so surprised that Deborah Russell didn’t mention some of these things—technicalities that involve the research and development changes, if you like, how we need to in select committee consider what is going around the rest of the world when it comes to R & D tax credits or rebates or environments, because it’s easy for an international company to take advantage of one country’s tax legislation over another, and if we are to incentivise certain things without considering that, there is opportunity for international players to game our system, and, of course, we certainly don’t want that to occur. So there’s a lot of work just in the R & D side of this bill.

There’s always been a lot of work put around the rules to do with trading and property. It’s been there in that legislation for a very long time that if one buys and sells property or is in the habit of buying and selling property, that property becomes part of that person’s stock or trading stock. So when one buys and sells a widget, we’re taxed on the gain, and so it is with someone who trades in houses. That’s been an underlying principle in the Income Tax Act for years and years. We clarified that a few years ago, and this current Government has increased the window to five years around what is deemed to be tradable profit when one is dealing with properties. Now we have a situation here today in this bill dealing with the same issue and also closing up loopholes that are being taken advantage of, which I think is a good part of the bill, and it does restrict or does not enable people of similar family names or cousins or friends or associates to appear to be separate in their tradings. It binds those people together, considers them one, and enables—

💬 Hon Shane Jones: Associated persons test.

That’s what I’m trying to say. Thank you very much, Mr Jones. The associated persons test is clarified and so will capture more people who are trading in property. So that’s a good bit, but quite complex and I think it deserves a bit of time in select committee.

There is another piece that I’d like to turn my attention to which is a good piece of the bill, which relates to M. bovis. This part of the bill is specific to the rural sector, where farmers have received compensation because they’ve had their herds culled. That is, you know, sort of like you’re selling all your stock at once, you’ve got a massive revenue income stream, and so therefore it’s taxed, and that’s obviously quite unfair because the farmer would not normally do that. The farmer would not normally sell all his stock on hand in one hit but M. bovis has forced the farmers to have their herds culled, and they are compensated for that, quite rightly so, and at the moment that is income, but this allows that income to be spread over a six-year period. So that’s another good part of this bill.

I think this bill is a missed opportunity. I’ve talked about the marginal tax rates and how that could be linked to inflation, but there are also other opportunities that could have been in this bill to restore confidence in the marketplace, to restore confidence in the general economy. The wage subsidy does some of that, but there are other things, that could be in this bill, which enable more cash to be put into the system, and targeted incentives. I’m talking about the GST refund proposal from this side of the House. That would enable GST to be refunded from those who pay the GST. So the larger the business, the more turnover—it’s a turnover-based incentive, if you like—the more GDP that you are creating as a business, would see you benefit the most, because it would be based on that—the GST that the business would normally have paid away. So I think that’s a good target audience.

The second target audience that could have been in this bill and that we have proposed is to enable investments to be written down much more quickly than they otherwise would be, and something that would normally be 15 to 20 years, depreciated down to zero could—even if it’s half that, even if it’s brought to a 10-year or a five-year or a two-year or a one-year or even an immediate deductibility, it would incentivise people to invest, to invest in hard assets. That makes no difference to the revenue that the Government would collect; it is only a matter of time. That deductibility would happen in any case over a period of time, and what we’re suggesting is that deductibility happens much more quickly, which would incentivise people with cash—because there’s plenty of cash around through the quantitative easing and the low interest rates and so on. It would incentivise people to invest in hard assets. Of course, if you’re investing in whatever it might be—a tractor—well, then, someone’s got to make the tractor, build the tractor, produce the widgets that go into the tractor, and all that multiplier effect can occur if one is incentivised to invest in these things.

So I think that is a missed opportunity, an opportunity to encourage people to invest. Once you feel like you’re investing, you’re only going to invest where it’s deemed or you think you’re going to make some money out of it, and, of course, we want people to turn a buck. We want the economy to get kick-started, and so that is why that’s an excellent proposal, because people who are thinking of investing—

The member’s time has expired.

💬 Alastair Scott: Oh, I was having so much fun!

ASSISTANT SPEAKER (Hon Ruth Dyson): You could seek leave for an extension, but it may not be granted.

Get in line. Thank you, Madam Speaker. I just wanted to speak briefly on the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill and just to pick up a couple of points, in the spirit of this being a parliamentary debate, from the Opposition. It was interesting just contrasting some of the speeches from the push-me, pull-you of politics, the National Party, because they were saying completely the opposite things. Alastair Scott said the bill does a number of really quite good things, Simeon Brown said the bill doesn’t do anything at all—which I would have thought, as a conservative who is always seeking to preserve the status quo, he would’ve found quite pleasing. But nevertheless, I think it’s a very good bill. It does roll over the existing tax rates, it does close some loopholes, and it makes some other technical changes. I think it’s a very good bill on balance, and it should be endorsed by all sides of the National Party, whichever diametrically opposed position they take. Thank you.

