Taxation (Income Tax Rate and Other Amendments) Bill

Thank you, Mr Speaker. When it comes to economic philosophy, I think it’s fair to say that I’m more in the camp of Hazlitt than Keynes. We have seen some very strong Keynesian economic responses to the recession, with the pumping of massive amounts of Government spending as part of the COVID-19 recovery. The great author and economic philosopher Henry Hazlitt would have a lot to say about that if he was still around. He was very much a supply side economist, recognising that each action needed to take into account not only the immediate but also the longer-term effects, so not only the people who were one group that was affected but a vast number of other groups.

But we have what we have. We have what the Government is doing, which is, effectively, pump-priming the economy, pouring a huge amount of money to stimulate the economy during a recession. That’s OK if it’s short-term bolus but not long term, and we have this for as far as the eye can see. But if you look at the importance of pump-priming, what should actually go along with that increased Government spending is interest rate reductions, and we have that. But the third leg of the pump-priming stool is tax cuts in order to stimulate the economy. Instead, we have the prospect of tax increases.

So the tax increases that are being proposed by this bill are actually a handbrake on the very thing the Government wants to do, which is to stimulate the economy. What the Government wants to do about its tax policy is two things: firstly, it has to be effective in achieving its goals, and, secondly, it has to be fair. Now, in order for it to be effective—

💬 Hon Dr David Clark: That’s right.

Yep, Dr Clark agrees. But the academic literature is very split on whether or not tax cuts will stimulate an economy and whether tax increases slow the economy down. I favour the academics that say, actually, a tax cut will stimulate growth. There’s empirical evidence to that degree. I’m reminded of the words of Winston Churchill, actually, who said that “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” That’s exactly what we’re trying to do with this bill.

Actually, I’m interested that many of the people in this House who believe that taxes are actually effective in stimulating the economy are the same MPs who would argue that imposing a tax on capital income is going to constrain capital growth. That’s what they want it to do. That’s what they want it to do, to dampen house price inflation. So if higher taxes on capital growth will blunt the effect of them, surely they’ve got to be consistent and acknowledge that higher taxes on income are going to have exactly the same effect.

I’m actually amazed that the Green Party intends to abstain on this bill. Apart from anything else, it lacks the sort of conviction that they would normally have about that. I would have thought that they would have supported any tax increase, but to say that they won’t support this tax increase because the Government is not considering another tax increase is hardly Green Party whakapapa, I would suggest.

The second leg of this is fairness, and I’m really interested in the fairness argument here, because it is only fair that those who earn more pay more, and I strongly agree with that. As an upper-income earner for most of my career, I’ve been very happy to do that, and we have an income tax system that has to be efficient and broad based - low rate. But it’s also highly distributive through things like Working for Families and accommodation supplements. The effect of that is that half of all households with children receive more in welfare payments and tax credits than they pay in tax, that single-income families with two children don’t pay a dollar of net income tax until their income exceeds $60,000, and that the top 9 percent of income earners are now paying a whopping 42 percent of the total personal income tax—42 percent. And you know what?

💬 Dr Duncan Webb: That’s fair.

I think that’s fair—exactly, Dr Webb. It’s highly progressive when it’s described in those terms, but it’s fair. But it’s frankly not fair to burden the top 2 percent of taxpayers who are already paying about 20 percent of that tax burden with more.

As Mr Bayly indicated in his speech, it’s highly unlikely that this will actually raise more than a very small amount of revenue. If one looks at the impact assessment that has been tabled with this bill, the IRD agrees. It says that “the estimates are highly uncertain.” They arise because they “are sensitive to assumptions about how … people change their behaviour … There is significant uncertainty in these assumptions”. So not only does it not feel fair to me, it’s not going to make a blind bit of difference, particularly in the context of the massive, massive spending that the Government is doing. It should be cutting taxes, not increasing them, and the process has been appalling.

I can’t support the passage of this bill under urgency. I can’t support it in principle anyway, but to be driving this through under urgency is quite wrong. As a former Minister of Revenue, I became very familiar with the tax consultation process that IRD embark on, the generic tax policy process. The number of committees, the small-business tax advisory group, the larger corporate group, Chartered Accountants Australia & New Zealand, of which I am a member—all were heavily consulted on all of the policies that were being considered under my watch. So I went to the IRD website, and if one searches the IRD website at the moment for the page “How we develop tax policy”, this is what comes up: “Page not found!” You can’t even find out how IRD develops tax policy, because the internet’s broken. Maybe they took it down. And if you go to the consultation page, there’s nothing on it. It says “There are currently no items that we are … consulting on.”

