Taxation (Budget 2021 and Remedial Measures) Bill

Members, the House is in committee on the Taxation (Budget 2021 and Remedial Measures) Bill. The first debate is on Part 1, which is clauses 3 to 6, “Adjustments to Minimum Family Tax Credit”. The question is that Part 1 stand part.

Thank you, Mr Chair. I’m very pleased to take a call on the minimum family tax credit part of the Taxation (Budget 2021 and Remedial Measures) Bill. I think we’ve traversed the circumstances for this in a reasonably liberal fashion in the first two readings, and this will, obviously, be a little bit pointed. Although, I want to indicate to the committee that, because this bill is a bill about taxation and remedying things, I think there are a number of other remedies that we could put. Actually, what we have had is a long dissertation from the Minister of Finance and the Government of the day about fixing 30-year-old problems. Well, my aspirations in the committee of the whole House are a little more modest than that. I’d like to fix one problem that is a longstanding irritant, and that is the failure to amend the thresholds for the tax rates that are in the Income Tax Act 2007, and there is a tabled amendment now on the Table in the name of the Hon Simon Bridges to do just that—this would, I think, constitute a new part, and so I won’t elaborate on that too long; I’m just doing some introductory remarks—and a second tabled amendment is in my name to remedy the punitive changes that the Government made recently to punish higher-earning, hard-working New Zealanders, who are already paying a vastly disproportionate share of the income tax base in this country, by removing line 5 of Schedule 1 of the Income Tax Act—that is, the 39 percent threshold.

So I’m going to come and talk about that at the appropriate time, but I want to just ask the Minister, in regards to the minimum family tax credit change that we are debating, whether he felt it necessary—or why, rather, he didn’t feel it was necessary—to increase the threshold more than he has, or more than the Government intends to, because, effectively, what we are doing, if my calculus is correct, is that the adjustment rates that are set out in Part 1 in clause 4 are, effectively, a dollar change. But the higher the jobseeker support revenue becomes relative to the income earning threshold of workers, then the lower the proportion of difference there is. And we’re actually closing the gap in a percentage basis between the tax credit for those who work and the income for those who don’t.

Now, the Minister, in his first reading speech, made it very clear that it was—despite the proud shouts of socialism from the many speakers for Labour in this bill—still at least the Minister of Revenue’s intention that our framework should enable work to be more valuable than not working, and I think, despite the Greens’ interventions and then their abstention, almost every other member of this House would say that work is always better than not productively working, with all the qualifications that the Greens would put around the value of unpaid work, which nobody denies, and the importance of volunteerism and parenting and all of those things. But, actually, paid work is the thing that pays the bills. It pays the bills for the household, it pays the bills for the Crown, because the Crown doesn’t have any money except that which it taxes or borrows and then spends. So it strikes me that while there is this incremental adjustment, the gap in a proportionate basis has actually diminished a small amount and, therefore, the value of work as compared to income support for job seekers has actually closed, and I wonder if he could just explain whether or not that’s the case.

I agree with the member that we should be having a gap between the earnings of people who are in work compared with those on benefits. It’s always difficult at the margins, but that’s what this bill attempts to remedy. The member is correct. It does it in numeric terms rather than percentage terms, but in terms of the rate at which wages are meant to grow relative to inflation, I’d refer the member to page 139 of Volume B.3 of the Budget Estimates, where it shows wages rising ahead of inflation. Benefits are, of course, indexed to wage rate growth, so whilst they will both increase by the same percentage, if wages go up by more than the Consumers Price Index, then so will benefits. The same percentage increase for both results in the gap between wages and benefits growing over time. So I think the member’s concern that there is a diminishing incentive to work, if that was his concern, should be allayed by that fact.

Mr Chair, thank you. I’d just like to ask a question for the Minister about the number of people that the Government anticipates will be affected by this change in the first year, and the fiscal impact of doing so. How many people will have an additional income top-up because they will be able to qualify for a minimum income tax credit, and when you add up the amounts of money that the Government anticipates or can at least forecast that they’ll receive, what is the fiscal impact of this change in the Government’s estimates?

The advice I have is that 4,800 people will be affected by the change. I don’t have the total amount that that entails to hand. I don’t think—well, I’m not sure that officials have that to hand, either, but if the member puts down a written question, I could answer it. Suffice it to say that these are really things at the margin. It’s not a huge amount fiscally. But I’ll check that with officials, and if I can get him an answer, I will.

We’re on Part 1, and in Part 1, there are the adjustments to the minimum family tax credit. Under new section MF 4H, inserted through clause 6—I might wait until the Minister, to be fair to him, is able to hear. In Part 1, section MF 4H, “Calculation of instalments: 1 April 2021 to 30 June 2021”, there’s a calculation there based on the old figure of $30,576 as the base amount. Then you have the calculation that is from 1 July 2021 to 31 March 2022, and that’s based on the new amount of $31,096.

My question, simply, is: what is the difference in weekly income for the current arrangement, for the period that is mentioned in section MF 4H, and for the bit that is mentioned in section MF 4I, for a family that has a dual income of $70,000 and three children? It’s not an unusual amount for people who are sharing an income, $70,000. It’s quite a modest income for a household, particularly if there are three children involved. So what are the three figures that they would currently be entitled to, that they’re entitled to between 1 April of this year and 1 July of this year, and, then, that they will be entitled to from 1 July of this year right through until 1 April of 2022?

I’m not able to give him that figure, but, to put it in context, in table 5.2, on page 128 of the Budget Economic and Fiscal Update, the family tax credit is listed, and members will be able to see that the forecast for the 2021 year is slightly more than $2 million, $2 billion—oh. I’m going to need to check that figure and come back to the member. I might be—

💬 Hon Gerry Brownlee: We don’t have that document.

Yes—

💬 Hon Gerry Brownlee: That document’s not in the media pack that you put out today.

Well, this—

💬 Hon Gerry Brownlee: Where do we get it?

Well, it will be on the web, if nowhere else. But I’m sure that the Budget and Fiscal Update I actually see sitting on the Table in front of me. So it is on the Table.

Thank you, Mr Chair. I just have a question about a matter I wonder if the Government’s considered: that the Government has raised the minimum wage to $20 per hour. The requirement to receive the minimum income family tax credit in a two-parent family is to work 30 hours a week; it seems to me that that would be $600. Now, with the new level, the income will be supplemented to about $608, and, I guess—actually, about $698. It seems to me that nobody could actually qualify on the 30-hour requirement unless they were earning less than the minimum wage.

I don’t know if perhaps I’ve missed something. Perhaps, taxation—income tax—means that people would still require a top-up to get their after-tax income to the right level. But it seems that it’s very possible that if the Government intends to continue increasing minimum wages at the rate it has, it may be that nobody can actually qualify for the minimum income tax credit, even at the rate that’s proposed. That’s not necessarily a bad thing, but I just wonder if the Government has actually considered the interaction between the minimum wage and the minimum income family tax credit.

I thank David Seymour for the question. The figure that the member quoted was the after-tax figure—net of tax figure—which is how the tax credit is calculated. The before-tax figure is higher.