Thank you, Madam Speaker. I rise to make a contribution this evening on the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill. I would just like to congratulate the Minister opposite who just sat down, the Hon James Shaw, for nearly cracking a minute, which I think sets a record for Government members on this piece of legislation tonight. So I do thank him for making a substantial contribution.

But I do want to speak on the bill, and I do so with some disappointment, actually, because, although income tax rates remain unchanged in this legislation, at least for the short term, what they don’t address is a wider problem in our income tax legislation. Every year in this country, taxation actually goes up. It doesn’t go up because the Government puts up income tax rates every year; it goes up because people move through the tax brackets and they end up paying more of their income as a proportion in taxation because it’s not adjusted for inflation.

💬 Simeon Brown: It’s unfair.

It is unfair, my colleague Simeon Brown says, and he gave a very good contribution earlier in the debate on exactly this point. It’s been called by some to be a stealth tax, because, although the legislative tax rates don’t increase, people still rise through the tax thresholds and end up paying more as a percentage of their income than they otherwise would.

On this side of the House, we don’t support that. We don’t support tax increases every year on hard-working New Zealanders—every year seeing them end up every week with less in their pay packet than they otherwise would have if those tax rates had been adjusted for inflation.

I won’t be sitting on the select committee that will be considering this bill, unfortunately, but I hope it does come up with an alternative proposal to what’s contained in this legislation. That would be a very, very simple move, which would be to automatically, every three years, adjust for inflation for our income tax rates. It would ensure that people end up paying the same rate of tax, essentially, every year, based on their income, and it puts Government in the same position as the taxpayers that they claim to represent. If we don’t do that, what we’re left with is a bill where, year after year, the Minister of Finance rubs his hands with glee because he’s taking more off taxpayers while they’re ending up with less.

I would like to address some of the better parts of this bill, because there are some good aspects. The first one was touched on by my colleague Alastair Scott earlier, and that relates to Mycoplasma bovis. I speak, I suppose, with some real sense of pleasure in relation to this part of the bill, because I’m an MP who comes from an area that’s been very, very hard hit by Mycoplasma bovis. The electorate that I serve has had 20 percent of the cattle culled across the country. In fact, 15 percent of the cattle culled have come from one district alone. That’s the Ashburton district—quite a small district compared to the rest of the country. This measure in this bill, as Alastair Scott has pointed out, would ensure that when someone is getting an unexpected or a higher income in the year—in the tax year—because either they have received compensation or they’re sending their cattle off to the works to get rid of Mycoplasma bovis, which is exactly what we want, that income could be spread out over six years rather than being in one tax year. So that is a very good measure, and I congratulate the Minister for it.

There are some other aspects to the bill which aren’t too bad. One of those is in relation to deduction for feasibility, and that is that the bill provides an amendment which would provide for an immediate deduction for feasibility expenditure incurred in creating, completing, or acquiring depreciable property or revenue account property if the total of such expenditure for the income year is $10,000 or less. We don’t oppose that measure, per se. We do have some concerns about the $10,000 threshold. And so that’s, I hope, something that will be teased out at select committee as well.

Another one in there, which isn’t too bad, I hope, is in relation to tax credits for research and development, and that is an amendment to bring it into line with the eligible R & D expenditure definition proposed by the legislation, which includes a novelty factor. From our perspective, it will be important that we get an assurance from the select committee that the definition of eligible R & D expenditure in various other legislation is consistent with what’s proposed in this legislation. So that’s something I hope that the Finance and Expenditure Committee do take a closer look at.

As we heard in the debate earlier, New Zealanders are paying too much tax. I think Andrew Bayly, despite having a reasonably short space of time to express it, did get that message across very well. But that’s not actually the worst part of this bill, because it’s not what’s in this bill that I worry about so much as what’s coming next. In recent months, this Government has taken on billions and billions and billions of dollars of new debt. I for one, actually, in some respects, don’t have a huge problem with that, because a lot of that debt is required. Some of it might not be. The $20 billion that’s been set aside, for example, for—

💬 Simeon Brown: Slush fund.

—potentially, a slush fund, as Simeon Brown describes it. But a lot of that debt was required, because we had things to pay, like the wage subsidy, which, despite some faults, kept people in jobs, or, at least, retained jobs for a space of time to let businesses get their affairs in order. And that was a positive. That was very positive.