As for the New Zealand Bill of Rights Act (BORA) vet that we have seen for the amendments to the Tax Administration Act, this is extraordinary, because the power to demand information has failed the New Zealand Bill of Rights Act and is considered by the Attorney-General to be inconsistent with the right to freedom of expression and the right to be secure against unreasonable search and seizure. Now, this is a classic. Who issues the BORA vet? The Attorney-General. Who is the Attorney-General? The Hon David Parker. Who does he issue the BORA vet to? The Minister of Revenue, who is the Minister in charge of this bill. Who is the Minister of Revenue? David Parker. [Interruption] Absolutely.

I’m sure the new chair of the Privileges Committee, which has an item of business before it about the judicial role of inconsistency of legislation with the bill of rights Act, will be interested in this development. And who was the most recent chair of the Privileges Committee considering that business? The Hon David Parker. So it is a triangular muddle that one person is responsible for and one person can fix, and the way to fix it is to take clause 33 out of this bill, fix it, reintroduce it, and send it to the select committee so that those people that would normally be consulted on it are able to have their say.

I’ll have a lot more to say about this bill in subsequent readings and in the committee stage. In fact, I should say this: I will be introducing an amendment to the bill by a Supplementary Order Paper that actually deletes clause 33 altogether, because I think not only does it fail the BORA vet, it fails any sort of fairness—the fairness that the Government wants to talk about. It simply doesn’t pass muster. The bill is philosophically wrong. It’s ineffective, it’s not fair to those who already pay the lion’s share of income tax, it’s being rushed, it breaches the bill of rights, and National is going to oppose it.

Thank you very much, Madam Speaker. All I can say is thank goodness that we do not have a supply side economist as the Minister of Revenue—we would be in a hell of a lot of trouble as a country and an economy.

The last speaker, Michael Woodhouse, gave us, or tried to give us, a very brief philosophical lesson about what certain tax economics thought about this, and what has been—

💬 Hon Dr David Clark: Not brief enough.

Dead right, Dr Clark. What has been proven over the years is that supply side economics simply do not work. They’re great in a textbook. Milton Friedman is so last century, I believe that even the Chicago school got rid of his name off the business school. Even Chicago have ignored Milton Friedman and said, “Sorry, we got this wrong.”

What demand side economics says is you give money to people who will spend it, because what that will do is create demand in an economy, and we absolutely believe that. We went out to the electorate, we stood there—I was with Minister Grant Robertson—and we signalled very, very clearly that the top 2 percent—not 98 percent; the top 2 percent—would pay a little bit more tax, because we understood we were in a unique situation and we were signalling that, you know, we’ve all got to play our part. We’ve all got to play our part. Ninety-eight percent will not see any difference whatsoever, and we’ve made that extremely clear.

But what we have also been very clear about is that in order to keep this economy going, we would provide money to people who found themselves in a really difficult situation in this one-in-100-year event. So we did that in the form of the wage subsidy. That is what demand side economics is about: 1.8 million Kiwis actually received money, because we knew if people who weren’t working or who found themselves in reduced hours, or businesses who found themselves in a position where they couldn’t trade—if money kept coming into the pockets of the workers, and that cycled through the economy, then we would do OK.

What have we seen? First of all, we were the first country in the OECD to get money out the door. Secondly, we are on about 5.8 percent unemployment. Now, sure, that is higher than it was pre-COVID. We knew that was going to be the case. But the Treasury forecast unemployment was going to be over 10 percent. In fact, I was reading a brief recently which was very early on in the pandemic that talked about between 13 and—worst case scenario—20 percent unemployment. But what we did is we got money out really fast to those who needed it so they would continue spending.

If Michael Woodhouse had been revenue Minister or had been part of the economic team, as he highlighted just in his last speech, what he would have done is he would have said to the top taxpayers, “We’re going to cut your tax.” and to those on the bottom, “You get nothing”—you get nothing.

💬 Hon Michael Woodhouse: Straw man argument.

Mr Woodhouse, that is what you said—that is what you said.

ASSISTANT SPEAKER (Hon Jacqui Dean): Order!

💬 Hon Michael Woodhouse: No, that’s not what I said. That is absolutely not what I said.

“We will cut taxes.”—we will cut taxes. That’s what you said—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! The member will resume his seat. In saying “you”, the member brings the Speaker into the debate.

Point of order, Madam Speaker. I understand that, but I thought there was a ruling from Speaker Mallard that said if you were using “you” in a context that was readily understood by everyone in the—anyway, I understand—

ASSISTANT SPEAKER (Hon Jacqui Dean): No, no. Thank you. The member is correct. “You” can be used to address the Chamber as a whole, but directing “you” at a member is against Speakers’ rulings.

