Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill

We come to the first debate, on Part 1, which is the debate on the annual rates of income tax. I’m aware that members have tabled amendments proposing different tax rates. These amendments will be voted on at the end of the debate on Part 3, because they amend the Income Tax Act 2007, and Part 3 deals with amendments to that Act. However, members should discuss their proposed amendments to the tax rates as part of this first debate, because the focus of the debate is the tax rates for 2021-22. Standing Orders require that the annual tax rates have a debate of their own each year. Part 1 is the debate on clause 3, “Annual rates of income tax for 2021–22 tax year”, and any proposed amendments to those tax rates. The question is that Part 1 stand part.

Thank you, Madam Speaker, and thank you for that introduction to this debate. It is right and proper that New Zealand has in its Parliament each year a debate on the rates of tax—how much of people’s money does this Parliament allow that Government to take out of people’s income? The ACT Party—the Association of Consumers and Taxpayers in its full name—says that that the Government is taking too much tax out of hard-working families’ incomes and, in particular, it is taking highly progressive taxation that means that some people pay too much tax and many pay none at all, or very little.

Even putting that aside, the overall amount of tax has increased dramatically under this Government. How much? Well, if we take the amount of tax that the Government was collecting at the start of its term in October 2017, and we ask ourselves how much more tax it’s taking for every person—and there are no tricks here. We’re adjusting for the growth in population. There are more people now, and that’s good. We’re adjusting for inflation—that’s been rapid. The price of everything is going up—we know that. But if we adjust for population growth and if we adjust for inflation, then this Government is taxing $2,138 more off every man, woman, and child, every human, in this country—even babies just being born. On their behalf—the average New Zealander—this Government is taxing more than ever before, and $2,138 more for every person than it did when it took office in October 2017.

The other problem is: who it’s being taken off. I want to put a thought in the minds of people at home: how much of the income tax should be paid by the 12 percent who pay the most income tax? Should it be 12 percent? Should they pay as much as they earn, in proportion? Should they pay 24 percent? Should they pay twice as much tax as the number of people? Should it be 36 percent? How many people at home think, “Let’s soak the rich people. They can pay three times more tax than the number of people.”? How many think they should pay three times as much? Well, now, many people would be surprised to know that the top 12 percent of income tax payers in this country, according to the Inland Revenue Department, are paying 48 percent of all the income tax—12 percent of the taxpayers are paying half of all the income tax. So if people think that there is some sort of system where the rich get richer and aren’t paying their share and get away, well, that just is not supported by the facts.

And you go to the other side—and I think every party in this Parliament, including ACT, wants to help people who maybe have had a tough time or are at a stage of their life when they need more help. Maybe they’re very young or they’re older, and they don’t pay as much tax, and they get more. But let me ask you this question: how much tax do the 48 percent who pay the least—how much of the income tax do they pay? Well, do 48 percent of people pay 38 percent of the tax? Do they pay 24 percent of the tax? No; 48 percent of taxpayers are paying only 8 percent of total tax. That is the system we have today.

So there’s two things here so far. Number one: the amount of tax that this Government is taking across all the different taxes has gone up $2,138 under this Government. Adjusted for population, adjusted for inflation, they’re taking more money than ever and it’s very unclear what results they’re getting for it. The second thing is that when we look at who’s paying the tax, we have a very small group of people, 12 percent, paying half of all the income tax, and we’ve got a very large group of people, half of all the taxpayers, paying only 8 percent. What that looks like is a small group of people being picked on by a large group of people, and that is what brings division.

Now, I would like to talk to a Supplementary Order Paper (SOP) that I’ve put on the Table, that I think would go some way to improving the situation. Supplementary Order Paper 140 would go a long way to making our tax system fairer and flatter and giving people back the opportunity to earn money and keep more of it. And that’s what I’m urging my colleagues on the National Party side to support. This is where you get down to the nitty-gritty of tax policy. You see, my good friend from down in South Auckland Andrew Bayly has an amendment that would adjust the tax thresholds. But do you know what that really means? I like the fact that it gives some money back, but here’s the problem with it: if he adjusts the tax thresholds for inflation the way he’s proposing, what he is doing is he’s making sure that more of the tax burden falls on higher incomes and less of it falls on lower incomes. What he’s really saying is that he wants to perpetuate the idea that half the people pay 8 percent of the income tax, and 12 percent of the people pay half the income tax.