Kia ora, Mr Chair. In the spirit of discussing the minimum family tax credit thresholds, I’m interested in knowing, I guess, the political decision to set the threshold where it’s been set, because I guess one of the things—well, ideally, we would have liked to replace the minimum family tax threshold with a family support credit for all low-income families. We’re thinking about the decision to put the threshold in a way that prevents some families from acquiring it and where the rationale is coming from, in terms of setting that threshold, and also the consideration of perhaps expanding the minimum family tax credit to self-employed people and beneficiaries in recognition of some of the productive labour many of our people who are reliant on income support do.

It’s the Government position that we intend that there be a differential between incomes for people who are on benefits and incomes for people who work. We think that it is appropriate that people who work do earn a bit more than those that are on a benefit. We think that is an appropriate incentive in society. We have had those debates in this Parliament for many years and the Labour Party was sometime criticised by people who hold a contrary view. We understand that view, but we disagree with it.

I want to seek to persuade the Minister in the chair to my tabled amendments. They are tabled amendments, of course, to this Taxation (Budget 2021 and Remedial Matters) Bill, which amends the Income Tax Act 2007. My contention is that this bill and its purposes don’t go far enough, and that these tabled amendments would be more than worthy amendments to be made. I do want to, on Budget day, put it within the context and the purpose of, really, the central part of this Budget, which is benefit increases. It’s a position where the Government is quite clearly acknowledging that we’ve got an issue, that there is an issue with incomes for lower income earners, but, of course, what has happened here today is announcements in relation to only those on benefits. What these tabled amendments, of course, would do would take that recognition of these huge cost of living pressures, inflationary pressures, that have, I accept, been the case now for some considerable time, and apply them in a more broad manner to more people who require that assistance.

Bluntly speaking, what I am talking about is not simply beneficiaries—because there’s a case been made for them—but also what I suppose we colloquially call today the working poor. Actually, I’d go even further than that. I think there is a case to be made for middle income earners, and I say that because, frankly speaking, when you’re earning $10,000, $20,000, $30,000, $40,000—actually, if you’re earning $80,000 in Auckland and you have dependants today, I think it’s hard to make the case that you’re somehow living large on the fat of the land. In fact, you may well, if you have children, depending on the Working for Families structure, for your particular circumstances be struggling as inflationary pressures and petrol, rent, energy, and other costs have gone up.

So the amendments that I am seeking in terms of tax indexation or what is often called bracket creep, would, I think, do three things that would greatly improve and be strong remedial changes to the Income Tax Act 2007. Firstly, of course, we would deal with that bracket creep. In that sense, with those inflationary costs of living pressures, as they go up—and, of course, what also happens is that incomes go up, people, though surreptitiously, move into a higher tax bracket, they are paying more tax, and, therefore, they are worse off. They have less disposable income in their pocket. This would, not in a huge way, but in a modest way, deal with that issue.

Secondly, what this bill would do is something related but subtly different, and it goes to the heart of income tax and the issues of income tax in this country. We have now—for certainly all of this century, but I’m sure I’m right to say, the last 30 or so years—seen the tax pie—

💬 David Seymour: It’s a history lesson.

Well, they gave us one earlier today, despite the fact they got it entirely wrong about Ruth Richardson. They seem to forget the fact that they were in Government for nine years from 1999 to 2008—but, anyway, I digress. I do want to keep on track and focus on this bill. But I do just say to the member interjecting, it’s entirely unfair. It was an entirely cheap political shot from the Government, what they did.

But on this bill, that second point—the member says this is a history lesson; well, be that as it may—is that the tax pie over the last three or so decades has grown and grown and grown in comparison to the private incomes of New Zealanders. The Government’s sack of goodies, if you like, has grown, as there has been bracket creep, and they have taken more—my argument is—at the expense of everyday, ordinary New Zealanders, certainly the working poor and middle income New Zealanders. So that is the second thing.

There’s a third thing as well. There’s a third point in this as well that I want to make in my persuasion to the Minister and the Government about this and the tabled amendments to be made. And that’s this: Grant Robertson and the Hon David Parker—

Tāmati Coffey: Are awesome.

—may well—well, that’s a matter of debate, a debateable point, as the Speaker would say. They could say, I anticipate, that “Look, actually, well, we just can’t afford to do this. We can’t afford to do this because it might cost”—look at my last figures about two years ago—“$600 million or $700 million per annum to make these rather modest bracket changes once every three years, per annum.”, and I acknowledge that’s a significant amount of money. They can’t afford that. But the Prime Minister today said in relation to benefit increases, rhetorically, but I thought quite powerfully, “We can’t afford not to do this—we can’t afford not to do this.” That is the logic when it comes to beneficiaries. I say it’s also the logic when it comes to the working poor and even those in middle income.

But there’s also a more powerful point, actually, which makes this rather different from the situation when it comes to beneficiaries and what has happened there, where it’s, effectively, a transfer over, and it is this. It’s a conceptual point, but it seems to me it’s a significant point. This is not the absence of tax that the Government is getting, and was already getting; rather, what it is is simply the absence of an increase in tax take. It’s not money they were getting anyway. It is a pile that is growing as that bracket creep happens. So they’re not losing money. That’s simply the absence of growth properly understood, it seems to me.

I also want to make this point in relation to these tabled amendments that fit nicely here in this remedial matters bill, and would be a part of the logic. Another objection could be “Well, it’s not fiscally neutral.”, and, of course, in a bill process, there is a veto power that comes, I think, right at the end of the bill process that the Government or, indeed, actually—not the Government—the finance Minister personally must exercise. So you could think that. But strictly speaking, properly understood, these tabled amendments are not in that class, because my contention is that these tabled amendments are fiscally neutral.

All we are asking the Government to do is provide for a mechanism where once a term, at the start of a term, the Commissioner of Inland Revenue advises whether there has been bracket creep in terms of that Consumers Price Index basket of goods and what is happening there, and advises the finance and the revenue Ministers about that. But, crucially, according to these tabled amendments, the Ministers would, nevertheless, have the ability in terms of those provisions to say “No, we’re not going to do that.”, and all they would need to do—a bit like the Attorney-General’s New Zealand Bill of Rights Act reports, if you like—is provide their reasons for that.

So the Minister in the chair personally could provide reasons why it was not appropriate to change those brackets, and I’ll give you an example. For argument’s sake, with the current inflationary measures of around about, what is it, about 2 percent, you would see that 33c for the $70,000 tax bracket go up to something like, I’m not getting this to the dollar, but $72,000, $73,000—[Interruption]—yep—which, you know, is not huge, but is a meaningful cost of living measure for those on that income.

So that is, Minister in the chair, what we are asking for here. We think they would be good, sensible remedial measures, and very much, actually, in keeping with the kind of spirit that the Government is trying to put across in this Budget, other than that nasty, cheap shot they had at Ruth Richardson and the “mother of all Budgets”—a cheap political shot that it was.