Understood. Thank you. So all I am highlighting here is that what the House has seen in the last two speakers is two fundamentally different approaches to how separate Governments would deal with the situation we find ourselves in. Under Mr Woodhouse, taxes would have been cut and those at the bottom wouldn’t have got anything. Under this Labour Government, under Jacinda Ardern, under Grant Robertson, what we decided is we would give money to those who absolutely needed it in order to stimulate the economy—demand side economics—and those at the very top, that 2 percent, would pay just a little bit more. I believe that history will show that we have made the right decision—that Grant Robertson as the Minister of Finance, that Jacinda Ardern as the Prime Minister, made the right decision in the way that this Government handled the pandemic.

I am very proud to commend this bill to the House. It is the right thing to do. Thank you.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. Just to foreshadow at the beginning of this contribution, the Green Party of Aotearoa New Zealand will be abstaining on this bill before the House today. The reason for that is that in the best-case scenario this bill enables us, by passage, by the majority of the Labour side and the Labour Government, to raise nowhere near enough revenue to meet the challenges of the borrowing that we have undertaken, and, importantly, to make the investments that are necessary to build back. But worst-case scenario, this further entrenches and exacerbates inequality.

We had the honourable Minister Stuart Nash referring particularly to history, and here I think it is important to refer to history and to our experiences with raising top income - tax brackets in the past. So we did just that when it was 2000, and the then Minister of Finance, Michael Cullen, increased the top tax bracket from, I believe, off the top of my head, 33 percent to 39 percent. In the subsequent years we saw an increase in house prices by approximately 17 percent. The reason for that, as was unpacked later by academics and experts and researchers, was that people were shuffling their money into trusts instead of the typical income which is taxed, and then into property, property being the major reason that we have the level of wealth inequality that we do in this country today. It then so happens that Sir Michael Cullen, after being the Minister of Finance, went on to be the chair of the Tax Working Group. He learnt from his mistakes, and he recommended a capital gains tax, a comprehensive one which would actually tackle the core of the issue of inequality in this country.

In his contribution earlier, the, I believe newly appointed—congratulations—spokesperson for finance for the National Party, Andrew Bayly, spoke to, and I believe he said the quiet part out loud when he said, and I quote, “There is such a thing as legitimate tax avoidance.” He was speaking to how we create systems which enable people with power and wealth and resources to shift their money into places and spaces that mean that they don’t end up being taxed in the way that they should. We have seen exactly that in the way that we have the highest rates of wealth inequality in this country since the 1980s, which, notably, is when we first started collecting detailed data.

To refer to some data, the wealthiest 10 percent—the top 10 percent wealthiest—New Zealanders own 59 percent, more than half, of all of the assets in this country. The poorest half—the poorest half—of New Zealanders own just 2 percent. The warning shot that the Greens are putting out there in discussing and debating this legislation today is that we risk doing exactly the same thing, repeating history, and entrenching and perpetuating and exacerbating these problems if we do not address the core root of this evil, which is that we do not equally tax capital as we do those who work for a living.

I’d also refer to the notes that have been prepared, the departmental disclosure statement and regulatory impact assessment, which speaks to the kind of problem definition and what the objectives, as outlined by the Labour Government, were in seeking to implement this piece of law ahead of Christmas. The reasons, as outlined, were, of course, to implement the Labour Party’s 2020 election manifesto, but also two key objectives—as bullet pointed at page one for those who are following. It is, firstly, a revenue objective, and secondly, a distributional objective. I’ll refer to both of those in turn.

So, on the first, around a revenue objective, that’s defined in this paper, in this advice, as “The Government is raising extra revenue to reduce the fiscal impact of higher operating allowances proposed in its fiscal strategy.” In there what we see, as outlined in the projections by officials, is that the amount of money that is projected to be raised by this will not touch the sides, again as I alluded to before, on the amount of borrowing that we are currently undertaking in order to recover from COVID-19. In fact, what is stipulated, and I quote from this very advice, is that “The revenue estimates are sensitive to assumptions about how much people change their behaviour in response to the tax (e.g., reducing hours, diverting income into another entity). There is significant uncertainty in these assumptions and changing them results in substantial changes in revenue.” That starts to unpick and casts seeds of doubt on that first objective, the revenue objective.