But what I worry about is that in this bill, and in other legislation that the Government’s brought forward to this Parliament in recent weeks, we don’t actually see any sort of coherent economic plan. All we see is a tax plan. So I worry about, in coming months and coming years, if we don’t come up with a coherent economic plan to actually get our economy moving again, what it means for legislation like this, and what it means for our tax structure.

If you look back at recent history, it’s actually not too hard to look at what they might do. This is a Government that loves tax. All you have to do is look at their record on tax in the last three years. They brought in an Auckland regional fuel levy. In fact, it’s not even an Auckland regional fuel levy—you’ll like to hear this, Simeon Brown from Pakuranga—because, when they brought in that legislation, they didn’t provide for any amendment in there that would have prevented price spreading. So what you’re seeing in some parts of the country is where fuel companies are allowed to spread the price of fuel across other parts of New Zealand—less competitive markets.

💬 Simeon Brown: The Ashburton tax.

Well, I wouldn’t quite call it the Ashburton tax, Simeon Brown. But certainly there are some areas that have seen elevated price levels as a result. Of course, there are other fuel taxes that have been brought in. They’ve extended the brightline, for example. That was a measure that was brought in for a very short period by the last National Government, but this Government has extended it out—I think doubled it, from memory. They’ve also increased WorkSafe levies, so that is a further tax on, particularly, small businesses, who are, unfortunately, struggling at the moment. There is ring-fencing of losses, of course; and then, unfortunately, the biggest one for me, which is the cancelled legislative tax relief, which, of course, the last National Government legislated for—in one of the first acts of this new Government, they, unfortunately, axed that.

The question we have now is: what’s next? That’s their record of the last three years in terms of tax—putting more and more taxes on New Zealanders, when, actually, the economy has been going pretty well. So what’s going to be their approach now, when they have declining revenues, more people out of work, and more benefits to pay? Their approach will be, Simeon Brown, not an economic plan but a tax plan. There’ll be a water tax. There’ll be a nitrogen levy. They’ll be whacking farmers again with the emissions trading scheme.

💬 Simeon Brown: What about a capital gains tax?

There’ll be a capital gains tax. I’ll come to that one. That’s a very good one, though, Simeon Brown. There’ll be a land tax, an asset tax, and, of course, as Simeon Brown says, a capital gains tax, which this Prime Minister promised was off the table, but, of course, it’ll be back because she’ll be able to blame COVID-19 for bringing it back. There’ll be more petrol taxes—there are some more coming up on 1 July: an increase in petrol taxes of 4c—and more increases to road-user charges, but there’ll be more to come, and, of course, higher income taxes, not in this bill but guaranteed to come in future years.

This is a Government that doesn’t have a growth programme. They don’t have a plan to get our economy back on track. All they have is a tax plan, and it’ll be in full force if this Government, by some miracle, manages to get re-elected in September.

What an extraordinary set of contributions we’ve had from the Opposition. I just want to dwell on one of the pearls that they’ve put forward, and that is their passionate support for the indexation of income tax. There might be, as I look around, at least one member in this Chamber who recalls the response of the National Party to Dr Michael Cullen’s proposals to index income tax rates, which were derided as “chewing gum” tax cuts. Yet that now, apparently, is the saviour of the New Zealand economy, and the idea a visionary tax policy from the National Party.

💬 Andrew Falloon: That was a one-off.

It was not a one-off. Dr Cullen’s proposal was for the annual indexation of income tax rates, and the line used by that side of the House was that they were “chewing gum” tax cuts. Yet that is now their idea of a visionary tax plan for the future of New Zealand.

What this bill does is ensure that New Zealand has the income that’s required to pay for the services and the infrastructure that New Zealanders need. And what is also extraordinary to me is, having listened to speeches all day from members opposite which whine and complain about Government debt, what do we hear from members on the other side? We hear that Government debt is too high, but we hear that we should have swinging tax cuts as well. These two things do not compute.

We hear, at other times in this House, that the Government is spending too much, and that the Government is not spending enough. And I simply cannot understand how this lot seriously imagine that they can be in Government in three months’ time when they can’t string together a halfway decent and credible fiscal plan. It’s a long way from the party of Key and English. Members on this side of the House had significant disagreements with that Government, but they did actually know how to add up numbers. They didn’t always come to the right conclusions, but these guys can’t even add up the numbers and come up with a fiscal plan that even halfway makes sense.