There’s nothing in the bill before the House about income tax rates and, therefore, I suppose it’s a question for the Chair as to whether introducing an amendment to the bill about income tax rates would be within scope. However, that decision has not yet been made by the Chair, and so I will advise the member that were that to be ruled in order, the Government would still be voting against it, for a number of reasons. I would note that, of course, not so long ago the Hon Simon Bridges was in Government for nine long years and didn’t put indexation of brackets in—

💬 Hon Michael Woodhouse: That’s because inflation wasn’t out of control.

Well, he says, “Because inflation wasn’t out of control.” Inflation’s about 2 percent max at the moment.

💬 Hon Michael Woodhouse: Wage inflation, I said.

In respect of—wage inflation’s out of control. No, actually, we quite like it in the Labour Party when people get paid more. We don’t call that wage—

💬 Hon Simon Bridges: It doesn’t matter if their rent goes up a couple of hundy bucks.

Well, it’s not. So in respect of the issue—in respect of why the National Party chose not to index brackets—it’s because they preferred to give tax cuts to the top. Their most significant tax cuts gave 40 percent of the tax cut to the top 10 percent of income earners. The cost of those tax cuts was paid disproportionately by low to middle income earners, who suffered the increase in GST. We won’t be repeating that mistake, and if this amendment is ruled in order—

💬 Hon Simon Bridges: Oh, nasty.

I don’t think that’s nasty. Is it nasty to put your amendment on the Table? It’s no more nasty for you to put your amendment on the Table than it is for me to speak against it. So if this amendment is in order, notwithstanding the fact that this bill isn’t about income tax, the Labour Party will be voting against it.

Before I take the next call, I’m going to make a ruling. Just for clarity: we’ve heard from the member on his tabled amendment and we’ve heard a response from the Minister. I will be ruling that amendment out of scope of the bill as accepted by the House at second reading.

Your ruling is, of course, absolutely accepted, but in his rebuttal the honourable Minister managed to open up quite a lot of other issues that clearly can’t just stand without some response. The first thing I would say is that much as he might want to criticise the last National Government, he should recognise what a huge mess a Government that he was part of left in 2008. It took years to straighten it all up. We finally got there. Somehow these guys have ended up with another opportunity to mess it all up again, and we’re looking at some of the most extraordinary debt the country has ever seen being piled up by these guys at the moment, with absolutely no plan for where they go from here.

My simple question on this part is: the Minister pointed us to page 128 in the Budget Economic and Fiscal Update and said the answer to my question about what the increases would be—what was the progression between now and that three-month period April through to July, and then July on right through the whole twelve months. Well, all that we’ve got here is actual figures from 2016, 2017, 2018, 2019, and 2020, a forecast for 2021, which is actually a drop on what was paid out last year, so less going to the people who are supposedly going to benefit from this particular bill. It drops even further next year, and then in the year 2023 suddenly bounces way up. It drops again in 2024 and then massively up again—or considerably up again, in 2025. So what are we to make of these figures? Why is there a trumpeting of this being great for New Zealand families, when in fact there is—let me just have a quick look here—about a $50 million, $60 million drop in actual payments expected to be made in the current year?

Now, it seems to me that there could be something wrong here. I’d ask a simple question: a family, two incomes, $70,000, three kids, what do each of those blocks of calculation—that initial period we’ve got now, the period that takes us through to 1 July from April, and then from April through to the end of next year—actually mean for that family? I would have thought that that would be something the officials would have had on a spreadsheet somewhere and could have at least said, “Well, we haven’t got it for $70,000. We’ve got it for $75,000. We’ve got it for $60,000. We’ve got it for $80,000 and $90,000.”, and so on, so that we could actually get an understanding of what’s being done here.

It seems to me that a simple movement of some $520 in the two thresholds is not going to make a huge amount of difference at all. There is no indication in the Budget Economic and Fiscal Update of what it actually means for families. I can’t help thinking that this is the usual story with the Government going out trumpeting something as being absolutely fantastic, amazing, and very good for people, and finding out that actually it’s very little, means nothing, and probably won’t happen.

So can the Minister tell us what was so persuasive about the information that was put to him by those who were wanting this increase that he was able to get Treasury to agree to it—not that that matters, actually. Treasury agreeing to something is of no great consequence at all; in fact, it’s probably a badge of honour if they disagree. But we just would very much like to know what that spreadsheet said.

The effect of the minimum tax credit is to guarantee a minimum income to a single person that works 20 hours a week, or, if it is a two-person family, between them, 30 hours per week, and if they work either 20 hours or, between them, 30 hours, the minimum tax credit tops up their pay, if it is under the threshold, to the threshold. So the amount that any one person gets depends on how much they earn. If working for 20 hours they earned, say—to pick a figure—$30,000, then they would get a top-up of $1,096 so that their total income would be $31,096, which is the new amount.

Thank you very much, Mr Chair. It’s been a fascinating debate, and I’d like to congratulate the Green Party for their passionate abstention in the matter. There is a march for apathy being arranged, and I hope they’ll join me and the procrastination society, and we’ll advise the date of that later—if it can be agreed.

I’ve got a couple of comments and then questions—it’s sort of like the kind of question you get at a public meeting, which is a long statement followed by “Don’t you reckon?” So in that spirit, I’ve got a couple of different lines of comment-question, and one is in relation to the different time frames and the different regimes that will apply in different quarters of this year and going into next year and beyond. The other line of questioning is in relation to the dollar amount at which the minimum family tax credit will kick in.

In relation to the dollar figures, we’ve heard some discussion about tax bracket creep, which is obviously not a derogatory term for a finance Minister one doesn’t like—it’s genuinely creep in the sense of increasing tax brackets. But I did wonder about the difference between those two numbers: the $31,000, roughly speaking, and the $30,500, and, obviously, I could ask you the difference between them, and, on the face of it, it would be roughly $500—or “five hundy”, in the name of a card game of that name. But leaving aside the arithmetic that underlines the difference, I wonder if the Minister can speak to the reasoning behind that change.

I understand, of course, from the explanatory note of the bill and from the legislative statement that’s come out in conjunction with the bill, that, of course, it’s in response to the increase in benefit rates. But I wonder if the Minister has considered other ways in which the amount might or might not be said to keep pace with current economic, fiscal, and, indeed, monetary trends. I refer, of course, to the spectre of inflation, which I think is a very real possibility and prospect following the Budget that we’ve heard today and in the context of other changes that the Government has announced and implemented recently. When wages are increased in an artificial or arbitrary manner, that is to say with no connection to increased production or productivity, then, of course, it’s only right to consider any legislation in the realm of taxation in connection with the possibility—indeed, some might say the likelihood—of inflation getting away on us as a nation and as an economy.

So my question to the Minister in relation to that increased threshold is whether it takes into account the possibility of inflation, and, if not, why not? I have a question too about whether any thought has been given to the possibility of the exchange rate—that is to say, the New Zealand dollar as compared with overseas currencies. New Zealand families are not immune to the fluctuations in the exchange rate. It’s not a particular area of expertise of mine, but I will note, of course, that in a pretty volatile global environment—I mean, New Zealand, I suppose, is doing its best to insulate itself from that by not entering into any new trade agreements, but that’s more in the category of cock-up than conspiracy, or perhaps accident rather than design. But, in any case, the reality is that it is at least theoretically possible that the exchange rate of various other currencies that are relevant to New Zealand families, directly or indirectly, should be considered, in my submission, and I want to know if the Minister has given any such consideration.