But more importantly, the concern for the Greens lies on the second outlined objective, which is a distributional objective. Of course, I alluded to inequality as rampant in wealth in this country just earlier, but here it’s defined as, “The Government is seeking to raise this additional revenue in a way which has as little as possible impact on low- and middle-income earners and thus increases the progressivity of the tax system.” Absolutely, you can see iron-clad in here that there is an intention, and, in fact, it will be achieved with regards to the progressivity of the income tax system, but not of the tax system as a whole. That’s because we aren’t, of course, increasing—by virtue of this legislation as drafted, there’s no proposed changes to anybody who is earning less than $180,000 per annum, on their income, on paper. But it doesn’t deal with, or grapple with, the fact that by virtue of potentially continuing to inflate this problem of rampant wealth inequality in this country, the costs, particularly the cost of housing, very well may go up in this country, which disproportionately impacts those low and middle income earners.

That is the crux of the problem that the Greens are having with this proposed law. At worst, it is going to make inequality worse. So it was put to us, and has been lauded as one of the potentially great things about this legislation, about the proposed tax changes, that only the top 2 percent of society is going to pay. Someone, actually, even mentioned earlier in the debate that it was something that we could celebrate that even MPs weren’t going to have to pay because even they wouldn’t be touched. I’d hazard a guess that most who sit in this Chamber have probably heard from their constituents about how disgruntled they are about the fact that back in the 1980s, the average backbench MP’s salary was the equivalent to that of a teacher, and we have seen that run-away inequality mirrored in the salaries of those in this Chamber, as we have in the wealth inequality. [Interruption] With regard to the barracking I just—yeah, I’m not even going to go there.

In order to actually meaningfully do and achieve the objectives, as outlined in the advice, the statement offered by officials, that is a revenue objective, a meaningful revenue objective, that’ll enable us to invest in the clean, green technology and infrastructure that was spoken to just earlier today when it came to the climate emergency declaration. In order to achieve a distributional objective for a more equal, for a more just New Zealand where everybody has the opportunity to thrive, we actually need to be doing the likes of which Sir Michael Cullen, as the chair of the Tax Working Group, having learnt from the mistakes of 2000, recommended only, I believe it was, earlier this year or late the last. Aotearoa New Zealand needs a wealth tax. We in this Chamber need to be bold enough to engage and debate that on the facts, on the evidence, and on the data.

💬 Dr Duncan Webb: Not this bill.

CHLÖE SWARBRICK: And Dr Duncan Webb, I deeply respect you, my friend. It isn’t this bill, but it should be, because the Labour Party that prides itself on principles like justice and fairness and equal opportunity—I would hope to listen to the forebears that it placed in the chair of its own expert advisory Tax Working Group, because we have the opportunity to learn from the past and to do far better to those that we are passing down the future to.

The Greens will be abstaining from this bill. Thank you.

Thank you, Madam Speaker. I rise on behalf of ACT in opposition to this Taxation (Income Tax Rate and Other Amendments) Bill. But I have to say, I thought that was a very fine speech from Chlöe Swarbrick, and I greatly enjoyed listening to her gradually discovering how tax policy impacts behaviour and why introducing distortion isn’t always a particularly good idea. Although I should just say to Chlöe Swarbrick that the Tax Working Group report, amongst its many findings, said it didn’t think that introducing a capital gains tax would actually do much for house prices. Sometimes it pays to read the whole thing.

I think one of the many reasons to object to this bill is the total lack of imagination. Imagine 21 years and going nowhere, because that’s what this bill is about. In 1999, at a time when I was so interested in politics I got confused between Michael Cullen and Christian Cullen, the Minister of Finance, new elected, came in and said, “We won. You lost. Eat that, etc. The rich pricks have had it too good too long.”, and introduced—wait for it—a 39c tax rate for what were then called higher earners.

💬 Hon David Parker: At what threshold?

At that time at a threshold of $60,000, as David Parker asks. And today, 21 years later, how far have they got? Well, now they’re just going to introduce it on people earning over $180,000. Imagine being so short of imagination that that was your big idea upon being elected?

Here’s another problem with this piece of legislation: the fact that it’s being done under urgency. Now, there are sometimes good practical reasons to put things through under urgency. The temporary bill to deregulate party pill testing for one summer, with an expiry date on the legislation—that was a good use of urgency, because it actually is urgent, because the problem is right before us. The reason for urgency that was given by the Leader of the House on this legislation is “Well, we campaigned on it and we want to do it really quickly.” So forget checks and balances. Forget the right of the public to have a say; it’s another case of “We won. You lost. Eat that.” Maybe the Labour Party think that’s kind of fun for now, but they should reflect on what sort of contribution that is to our democracy—what sort of leadership, what sort of kindness, dare I say it, are they bringing by putting a bill through under urgency for purely political purposes? I think that that is a great shame.