So this is a Government which has used its tax base and its sound fiscal position in totally unprecedented circumstances to support New Zealanders, to help New Zealand jobs, to help New Zealand businesses get through a global pandemic. And what we actually need at this point in time is a stable tax base and a stable tax system so that we can continue making the investments and the supports that New Zealanders need to get through the challenging economic conditions that we and the whole world will face over the next six months.

Now, this bill sets those annual rates, but it also makes a number of other important changes to the tax system, and I’m pleased to hear that, generally speaking, there’s support around the House for that. It’s part of an active programme of work led by the Hon Stuart Nash under which we have seen significant improvements to the IRD system over recent years, and, in fact, one of the pieces of feedback that I have been really pleased to receive over the course of the challenging circumstances we’ve faced with COVID-19 is that many New Zealanders have actually really valued the support that they have received from IRD. They’ve generally been pretty quick to respond to queries, they’ve generally been willing to address small issues, to write off debts where it’s possible and where it’s reasonable to do that, and, of course, we’ve had other really great and helpful measures such as the interest-free small-business loan scheme, which has given out over $1 billion to help the cash-flow needs of small businesses in New Zealand—over $1 billion.

Those members opposite, they keep throwing the question, “What have you done? What have you done?” Well, just listen up: over a billion dollars through the IRD’s small-business interest-free loan scheme, and I’ve received outstanding feedback from small businesses in my electorate about how that has helped them get through. It’s not everything, of course; this Government has always said that we can’t save every business and we can’t save every job—no Government in the world can under these conditions—but we’ll cushion the blow and help as many of them get through as possible.

This bill isn’t the whole picture, but it sets up a stable tax base and makes some sensible changes that’ll see New Zealand businesses and New Zealand workers into the coming years with some confidence, and gives us a tax base to support the services and infrastructure that New Zealanders need. Along with members on this side, I commend it to the House.

Thank you, Madam Speaker. Well, it is a pleasure to speak on the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill, and I have some advice for the member that just took his seat, Michael Wood. If he’s getting a lot of feedback, as he referred to earlier, he should stop talking to himself in the bathroom because that seems like he was only hearing his own voice. But he also mentioned that this party is a long way from the Key and English party. And I’d say, well, actually, things change. That’s true. But the major difference between this side and that side is that Ministers such as David Clark would have been gone by lunchtime. That is what leadership is about and, unfortunately, we’re not seeing it from that side. But back to the bill.

The issue about indexation, which was also touched on by the previous speaker, is quite an important one, actually. This time that we’re going into now, it’s going to be about confidence. It’s going to be about having people spending some money because a lot of our GDP in our economy is based on consumption. And if people don’t have the confidence and they don’t have the cash in their pocket, they won’t be spending. If they are not spending, then the economy won’t go around. We will end up in a spiral where the lower the expenditure, more jobs are lost, more people on the dole or getting some other form of Government assistance. And when you are on the dole—not you, Madam Speaker—but when people are on the dole or on lower incomes such as they will be, they don’t have the confidence to spend and invest. And then it becomes another spiral because then it just continues it downwards where we end up losing more and more jobs. And it’s such a pity because tax isn’t going to be what drives your economy, but it has a significant impact on it.

It is, as I said, about confidence. It is about businesses having the confidence to invest in their future as well. And given that in the OECD we have the fourth-largest tax take from companies, we have one of the highest—

ASSISTANT SPEAKER (Hon Ruth Dyson): I’m really sorry to interrupt the member, but the time has come for the dinner break.

Sitting suspended from 6 p.m. to 7 p.m.

💬 SPEAKER: The House has resumed. When we adjourned for the dinner break, we were debating the first reading of the taxation bill. Stuart Smith was speaking, and if he wants, he can have two minutes and 44 seconds.

He does indeed. Thank you, Mr Speaker. Perhaps if I could recap as to where I was up to, I was talking about the indexation of tax brackets and bracket creep and how if those members were to adopt the National Party policy within this bill, that would put $660 million back into the system, and—

💬 Brett Hudson: How much?

$660 million.

💬 Brett Hudson: Oh, that would drive more spending.

It would drive more spending and it would help halt the spiral downwards, which I fear we are facing.

However, I do want to point out a really good feature of the bill, which is the M. bovis tax provisions, which allow the income that’s received for compensation for those cattle that have had to be destroyed or killed. It gives the farmer six years to pay that tax off, and I think that will be greatly appreciated, not just from a financial position, but, Mr Speaker, as you would understand, there’s a heck of a lot of stress and depression out there amongst those farmers. I don’t mean that in a clinical sense, but in the situation—

💬 SPEAKER: Well, sometimes it is—yes.