I will just add—I apologise to the Minister, who is prepared to answer those questions, and I do thank him for that, genuinely.

💬 Simeon Brown: Is it a speech or a question?

Well, it’s a bit of both. It’s a lot of one and not the other—that’s my answer to Simeon Brown, who’s asked whether I’m posing a question or giving a speech.

The cost of living, of course, is another factor, and we’ve got inflation with a capital “I”, but, of course, more generally, the cost of living in a way that might not be captured in the Consumers Price Index (CPI)—for example, when a Government excludes the cost of housing increases, whether that’s mortgage loan payments or rent, which have seen rise in a rampant fashion in the last 3½ years, and to be fair, to a lesser extent before that.

So I want to know, please, from the Minister, if he has considered the changes to the economic landscape in that regard when talking about those different thresholds. I give a heads-up or a warning, perhaps, that I do want to speak about and ask some questions in relation to the time frame, but I look forward to the opportunity to do that in a different contribution, and I request an answer from the Minister on those other points in the meantime.

I won’t digress into either house price or rent inflation, because the Speaker sat me down during the second reading when I responded to incorrect statements by the Opposition on that same subject. So I don’t think it would be wise for me to raise those issues at the committee stage.

However, in respect of the wider inflationary concern the member Chris Penk has, I would observe that putting $20, $25 a week into the pockets of the lowest-income people in the country is not likely to lead to great pressures in the economy, because that’s likely to be spent on basics—food, clothing, and the like—and so I don’t see a huge inflationary risk there.

I would note that if there is an increase in underlying benefits occasioned by either inflation or by Consumers Price Index (CPI) inflation, or by wage inflation—given that benefits are now indexed to both, effectively—there is already a provision in the law that allows the minimum tax credit to be adjusted as a response to those benefits going up as a consequence of either CPI or wage inflation. That generally happens in December each year and is so regular that it’s occasioned by an adjustment to the members tax credit by Order in Council, rather than primary legislation.

I was fascinated at comments made by the Minister in the chair, David Parker, in his response to my colleague Chris Penk. I’m paraphrasing, but it’s close: he said that these changes were not likely to put pressure on the economy because the people who are benefiting from these changes are likely to be spending them on the essentials, on the basics. It conjures up some idea that people on higher incomes are somehow dashing to their gilt merchants and their sharebrokers, if indeed we were to give them some kind of tax break. Right? Well, I’ve got news for the Minister. They used to be supporters of the Labour Party. They used to be the union members of the teachers and the nurses and the police. They are middle-income New Zealanders, and they’re getting nothing from this Government, certainly not from this Budget. In a previous rebuttal to Mr Brownlee, he also implied—rather, to Mr Bridges, and Mr Brownlee—in refuting his tabled amendment to change the tax threshold changes, that he basically admitted that a Labour Government would never adjust the tax threshold changes because I would benefit from it as an upper-income earner. That is the level of jealousy that we see from this Government. They can’t possibly help somebody in the middle-income bracket—say, from $48,000 to $70,000.

💬 Hon Dr David Clark: It was the National Government that didn’t do indexing.

Well, this Government reversed those changes, actually. He’s a bit tricky with history, that Dr Clark.

💬 Simeon Brown: He likes his bike, though.

He sure does, and his beach walks, but he cannot bring himself to support tax threshold changes, because everybody benefits. Remember the slogan? This was a Government for all New Zealanders, only those who earn, say, more than $70,000 don’t get diddly—in fact, they get punished for their endeavours.

It’s also worth bearing in mind what the Minister said. Actually, who pays the income tax, because the Treasury documents from Budget 2020—and I haven’t analysed this year’s Budget—show unequivocally that the top 21 percent of income earners pay 64 percent of income tax, and the bottom 48 percent of income earners pay 8 percent of the income tax base, and do you know what? I’ve said it repeatedly: I think that’s fair. It’s quite progressive, and if it were adjusted for inflation, I think that’s fair enough. People who earn more should pay a higher proportion of their wages to tax, but not in the punitive way that this Government has done. We’ve punished endeavour. They’ve increased the top tax rate to 39 percent, and my tabled amendment seeks to remove the top tax rate, to undo that punishment.

Because here’s what’s going to happen: they’re not going to be paying tax; they’re going to be paying for their airline tickets to Australia, where incomes are higher and the lower thresholds are just that—the lower income thresholds are lower here—and the opportunities are better and the house prices are cheaper. Those doctors and those highly paid professionals will be looking at the job ads and the real estate pages in Australia.

I should add that we are going to have another go at improving things for middle-income New Zealanders. I’m aware that there will be tabled amendments in the names of my colleagues Nicola Willis and the Hon Gerry Brownlee.

💬 Chris Bishop: Oh, they’ll be good ones.

They are very good ones. I’ve just had a look at the drafts and they’re excellent. I think we need to have that discussion. We need more remedial measures in this bill to make it fairer for hard-working middle-income New Zealanders to get ahead.

I will take the opportunity to respond to the member’s tabled amendment, to which he referred, which purports to decrease the top tax rate from 39c in the dollar to 33c in the dollar—39c currently kicks in for incomes over $180,000. Now, again, if this was to be in order, we would be voting against it, but, again, I’m not sure how that could be within scope, given that there’s nothing in the bill about income tax rates.

Similarly, as I ruled before, I’ll be ruling the member’s tabled amendment out of scope as well.

Thank you very much, Mr Chair. It was a bit of a shame that I never got to speak to the Hon Michael Woodhouse’s amendment, because that is what I intended to do. So I’ll turn my mind back to Part 1, clause 4, “Section ME 1 amended (Minimum family tax credit)”, where it says, “In section ME 1(3)(a), replace ‘$30,576’ with ‘$31,096’.” Now, I understand what the Government is trying to achieve by increasing that family tax credit, but to my colleague Michael Woodhouse’s point: that margin is $520. So we have—

💬 Hon Members: How much?

What the Government has—it’s $520.

💬 Simeon Brown: That’s like 10 bucks a week.

It is $10 a week, exactly. So what we’re looking at here is a Government that is pretending to be very generous and supporting people to get an increase in their family tax credit, but the reality is that on one hand, they are losing 10 times that in the increased costs of living and that’s just for their rentals, and we know that in the last five years, rents have gone up 21 percent. But the staggering figure is into March 2021: the largest year-on-year increase in 2½ years, because it grew by 6 percent.

Now, it might seem very generous to deliver a $520 increase in the minimum family tax credit threshold, but it does not go anywhere near closing the gap in the expenditure those same families are being asked to fork out for, and we know that they are very hard-working families. That’s why we top them up—because we want to keep them in work. But I ask the Minister: what drove the decision to increase by $520 a year when the Minister will be very aware that the actual costs for those families at that threshold is, in effect, going backwards with the increased outlay that those families have?