Another reason why you might oppose this bill is the unintended consequences. We heard a bit about that, perhaps inadvertently, from the previous speaker from the Green Party. One of them is that, of course, once people find that they are going to be liable to pay more tax, it’s in their interest to structure their affairs to avoid it. And, of course, there’s already speculation that the fringe benefit rate will have to be raised to disincentivise people to be paid more in benefits in kind rather than cash. There’s already speculation that the trust rate will have to be moved, and it’s already in this legislation that the trust regime will have to have greater powers for the IRD to request revenue information off people to make sure that they’re not using trusts to avoid this top tax rate.

Now, people have been quoting all sorts of intellectuals, and it’s kind of cute. So let me give you a bit of Adam Smith. The levying of an income tax would be an intolerable intrusion into the affairs of men—and I’m sure he meant women, too.

One of the implications of a complex tax regime is a greater incursion into privacy. What a great irony. Just as we’ve had a new Privacy Act, with more teeth to protect people’s privacy, come into effect, this Government, under urgency, is rushing through legislation that will further impinge upon people’s privacy.

But then there’s another reason why someone might be opposed to this legislation, and that is the morality of it. What I find really interesting is the constant reminder—subtle and not so subtle—from the Labour Party members on the hustings and the campaign trail and in this House: don’t worry; it’ll only affect a small number of people, OK? Just 2 percent. You know, the message is: it’s OK to go after people if they’re a minority. You know, that’s what they’re saying. It won’t affect many people. It won’t affect you; we’re just going to take it off someone else, and there’s not many of them. It’s OK to beat on a small group of people, just so long as they’re people that are successful.

That’s the problem here. It’s the morality of it. It’s the old-fashioned bully-boy tactics. In fact, it’s tall poppy syndrome in the tax code. That’s what this is. It’s OK to go after a small group of people and take their money off them. That’s the message that comes through, and, again, the Labour Party should reflect on the values in the leadership and, dare I say it, the kindness that they’re showing with such a message behind this legislation.

You see, the values that we try to teach our kids and hope that they’ll receive at school are very different. The values are: go to school, listen to your teacher, do your homework, get good grades that turn into qualifications that turn into jobs that turn into a career. And when you earn money, put a little bit of it aside—save it, invest it carefully. If you do all those things right, you might be comfortable and make a bit more money. Those are the values we try to teach our kids and hope they learn at school. Then the Labour Party comes along and says, “If you do all those things, if you do it too well, then we’re going to not just tax you more proportionally, we’re going to put in place an extra tax for that small number of people; we’re going to hit them disproportionally hard with this top tax rate.” I think that on a moral basis that is absolutely shameful and the opposite of the values of aspiration, thrift, and achievement that we should be celebrating in this country and in this Parliament.

This legislation is rushed. It lacks imagination. It will have unintended consequences. It doesn’t have a clear problem to be solved, and it is immoral in that it’s premised on it being OK to beat on a small group of people so long as they’re successful. Now, maybe that would be justified if there was a problem to be solved, if there was a need for revenue that could be solved by this legislation. But what do the documents—the regulatory impact statement and the departmental disclosure statement and the analysis that we’ve seen—tell us about this legislation? It says it’s going to raise about half a billion dollars. Now, once upon a time, that was a lot of money, but we’ve got a Government that just committed to borrow $140 billion. It’s not going to make any noticeable impact on the Government’s balance sheet. If the Government was truly worried about balancing its Budget and having money to spend, here’s a question: could they have found anywhere in the $100 billion - plus they spend each year just half a billion dollars’ worth of savings, to avoid all this? Of course they could have, but this tax is a solution looking for a problem.

This can’t be as good as it gets. Imagine if we actually had a better way. Imagine if the objective of this country was to grow its productivity and its wealth by having the best public policy that was the most efficient and was based on and encouraged the best values of the Kiwi spirit instead of putting tall poppy syndrome in the tax code. Imagine if we strove to have low, flat taxes that were efficient to administer, that did not encourage distorted behaviour, that were efficient to comply with, that did not have people running off to their tax accountants and tax lawyers to set up new schemes to avoid paying them, and, most importantly, sent a message that this country values success—this country thinks that if you do all those things we encourage our kids to do and you end up earning more than $180,000, we don’t say, “We’re going to take it off you.”; we say, “Good on you!” That would be the values of a country that I would like to see, not the values of a country that thinks it’s OK to beat on a minority so long as they’re successful, not a country that rushes through ineffective legislation that makes the tax system more complicated to solve no defined problem. We can do so much better than this, but, sadly, the Labour Party is stuck legislating like it’s 1999. What a shame.