—well, it may well be—they have found themselves in, and it’s a very serious matter, actually. I know that in my electorate, dealing with some of those people—as other provincial MPs will have had this experience—this will really, actually, mean a lot to them. It’s not a lot of money from the IRD’s perspective, but it’s quite significant for those people that are involved in it, and I congratulate Minister Nash for including that in the bill. I think it’s really important and it will, as I said, be well-received.

But we do have a difficult time ahead and, as I said earlier, before dinner, the importance of confidence in the economy—confidence so that people can and will spend—is so important because, in fact, a big percentage of our GDP is driven by consumption, and that requires people to spend some money in the local shops, the local cafes, and so on. What we’re seeing from overseas is that while the support from Governments and from the welfare side of the economy is very much appreciated, that money doesn’t go around in the same way it does when people are earning money with a job and have the confidence to spend that money.

How we get that confidence back is going to be quite a challenge for us all, but it’s my submission that, actually, not lowering taxes through the tax bracket relief is actually not going to help. It will harm. It will slow the economy and it should—

Order! The member’s time has expired.

I commend this bill to the House.

I premise my contribution that it is to be assumed that all members of this House want to do what’s best for all New Zealanders. So the question to ask of every bill that comes before us is whether it is the best possible bill for the situation that it seeks to deal with and whether it is the best for all New Zealanders, especially at the time now that we have where we are in urgency. So for people out there who are watching, when the Parliament is in urgency we are going to be running beginning from yesterday through today, up to midnight and then again tomorrow up to midnight—

💬 SPEAKER: Saturday.

—if at all; hopefully not—to debate 21 bills that the Government seeks to pass over these days.

Added to this question is that we are presented with circumstances that demand all the more that this question be answered transparently and with clarity as to its intent and its effects. The circumstances we call COVID-19, the pandemic, which has required a lockdown which has now resulted in a New Zealand economy that is in severe decline. We are in crisis. Both sides of the House confirm that we are—to use an overused but very apt word—in an unprecedented situation where the Government has to spend to unprecedented levels. Spending which is of borrowed funds—borrowed money. My colleague Lawrence Yule, in his speech yesterday on the appropriations bill, said that when the Government speaks of spending and allocating funds, then these funds are not the Government’s funds but borrowed funds and funds that are borrowed against all New Zealanders, against us—that we will be paying for this.

So there are further questions to ask. First, I will ask these questions. So the first question to ask is: is the borrowing at the right level? Is the spending useful and appropriate for getting the country towards improving the economy?

The other question is: how will New Zealanders be paying for this? So we are going to be paying for it by taxes—and just again, for the benefit of the viewers out there, especially because of the very strong messaging in the 2017 campaign, which I remember very clearly, that very good promises were made that no new taxes would be raised. But several have been—for example, the Government has increased fuel taxes three times, it’s added on a regional fuel tax in Auckland, introduced ring-fencing of losses, and Amazon tax.

💬 SPEAKER: Order! Sorry, the member will resume his seat. I’ve been searching through the bill. Not in this bill. The member will speak to this bill, thank you.

Thank you, Mr Speaker. I apologise for that.

So it is a given that inflation leads to higher taxes and higher taxes means a heavier burden on the common ordinary New Zealander like myself.

💬 Matt Doocey: Everyday New Zealanders.

With the income—everyday New Zealanders. The Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill actually fixes the income tax—it remains the same, unchanged, for 2020-2021. So this essentially will result in a higher and increased financial pressure on New Zealanders.

An arguably better bill would provide for a rolling tax relief, which would link income tax brackets to inflation, ensuring income taxes are adjusted in line with the cost of living—

💬 Hon Tracey Martin: Cut spending.

—allowing New Zealanders to keep a little bit more in their pockets.

💬 Kieran McAnulty: Would the member sell assets?

This is—

💬 SPEAKER: Order! It’s hard enough to keep this debate on track without irrelevant interjections.

💬 Kieran McAnulty: Yeah, Tracey.

💬 SPEAKER: No, Kieran McAnulty.

The rolling tax bracket is actually a policy that National announced last year. And the Government has been free to accept this, but the current taxation bill before us does not. It does not provide for this.

This is the principal reason why National opposes this bill. National does not support potential increases in tax, whether directly or indirectly, and we view this as leading to that. The bill does provide for a deduction on feasibility, a $10,000 write-off, which is something that we agree on, the deduction on the feasibility. But we are just uncertain whether that $10,000 is the correct amount.

I end my contribution there. Mr Speaker, thank you.

Thank you, Mr Speaker. I think the debate went a little bit off track so let me clarify. This is a good bill and I commend it to the House.