I’ve got great sympathy for people—as I’m sure members on all sides do, actually—on low incomes who manage weekly budgets, and I have great respect for people who sometimes do very mundane jobs, don’t earn a lot of money, and struggle to make ends meet. We as a Government have been, quite obviously—given the controversies in the House and elsewhere recently—trying to disproportionately lift the income of low-income earners, whether they are on benefits or in work. We’ve done that through minimum wage increases, the way we construct wage agreements in the public sector and also through the lifting of benefits and other prior changes like the Best Start package for children—previously for those families with children. And that is, in my opinion, all good.

This is not as significant as a lot of those other measurements, but it does ensure that we lift the minimum tax credit so that those families that are in work for 20 hours or more a week will earn a little bit more with their income being topped up if they happen to earn less than $31,096 per annum.

Thank you, Mr Chair. I just appreciate the opportunity to take a short call on this Taxation (Budget 2021 and Remedial Measures) Bill. Just reflecting on the comments from the Minister there, where he talks about the crocodile tears of great sympathy and great respect for people who are trying to balance their budgets at home. I know there’ll be thousands of people listening and watching the Minister at home. They’ve probably all tuned out now—tuned out when they heard him talk about great respect for them and then doing nothing for them.

What this bill does, or appears to do, is pretty much diddly-squat. Here, he’s replacing $30,576 with $31,096. This is something which seems to be doing absolutely diddly-squat, and it just shows that this Government can talk a big game about its sympathy and respect, but it doesn’t actually deliver for those who are trying to make ends meet and those who are working hard, those who are trying to pay the bills, and those people who are trying to actually get ahead.

He’s talked about the fact that this Government’s trying to lift the incomes of those on the lowest, but it fails to take into account the actual increase in costs that this Government continues to pile upon these exact same families. It talks about trying to lift the incomes of our lowest-income earners, but the Minister has failed to talk about the increased cost of renting a house.

How much has the cost of renting a house increased under this Government’s time in office, Minister? How much has it cost in rent? How much more are families paying in rent every single week under this Government than when this Government first came into office? How much are families paying extra in tax on their petrol since this Government came into office? How much is this Government forcing—

💬 Hon Dr David Clark: Got nothing to say about the bill.

Well, it does have something to say about this bill, because this Government talks a big game. This Minister got up and talked about the great sympathy—the great sympathy—that apparently you’ve all got towards all these families who are working hard and trying to balance their budgets—the great respect for people sitting at home right now trying to balance their budgets. They’ll be sitting at home having their dinner time meal, just about to put the kids to bed, and they’ll be thinking about the fact that this Government does nothing to help them balance their budgets—does nothing. All we get are some words about respect and sympathy. When I hear interjections from the other side of the House about “What’s this got to do with the bill?”, well, people at home will be asking the question of what’s this Government got for them—what’s this Government doing for them? And here we are, debating a piece of legislation which makes a small change here to the minimum family tax credit.

I go back to my line of questioning, which is around the cost of living, around what the cost of living has been under this Government—the increased rent that people sitting at home are having to pay.

People are having to look down the barrel of more costs being imposed upon them. Every time this Government passes new regulations around rentals, they fail to take into account the fact that landlords pass those costs on to their tenants. It’s almost like they don’t quite understand—like if you increase a cost on someone supplying a service or a product, somehow they’re just going to magically not pass that cost on. It’s like money grows on trees, if you live on the other side of the House. But, actually, if you’re a business, or you’re a family, or you’re trying to get ahead, you realise, actually, every single cost has to be paid by somebody.

This Government is putting forward pieces of legislation like this which, essentially, just fiddle around the edges but fail to address the real costs that working families sitting at home right now are truly, really challenged for. All we hear from the Minister is “I have great sympathy”. Great sympathy; great respect—great. Well, it’s not that great, is it?

Madam Chair, thank you very much for the opportunity to speak on Part 1, in regards to the adjustments to the minimum family tax credits changes. Look, I just wanted to pick up what I thought were some very insightful comments by my colleague Chris Penk—

💬 Chris Penk: That’s right.

—in regards to some of the amendments—stop, you’re kicking me in there. But, before I do that, I wanted to just raise that Business New Zealand has, obviously, come out with some comments about the Budget this evening. Their comment is “The Budget has a missed opportunity for growth.”, and I think that really sums up some of the aspects, but I want to get back to the amendment, because I know that’s why we’re here to chat about that at the moment.

Specifically, I’m looking at clause 4, and I’m looking at section ME 1(3)(a), the replacement of $30,576, up to $31,096. So we’ve talked a little bit about that. A colleague previously has just discussed the differential in the rate. Minister, what I’m interested in is that you mentioned that $25 a week is going to be the consequence. Most of that is going to go on to essential spend. You did actually note that that won’t impact inflation. I’d question that, considering some of that’ll go on rent, which we definitely know is going up. But getting back to the point around the question I want to raise: with that rate that you’ve set, I’d be interested, potentially from officials, in some comments around that. What type of scenario testing did you play out when you were coming up to land that number—

CHAIRPERSON (Hon Jacqui Dean): Order! The member will leave the Speaker out of the debate.

Tim van de Molen: You can’t say “you”.

My apologies—sorry. To the Minister, so I’d just like to clarify with the Minister, when you were considering setting the number at $31,096, what range of sensitivities did you look at in regards to setting that number, and taking into account the point that you made before, Minister, in regards to what was a reasonably minor impact, what was some of the decision-making process that went around that?

I think the minimum family tax credit aspect is, as we know, a payment to make sure that families are getting a basic income—where parents are working—and we definitely acknowledge that that’s an important aspect, but I guess there must have been a little bit of consideration, and did you consider anything more? How did you land on that number? Can you give me a little bit of clarity around that? Thank you, Minister.

We took advice from officials as to the appropriate number, and we were also mindful, as I think I said earlier, that there is a mechanism for the annual updating of the figure in response to increases in benefit levels that are occasioned by adjustment for inflation, whether it’s Consumers Price Index inflation or wage inflation. There’s an annual adjustment process by way of Order in Council in December each year, and we took that into account as well.

Thank you, Madam Chair. Along the lines of the question that’s been just asked and answered by my colleague, I’ve got a question that would ask: was there consideration given to altering tax rates so that that minimum figure that’s in here, the now $31,096—or soon to be—would, in fact, be the after-tax earnings, which could come from a person in work who was paying a lesser tax rate? It seems to me that’s quite a simple way of doing things, and, of course, would mean that the person did not have to go almost cap in hand to the Government to be topped up to their particular income level. It would mean that they could maintain their dignity.

Now, I’ve put an amendment on the Table to achieve that. I appreciate that the previous Chair said that it’s likely, at the time we come to vote, to be knocked over, but it is a reality that we’re dealing with a system here that balances the lowest-income earners’ take-home dollars—and, in any event, there is a tax factor in that, because if they are working they will be paying tax. So my suggestion is, and the amendment that I’ve moved is, that the tax rate be moved to 10.5c between $0 and $17,000 and 17.5c between $17,000 and $48,000.