Madam Speaker, thank you for the opportunity to take a call on this bill. My wife and I have four young children, and if there’s one thing that our children understand it’s fairness, and, if they feel something is not fair, they certainly tell us in quite loud language at times. If we go back a couple of months ago, the Labour Party took a manifesto document to the election—they took a manifesto document to the election—and part of that manifesto was this policy here, which is to increase the tax rate for people earning over $180,000 to 39c—now, only for those earning over $180,000. Now, the previous speaker, David Seymour, talks about those being successful people; I’m not sure how he defines success, because I would also say that teachers and nurses are also successful, but that’s up to the member to make that definition for himself. But the key aspect around this bill here is around fairness.

The country voted for this bill. The Labour Party took the manifesto—and this was an integral part of the manifesto—and one of the key arguments was the fact that we have increased debt to support the country during COVID, and this is a key aspect: the money that this bill raises supports the paying down of debt.

Now, I won’t go into the details, because the Minister of Transport spoke earlier on about this bill, but I just wanted to raise a couple of those key points there: that this is a Government who believe in fairness. This is a Government who believe in being fiscally responsible. We acknowledge that we have increased debt, just like the previous Government did through the global financial crisis, and they paid it down; just like we have during COVID, and we’re starting to pay that debt down.

So it is an excellent bill, I commend the Minister of Revenue, and I commend this bill to the House. Thank you.

I call the Hon Gerry Brownlee—five minutes.

Well, the first thing I would like to point out to Mr Strange, who’s just resumed his seat, is that the Government has not started to pay down debt; the Government continues to borrow at an extraordinarily large rate—

💬 Andrew Bayly: $110 million a day.

—in fact, as my colleague points out, about $120 million a day. To suggest in any way that this bill is about paying back the debt is a total nonsense.

Let’s just have a look at it for a minute. The projections are over four years that this might bring in some $2.2 billion. It’s a lot of money—$2.2 billion over four years, of 2 percent of the taxpaying base—a lot of money; no question about that. But the debt in four years’ time is going to be some $214 billion. So this is, on a good day, when everyone pays up—no one avoids; everyone puts the cash in—1 percent of the debt. This is 1 percent of the debt. So this bill does not have anything to do with repaying debt. This bill is entirely about the—you would say—placation of those who are anxious about others who earn more than them through the election promise to increase to the 39c rate.

I think it was interesting when our colleague David Seymour pointed out that that’s exactly what Labour did 21 years ago. How long did it take before people started creeping up towards that income level? Now, of course, 21 years later, where that level was set is now below what the mean income is for New Zealanders. So you do get a lot of movement over a period of time, and it seems to me that the idea that you’re going to say, “Well, at the $180,000 mark you meet something magical and you must pay more tax.” denies the fact that everybody in this country wants, eventually, to see their incomes rise.

The other thing that is most worrying about this bill is the reach-back powers given to the commissioner into the private affairs of New Zealanders. For seven years, backwards—back as far as the 2013-14 year—the Commissioner of Inland Revenue can ask trustees to provide information about that trust income. Here’s one problem: why doesn’t he already have it? Why doesn’t the commissioner already have that information about income? He should be taxing any trust at the rate that they’re due to pay it.

💬 Hon Stuart Nash: She.

She—well, OK. In this case, I’m using it as a very generic term. She’s actually a very good State servant. But the question is: the information should be there, so what is the additional purpose here? Well, when we look at the bill, we find out it’s to help develop policy. So where’s the information going? Who’s taking that information? Who’s using that information, and what are they doing with it?

I think it was a very good point that was made earlier in the debate that we worry all the time about privacy in this country. We strengthen privacy laws constantly. But then, under urgency, to try and get enough money to pay 1 percent of the debt—if we’re lucky—each year for the next 200 years, we suddenly change privacy laws. It seems to me that this is a bill that’s very poorly conceived and that’s written in a hurry simply to accommodate the ability for Labour politicians, Labour members of Parliament, to go out and say, “We promised to put that top tax rate up, and we did it.”, and then, of course, to hope that no one asks them why, because the answer to why can only be because people earning over that much shouldn’t keep as much of the income as they’re earning. It can’t be anything else. It can’t be, “Oh, we want to reduce the debt.”, because it won’t do it.