It would be interesting to know, under current rates, what does someone have to earn to actually be right on that cusp of $31,096, and are we, in fact, seeing a situation where they drop below that amount, because of the tax they’re paying on their income, and then have it rebated back to them? It would seem a simple thing to do would be to change the actual rates so that they don’t have to go through this exercise of saying, “Look, I’m sorry, I need to top myself up; would you please give me some of my tax money back?” For that to occur, of course, it would be a simple matter of the Government recognising that this might be a better way to do things and at least considering it. I suspect, though, that, despite the nature of this bill being fundamentally one that deals with a tax rate, it will probably be knocked out—ruled as inappropriate. I think that’s unfortunate.

So it is to ask Minister Parker again: what was the consideration given—or was there consideration given—to moving a tax rate so that those people who are in work would only be paying tax that would get them back to that $31,096? It seems to me that that would put them somewhere, under current tax rates, in the upper 40s, or perhaps just mid to upper 40s. If their rate was lower, then they may, in fact, keep a little bit more than the $31,096, but administratively it’s got to be a heck of a lot cheaper for the wider tax base.

Well, the figures in clause 4 are after-tax figures, which was—

💬 Hon Gerry Brownlee: That’s right.

Well, no, that’s actually what—the member didn’t say that at the start of his contribution. He might have mistakenly said it that way, but I had the impression that that’s not what he said.

In respect of the other issue that the member raised, as to whether we should change income tax rates, well, that’s not part of this bill. But I would also note, as the member did at the end, that, yes, that would be complicated, because it would have fiscal effects beyond this class of people who are being helped here, because, of course, those income tax changes would flow through to every other taxpayer as well, not just low-income people whose position is improved by this.

Thank you, Madam Chair. I’d like to carry on from where my colleague Simon Watts was asking some questions before, which is around clause 4, regarding the replacement figure for the minimum family tax credit. Under this proposed piece of legislation, it proposes to replace the number “$30,576” with “$31,096”, and he had a very good question, which was asking what advice or formulas had the officials used to come up with the figure $31,096. I didn’t get an answer, Simon didn’t get an answer, Chris didn’t get an answer—none of us got an answer—and, Madam Chair, I don’t think you got an answer, either. I think it would be helpful to the committee if the Minister could actually answer that question.

What he said was something along the lines of “Well, that’s just what officials came up with.” Well, it’s nice. It’s nice that officials came up with a number—well done, thank you. But we’d like to actually have an answer to the question about how they came up with that number, because, as I think it was Michael Woodhouse or one of my colleagues earlier, or it might have been Maureen Pugh, actually—I think you said it. It’s a difference of $520 between those two, which is $10 a week. So was it that they thought, “Well, maybe we should increase it by 10 bucks a week. That’s a good number. That’s easily dividable: $520 divided by 52 equals 10. It sounds quite good.”? Or was there an actual formula applied—

💬 Hon Poto Williams: Point of order, Madam Chairperson. I just raise this point of order, given that we have changed Speakers’ rulings around how we conduct committee stage debates, and they are much more attuned to asking questions of the Minister and receiving answers. Can I just say that that member in his last couple of contributions has taken four calls, has been repetitious, and has not actually, in my view—and this may be something that I would like you to think about—not really—

CHAIRPERSON (Hon Jacqui Dean): Thank you. I—

💬 Chris Bishop: Point of order—

CHAIRPERSON (Hon Jacqui Dean): Thank you. I am ready to rule on this. We’re in urgency. This bill has not gone through a select committee stage, and so it is quite in order to allow detailed questions around what is provided for in this bill.

💬 Chris Bishop: Point of order, Madam Chairperson. Just a point of order. I just want you to clarify and make it clear to the committee that despite our new practice being questions being encouraged during the committee of the whole House stage, members taking five-minute calls is acceptable and that you don’t need the encouragement and help from former Assistant Speakers who are no longer in that role.

CHAIRPERSON (Hon Jacqui Dean): I thank the member.

Well, thank you, Madam Chair, and thank you for the opportunity to continue with this line of questioning, which I think is actually very relevant and quite a detailed question. I know the Minister in the chair understands the nature of the question and is, I hope, going to be able to give a detailed answer to how that figure was come to. I make the point that this is the committee of the whole House—this is the only chance that this Parliament has to interrogate this piece of legislation.

The legislation was dropped by the Government at about 4.30 this afternoon. That was the first it was brought to Parliament. It hasn’t gone to a select committee, submitters haven’t been able to have an opportunity to submit on it, and this is my chance and the Opposition’s chance to be able to actually interrogate the detail. We haven’t even had an opportunity to be briefed by officials. Ministers should be coming down to the House and actually encouraging questions because, actually, this is the opportunity for the Opposition to hold this Government to account, and there’s so much in this bill which needs to be held to account.

So the answer is—the question is, sorry. The answer will come soon, I’m sure—I hope—and I hope it’s a good one, because otherwise, we’ll have more questions. The question is: what was the formula used to come to the difference between $30,576 and $31,096?

Also, I guess the other question would be whether the Minister is prepared to table the advice in relation to that on whether there’s some formula, or is there a formula that’s used? He’s talked about Consumers Price Index adjustments, which are used in other instances. If these changes are made in this way again, is there a formula that officials would use in a general way, or is it something which is just made up on a case by case basis?

Providing some of that assurance to us on this side of the House around how these decisions are made and how they’re come to would give us more confidence in the legislation which has been put forward. So, look, that is something that I do ask the Minister to address. A very important question, I do note—our right, our only opportunity here in this Parliament with this piece of legislation, to actually put these questions to the Minister.

There’s no change in the underlying principle here, which has been around for a long time. The threshold is calculated to reflect the maximum income that someone on a benefit can earn, including their benefit plus their allowable earnings in addition to their benefit, taking into account the abatement of their benefit caused by those additional earnings. That overall figure is then calculated and the minimum family tax credit is calculated at $1 more than that figure so that, in theory, the person in work will always earn more than someone that is on a benefit.

Madam Chair, thank you. I’d like to ask the Minister, for somebody—there’s 4,800 people, he said, who will be affected by this change. Presumably, those are people whose income is currently between the current threshold and the new threshold. I wonder, for those 4,800 people, it would seem that until they get to the new amount of $31,096 total after-tax income and they get offered extra hours or an increase in their hourly rate, perhaps, they won’t actually get any more money. It seems as though, if I’m reading this right, those people have now been put in a position where, if they do work more, until they get to $31,096, the effective payment for those extra hours is nothing. Am I reading that correctly?

At the intersection between work and benefit, there are always a small number of people whose circumstances are close to identical, whether they’re in work or on a benefit. That’s long been the case, and it’s a difficult area of intersection, because we want to maintain incentives to work. We also know that the amounts that are in issue when there is any change to benefits in terms of effect on the minimum family tax credit, they’re always very small. And people who are higher earners might sometimes think, “Gee, there’s not much in this.”, but it does matter. It’s a matter of principle, and $500 for someone in that situation can be significant, or is significant, and is important to them. The member is correct, though, that if someone was earning for their hours of work less than $31,096 and earned a little more, then the payment to take them up to that minimum level of income that’s effectively provided through the minimum family tax credit would mean that they would be no better off.

A further question for the Minister, then. I take the principle that this $31,096 threshold has been calculated by making sure that the maximum someone could theoretically get on a benefit is going to be $1 less than what they would get if they were working. Now, I just wondered, does that include a benefit for somebody that was not working at all, because it would seem that, in order to qualify for that $1, a person would have to work 20 hours a week, 52 weeks a year—make it 1,000 hours. They’d have to work 1,000 hours for $1, and I just did some quick mental arithmetic, and I wonder if you could confirm or get the Treasury officials to confirm that that amounts to working for 0.1c an hour. I know this Government is very committed to higher wages; that seems like a very small amount of money. It can’t be the case that the difference between the benefit and working is 0.1c an hour, but that sounds like the logical conclusion of what the Government’s saying.

Well, if someone was on a job seeker benefit and they were receiving $350 per week, the member can see that that would roughly total about $17,500 a year, which, of course, is much, much less than the $31,096 minimum through the minimum family tax credit.

Thank you very much, Madam Chair. Just to continue on that theme, of course, a person to be working for the nominal additional dollar would—or at least the additional dollar, to be fair—have to expend a certain amount of effort and energy and cost, even, to get to work and so on. Actually, I have a sort of related point, but it relates to the amount of the value of the tax credit versus the cost of calculating the jolly thing, because if we think about the amount of time and energy and perhaps even dollars it would take to make the calculation, to the Minister and Madam Chair, it’s actually a relatively small amount when one thinks about calculating the complicated regime where we’ve got several different time frames, several different amounts, and the extent of the credit would actually be relatively modest.

So the costs that could be incurred in working out how much extra one would get, or rather the lesser amount that would be taken away from one, would include potentially getting tax advice from an accountant or a lawyer or, if one was doing it oneself, counselling—or, if one was doing it through a spouse on the dining room table, marriage counselling. These things are not free, and so there is a cost, and there’s also an opportunity cost if one is spending time on one’s accounts on this extremely complicated matter when one could be selling more widgets or services. So the value of it, I think, should take that into account, and I’d be interested to know whether the Minister has run that real-world filter over what has been proposed in here and the policy underlying it. Personally, if I were to be calculating this myself, I’d run out of fingers pretty quickly—that’s the sort of digital calculation that I’m into.

💬 David Seymour: How many does the member have?

I think the question across the House was the number of fingers that the member has. Well, I’ve got fewer than if I’d been born in other parts of the country, and I won’t say any more than that for fear of offending provincial colleagues.

The different time frames involved in Part 1 are part of that complexity that I’ve referred to in relation to the cost of calculating the credit to which one might be entitled. We’ve got a system whereby, coming into 1 April, or rather looking back now to 1 April; so the 31st—no, anyway, before 1 April; I’m going to get myself confused here if I’m not careful—to 30 June of this year, retrospective though it may be. Then we’ve got 1 July 2021 to 31 March 2022. This is a genuine question—and I know I shouldn’t say that because it’ll make it sound like my other questions are not genuine; the Minister can make up his own mind on that—what is the regime that applies after 31 March 2022, because it doesn’t seem to be here? I may genuinely, as I say, be missing something obvious here, but that does seem a gap, at least in terms of what we’ve got in front of us. I’m sort of reading this as I go; I’m sure you can hardly tell, Madam Chair. This relatively new, or very new piece of legislation—it could hardly be newer; it’s existed, as far as we’re concerned, for less than four hours now—doesn’t seem to provide a regime beyond 31 March 2022. One presumes that the world will not come to an end at that—I’ve probably missed some memo about the end of the world at that time, but potentially, as I say, I’ve just missed it.

But my final question, and this is also very profound, is in relation to the phrase “1 week”, because in “weekly periods”, which is one of the defined items, we hear that this is the number of periods of one week. I wonder if the Minister can explain what one week means in this context. Is it the European idea of a week, which is Monday to Sunday; is it Sunday to Monday, as in US, Canada, Brazil, and Japan; or is it perhaps a more straightforward seven days in the Craig David sense of the phrase? I know the Minister gets that reference; he’s old enough but not too old, I’m sure. But it is actually a relevant question. You know, it’s definitely around the edges, but then again, this whole thing is. The seven-day period could start on 1 April, it could start on 1 July, and depending on what the calendar’s doing at that particular time, that might make a difference, albeit small. So I’d be grateful if the Minister can enlighten us on that point.

I’m pleased to inform the member Chris Penk that the Government has computers and we actually don’t have people working this out on slide rules, nor do we have people doing it every week. Indeed, most people elect to get their minimum family tax credit annually at the end of the year. For some people, for whom the $20 dollars a week or whatever it amounts to is important, they elect to get it fortnightly, but once they make that election, generally we let computers do the accounting.

I want to return to a line of questioning that other members have pursued, which the Minister hasn’t commented on in detail yet. I want to give him the opportunity to do so. It relates to exactly how these threshold amounts were chosen for this bill. I think the Minister has done a good job of explaining the principle that is applied, which is that the minimum family tax threshold is adjusted to reflect the changes in the benefit rates and abatement thresholds to ensure that those families who are in work are always guaranteed to get more income than those families who are not in work. And “in work” is defined as a single parent working at least 20 hours a week or both parents combined working 30 hours a week.

What I have done is I have gone back and I have looked at instances in the past when we have made similar adjustments, because, of course, each year the minimum family tax credit threshold has been adjusted to reflect these sorts of changes to benefit levels, to the minimum wage, and to abatement thresholds, and this has been happening each year since 2006. But the rate at which those thresholds have changed has not been uniform; it has been dependent on other things that are of import.

A particular recent example, which, it seems to me, is relevant here, is what we did in December last year, which was—members will recall—when benefit levels were lifted $25 a week in what was then termed as a response due to COVID-19. Now, at that time, the threshold adjustment that occurred was actually significantly larger than that which we are debating in the Chamber tonight, because, at that time, the threshold had been $27,768—so a minimum payment of $534 a week—and, in response to the $25 lift in the benefit, it was lifted to $29,432. So, in that case, what we saw was an increase in that threshold that amounted to $32 per week. Of course, the adjustment we’re debating tonight is rather less that that; it’s $10 a week.

What I am seeking to understand from the Minister—and what I think other members are trying to elicit—is why $10 is the amount. The context here, of course, is that we have had a Budget announced, which we will have the opportunity to pore over in more detail in the coming days, which, on the tin, says that it’s increasing benefits by $50 a week. So, intuitively, it seems to me that if it’s increasing benefits by significantly more than we did this time last year, then you would then expect a corresponding significantly larger increase in these thresholds.

The reason I ask this, and the reason, I think, other members are asking for a little bit more elucidation on these calculations, is that it is critical that we are not lessening the incentive for work. It may be that, yes, work still pays just more but it doesn’t have as big a gap between work and benefits as in the past. If that is the case—obviously, we’re debating this bill under urgency; we haven’t had a select committee process, and there hasn’t been the opportunity to seek detailed analysis from officials to do the accounting analysis of it—I would just invite the Minister to be utterly transparent about that and to explain the basis on which these calculations have been made.