We will not be supporting this bill. We don’t begrudge for one moment the spending that the Government has done to help New Zealanders through a difficult time, but we do not think that it is fair or that it’s kind to create the illusion that somehow this bill is going to solve the massive debt problem that this country is accumulating day by day. Only productivity will do that.

It’s a very interesting and perverse thing to hear the use of terms like “minority” and “privacy” and see some sort of suggestion that there’s persecution in a bill like this. This is a bill which is designed to tax people who earn over $180,000, 39c in the dollar—they are well able to actually pay that and they’re willing to do so, and they voted to do so in their droves. That’s because it is the right thing to do. That is because most of us have moved on from Churchill and, in fact, Adam Smith; we are right up to date at the moment and we are reading Stiglitz. We are talking about how we have a gap between rich and poor, and this tax targets the top 2 percent. We have a gap which is all about the top 1 percent, so this is bang on the money for where it should be.

💬 Hon Member: Well said.

Thank you.

I rise to oppose the Taxation (Income Tax Rate and Other Amendments) Bill. We here on the National side oppose it in principle because we believe that you can’t tax your way out of a recession, and that in fact, this is entirely the wrong time to be adding new taxes and new costs to those working hard in our economy.

I want to, in this contribution, put on the record for Hansard the shambles of a process by which this bill has come to the House. Because we all know the back story here—it’s been canvassed by other members—whereby Labour campaigned on raising the top tax rate, and as has been the case in the past, the tax experts came out, the economists came out, everyone came out and said, “Well, we’d like to warn you, Labour, that if you do that and you open up a massive gap between the trust tax rate and the top personal rate, then you are very likely to see some avoidance behaviour.” This was not new or revolutionary advice; this was very typical advice. And Labour said, “Oh no, no, no, nothing to see here. Let’s all move on.” And then, lo and behold, post the election, drafting the bill, Labour decides that, actually, it turns out all those experts were absolutely right. There is a significant risk here that people are going to try and avoid this tax by funnelling income through trusts.

So what does the Government do at that point? Does the Government say, “Well, we’ve made a commitment in the election that we are not going to introduce any new additional taxes and we must honour our commitment”?

💬 Hon Stuart Nash: Penny and Hooper.

Because, of course, that would be the position of integrity wouldn’t it, Mr Nash? That would be the position of honesty, of doing what you say you will, of campaigning on a promise and keeping to it. No, no. That was not the response that Labour decided to have. Instead, what Labour did was they said, “Hey, here is an opportunity for us to potentially introduce a sneaky additional tax. But we can’t do it straight away, we better trump up a bit more of a case. So let’s create some new powers.” Is it that surprising that Labour would create new powers for the commissioner? “Let’s create some new powers for the commissioner to keep an eye on it, and let’s make sure those powers are really strong and allow the commissioner to obtain information to watch what’s happening in trusts and to ensure that this information can be used to formulate policy in the future.”

Now, the problem with all of this is that this is all being done in a rush; we are debating this under urgency. So it appears that the Minister of Revenue didn’t really stop to think what the implications of introducing these significant new powers might be. That was, until he put on his other hat, as the Attorney-General. So at which point the Attorney-General assesses this bill against our New Zealand Bill of Rights Act and says, “Does it have any problems?” Oh yes, there are significant problems with this bill, because what it does is it actually creates a search and surveillance concern, and a freedom of expression concern—such that the Attorney-General has issued a section 7 report saying that it is inconsistent with the New Zealand Bill of Rights Act. So we have in this House a bill being debated that causes major concerns when it comes to the rights New Zealanders expect to be protected.

So what does the Attorney-General do, then, when he comes to this conclusion, that the bill is causing these major breaches? Does he perhaps have a word with his friendlier self, the Minister of Revenue, and say, “Well, you know, perhaps you need to amend that, perhaps you need to come up with something else?” No, no. Instead, what the Attorney-General does is suggest a clause that could be used to mitigate against this, and does absolutely nothing more. So we have this spectacle of a bill being introduced under urgency in this House, that most members in the Chamber only saw a few hours ago, that the Attorney-General is advising should be amended, but that hasn’t come to this House with any of the amendments.

I just want to say that that is a shambles of a process. And the new members opposite should be aware that this is not standard practice by a decent Government that knows how to get legislation through. This is shambolic and it speaks to a degree of confusion in the head of one Hon David Parker that I find concerning and somewhat bedazzling. Why you couldn’t just talk to your better self when you were putting this report together, I do not know.

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! Leave the Speaker out of the debate.