It’s relevant because, actually, fundamentally, what this bill is about tonight is incentives. It is about the thresholds at which we set income tax adjustment payments to make sure that those families who are slogging it out—who are having to pay petrol for the car, having to organise childcare, having to pay for lunch at the canteen instead of eating at home, having to face all of those extra costs of working, and putting their effort in—are actually getting more ahead than those who are not making those sacrifices.

So my question to the Minister—and I just want to be very clear—is: how was the decision made to lift the threshold by what amounts to $10 a week when last year, when we made these similar adjustments, the amount was $32 a week? Why is there such a discrepancy in those two numbers in this case? If the Minister could explain that, I would be most grateful.

On a number of occasions I’ve already described how the threshold is calculated, so I’m not going to repeat that. But in respect of why the calculation is different this year to last year, it’s because last year we changed the amount that someone on a benefit can earn before their benefit abates, and that therefore changed the maximum amount that a person on a benefit after abatement could earn, that had to be then reflected in the change to the minimum family tax credit so that a person who wasn’t on a benefit would not be worse off.

I move, That the question be now put.

Thank you very much, Madam Chair. I thought I should just comment on a few things I’d heard from speakers in the National Party. They were advocating for more progressive taxation, and I thought I should just make the point that bracket indexation actually ensures that the portion of the tax burden that falls on lower-income earners remains low; the proportion of the tax burden that falls on higher-income earners remains higher than it would otherwise be. Fiscal drag actually has the effect of increasing the average tax rate and therefore reducing the relative progressivity. So, of course, I think it’s important we have an ACT Party to point these things out, otherwise we, on this side of the House, could inadvertently make the taxation system more progressive, and we’ve already got several parties on the left to do that. So I don’t think it’s something that the National Party should be advocating as well, or at least I’d hope that they wouldn’t.

Then I also just wanted to come back to this question about the incentives, or the marginal tax rates, that we’re facing. The Minister said, “Well, if somebody’s on $375 a week, 52 weeks a year, then I guess we can conclude it’s $17,000, $18,000 a year, and $31,000 is certainly more than that.” So I guess they would be getting an additional $13,000 a year, but they might have to work 30 hours a week—so 1,500 hours per year to get that $13,000. So would that mean that the marginal after-tax income of somebody who goes from being on a benefit to working 30 hours in order to get this credit would be somewhere around $8 or $9 a year—an hour, sorry; certainly not a year. But, you know, it’s interesting just to get a sense of what sort of policy we’re expanding here, and what real incentives people face, because, if you only get $8 or $9 an hour for choosing to go to work, you can understand why people might be reluctant to do so.

I think the answer to that—and I expect the member already knows it—is a very small group of people who are actually affected by this; the vast majority of people who are in this income band, if they were coming off a benefit, they were at that abatement threshold, and they chose to work more, would actually earn more than this amount, except at the margins, and as they earned more, they would, if they were coming off a benefit and therefore affected by this, be capturing every dollar that they earned, less their tax rate.

Madam Chair, thank you very much for the opportunity. I just wanted to raise a new point, obviously, in regards to part A of this amendment, and that is in regards to the—and I refer to the departmental disclosure statement section 3.7, which obviously has considered, you know, that this bill has been through internal review of subject matter experts and looking at the administrative impacts of such a bill, and, obviously, the key department responsible around this bill is the Inland Revenue Department. I have a little bit of experience; I actually worked for the Inland Revenue Department back in the day. I don’t know if anyone else in the Chamber has ever done that. Back in the day—I was a student, actually. That’s how I paid for my university. But anyway, very good organisation, and I think very highly of them—

💬 Hon Michael Woodhouse: All good IRD staff should be over this side of the House.

But anyway—anyway—let’s get back. I’ll just try to stay on piste here, Mr Woodhouse—but anyway.

So what I want to get to the point on here, Minister, is a little bit more context, a little bit more picture, around some of that consideration that was put in around this bill. I’ve read and we know that Inland Revenue has had a transformation programme that has had significant delays, which have led to significant financial issues, so they’ve got staffing challenges. I’ve noticed that they’ve made staff redundant in their IT space only earlier this year. So that’s the context of a Government department under a lot of pressure, and we’ve seen the challenges of immigration as well. So I don’t want to, sort of, generalise, but I think we’ve got some challenges in terms of workforce.

So getting back to this, obviously any change in terms of bills and legislation is going to have an impact. It’s going to have an impact on people. I guess what I’m really wanting to get context of, because I know that this Minister and this Government—they say they care. So I want to get an understanding of this: what is the type of assessment that you went through? What are some of the findings that were given in terms of the costs and benefits of making this change, some of the challenges around how you weighed that up?

The other aspect is in regards to the IT systems. I’ll tell you what—and I, obviously, am the associate spokesperson for health—we’ve had some pretty significant announcements around IT, cyber-issues in Waikato DHB. Gosh, you know, I feel sorry—

💬 Chris Bishop: Oh, don’t forget about Canterbury.

—oh, and Canterbury. I mean, I’m sure there’s a few. But in terms of the IT system issues as well, any changes can have an impact on the system. I’m really keen to get an understanding at a high level around what that’s going to look like, and, yeah, if you could just paint us a little bit of a picture about that, Minister.

I suggest that the member talks to the Hon Michael Woodhouse, who is former Minister of Revenue, who was one of the Ministers over a period of years now who’s overseen the Business Transformation project, which has been a huge and incredibly successful transformation of the IT systems at Inland Revenue. That’s been successfully handled by successive Governments, actually, going back to when the Hon Peter Dunne was the Minister. So it’s been under way for a while now, and the good news is it’s coming to an end and that huge spend and increase in IT staff that was necessary to see it through is coming to an end. Because we’re such an efficient Government, we’ve actually managed to land this project and bring it closer to conclusion. Because it’s closer to conclusion, some of those extra IT staff that were needed are no longer needed, and that’s what happens when you efficiently run a Government department. In fact, so efficient is it that I’m sure that the computer system is now better able to handle this not very complex change to the minimum family tax benefit.

Very quick call in response to the Minister’s quite rightly gloating about the success of Business Transformation. But instead, could I ask him, in light of that, that rather than making IT workers redundant, use those resources to actually staff the call centres, because tax agents up and down the country tell me the calls are not being answered. Yes, I know we want to drive so many of the inquiries to IRD online—I accept that—but guess what? The Income Tax Act is so large and complex and everybody’s situation is different that it is necessary for taxpayers and tax agents to call. How about the phones get answered?

I am very confident that the small number of people that are affected by this change will not overrun the call centre at IRD.

I move, That the question be now put.

The Hon Michael Woodhouse’s tabled amendment inserting new clause 6A amending the top rate of income tax is out of order as outside the scope of the bill. The Hon Simon Bridges’ tabled amendment inserting new clauses 6A and 6B concerning the indexation of tax brackets is out of order as outside the scope of the bill. The Hon Gerry Brownlee’s tabled amendment inserting new clause 6A increasing the lowest tax threshold is out of order as outside the scope of the bill. Nicola Willis’ tabled amendment inserting new clause 6A lowering the rate of income tax is out of order as outside the scope of the bill.