So having put these process issues on the record, let me turn now to three key areas where National has concern. The first that we have telegraphed consistently is that we are concerned that this bill will erode the integrity of our tax system. It will do that by encouraging taxpayers to find ways to avoid tax; this is a risk that occurs when there are large differentials between different rates. This will have a high differential—not only with the trust tax rate, but with the corporate tax rate—in fact, an 11-point differential between those two rates. When you see those big differentials opening up, the incentives are clear. The incentives are to find a way to somehow funnel income through the lower tax option. We are concerned that by further increasing these differentials, we will see a further erosion of the integrity of our tax system. And that is absolutely backed up by the advice of the IRD, who, in the papers tabled in this House, acknowledged that that is a major issue that does draw into question actually how much revenue this tax will earn at all, what behaviours we can expect to see, and what impact it will have. So that is what the official advice is telling us.

Our second concern that I have canvassed is around these new powers for the commissioner and what they mean in practice, and how they will be mitigated in order to comply with our New Zealand Bill of Rights. But the third area is actually how well this bill measures up with its own objectives, with the measures that, in fact, it sets for itself—because it does a very poor job on both. The first purpose that is stated for this bill is to increase revenue, and as some of the members have canvassed, it is really important here to think about these big numbers in a broader context, because it’s estimated that this bill may raise $550 million, but you need to think about that number in the context of the debt that New Zealand is currently acquiring, which is a much, much bigger figure: $140 billion by 2024.

When you consider the scale of this revenue, this tiny bug versus the enormous debt, you know very quickly that this has absolutely nothing to do, Jamie Strange, with paying down New Zealand’s debt or creating revenue. That’s a complete furphy of an argument. Grant Robertson may have hoodwinked you in caucus about that one, but there’s no substance to back it up when you look at the actual numbers. So then you turn to the second purpose, and I also want to point out on that revenue point that the advice in these papers is very clear, that officials are very concerned about what those revenue numbers will actually be, given all the behavioural issues that may be occurring.

But the second issue you have is that the bill says that one of its purposes is to have a distribution impact. So this is Jamie Strange’s point: that somehow this is going to create a new dawn of fairness in New Zealand. Again, we do need to look at the objective numbers here, because what the analysis from Treasury says is that this will have a tiny, negligible impact on inequality. Absolutely tiny. There is that wonky way that Treasury measure this: it’s called the—I’m going to mispronounce this—the Gini coefficient, and what the analysis shows is that that number reduces from 0.493 to 0.491, a 0.2 percent reduction. It is absolutely tiny, and, again, what this does is it shows you that the high level argument, “Oh, it’s going to raise a lot of revenue to help pay down debt, it’s going to make New Zealand fairer.”—none of those arguments are backed up by the numbers.

The members opposite may not care when big rhetorical statements are not matched by numbers of substance. But we on this side of the House will continue to ask the Government to be clear—that if you’re going to do a bill that is going to create all sorts of compliance issues, it’s going to create all sorts of potential breaches to the New Zealand Bill of Rights Act, you’d better be clear that it will actually deliver on the grand purposes you have set for it.

So National opposes this bill. You can’t tax your way out of a recession. This is a shambles of a process, and this bill won’t achieve the purposes it sets out for itself.

It was a real shame that there weren’t a few more people on the opposite side of the House tonight when we had some maiden speeches. There were some very moving speeches made tonight. We had my new colleagues from Sri Lanka, the Cook Islands, three from Samoa, and there was a consistency that ran through those speeches—they were all families that arrived—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! I do hope the member is going to come to the bill very soon.

Oh, Madam Speaker, it will become very obvious if Madam Speaker would just take a little patience.

ASSISTANT SPEAKER (Hon Jacqui Dean): Well, very soon.

What became very obvious was that the reason that these people were here, their families were able to succeed, was because of taxation, because the redistribution that taxation is—many of the arguments we’ve heard, whether it be Mr Seymour or the previous speaker, Nicola Willis, they’re really arguing against tax. They’re not arguing against this particular segment of the bill; they’re arguing against any tax in the first place.

What is important to understand is that we all benefit when those who are at the bottom, as these people’s families began, through a redistribution that tax is, are able to contribute fully, with their families and individually, to this country. So those who are so outraged by this provision, which will see those who earn over $180,000 a year pay 39c in the dollar, might just be drawn to the fact that without a fair tax system, we will end up with the very part of the world we all escaped from, which is somewhere where there was absolutely no equality or no equal distribution of wealth.

So I have no hesitation in standing and arguing and recommending this bill, because I think as most of us have just come off the hustings will have seen, there is very little opposition to it among those who will actually be those who will be paying the money. So I recommend this bill to the House.