The ACT Party says that if we want a culture of aspiration and a united country, then we cannot have a tax system that is filled with tall poppy syndrome, where the majority of people vote at the ballot box to take money off the minority, where they’re less concerned about the quality of Government spending—because, hey, it’s only this little group that we’re taking all the money off. And we have, fundamentally, division and exploitation, and tall poppy syndrome in our tax code. That’s why ACT can’t support Andrew Bayly’s amendment to adjust those thresholds. It’s one way of giving money back to people—or letting them keep it, to put it more accurately—but it is not the best way, because it perpetuates that tall poppy syndrome in the tax code. What the ACT Party is proposing—and we hope that our colleagues around the House will join us—is a fairer, flatter, more consistent tax policy that will allow people to keep, on the average wage, around about $2,000 more of their own money.

How does that work? Well, we’re going to get rid of the 39c envy tax that this Government has put in place. Why? Are they going to get more money? No, they’re not. They’ll be lucky if they get a few hundred million dollars more when this Government has already started spending tens of billions more than when it came into office. So the amount of tax it gets by putting on this 39c rate is immaterial. It makes no difference in the context of this Government’s taxing and spending. But what it does do is it just sends a little message.

It sends a little message to every child in this country: “If you work hard, listen to your teacher, get good grades, turn those into skills that turn into qualifications, that turn into jobs and careers, and put a little money away and invest it carefully, you know, if you do all that and it works out for you, guess what! We’re going to take it. Not because it makes a big difference to how much money the Government has to spend; just because we can, because there’s not many of you and there’s lots of us, and, in democracy, you’re outvoted and we’re going to take your money.” And that is wrong. It is morally wrong to pick on small groups of people and take their stuff just because you can. Just because a Minister has a chip on his shoulder for whatever reason, it is wrong to go and take people’s money just because it’s possible to do it. So we’ll get rid of that 39c rate. It needs to go for the culture of aspiration and unity in this society and in this country.

Then, the Government says, “What’ll we do with the middle income tax rate, the rate that you pay between $48,000 and $70,000?” Well, you know, if someone on the minimum wage put in a few extra hours, half an extra shift, 44 hours a week, they can find themselves paying the 30c tax rate on their next dollar. We think that 30c in the dollar on an average wage is too high. So the next thing that these amendments on SOP 140 do is they drop that 30c tax rate down to 17.5. So from $14,000, the 17½ kicks in. You pay that all the way to 70, then you pay 33c after that—there’s no 39 rate.

It’s good we have a debate about taxation in our Parliament, because there’s no proper taxation without representation, and the ACT Party speaks for those who are tired of having their money taken away just because this Government thinks it can. We stand for fairer, flatter tax rates where we don’t have one group of people picking on another and taking their money because they can. We stand for giving genuine relief, around $2,000 to the average earner back on their tax bill, with a generous middle-income tax reduction, and if people think that that sounds like a good future for our country, they should vote for ACT’s amendments.

Thank you, Mr Chair. I’d just acknowledge my colleague David Seymour there for his passionate speech about tax. He is quite right: tax is the issue we should be talking about today.

I would just preface my comments with what we heard at question time, when the Prime Minister was asked about the issue of cost of living increases. Of course, we do have a cost of living crisis. Her response was that we should be increasing benefits. She was very proud about what’s been done with benefits. Of course, it’s all about the Government taking money from taxpayers—from hard-working New Zealanders—and reinjecting it, putting it through the big mincing machine called the Government, and then repaying it out to people that they decide are the most worthy of that benefit.

But, of course, as Mr Seymour has quite rightly pointed out, taxes come from hard-working New Zealanders, and that is the central issue. That’s why we will be opposing this bill: because we’re fundamentally opposed to a Government that thinks that it has a right to continue to increase taxes—which this Government has, and I’ll talk about that shortly—and then to pay it out the way it should do. The principle we should be trying to do to drive New Zealand forward is to increase real wages—not by artificial means of paying benefits to support people or to reduce bus fares or whatever but by actually creating wealth through better jobs, better economic outcomes, and, as a result, real increases in wages.

As Mr Seymour alluded to, the Government is raking in tax at the moment. This year, we’re, basically, talking about $100 billion. Over the next four years, it will take in roughly about another $24 billion of additional tax. Just to be clear: what I mean by that is that by 2026, it will be not taking in $100 billion but, in that single year, will be taking tax of about $124 billion. Of course, that is a massive increment of tax—because you’ve got increases next year and the year after, ultimately to get to that figure. The only reason I quote four-year figures is that is what the Government’s projections are always about: four-year cycles. We have got a Government that is just continuing to rake in huge amount of tax, and that is principally because of inflation. There have been a whole stack of other taxes that have been imposed, but I’m principally talking about personal tax. The other taxes, as we all know, that the Government has put in place—there’s a whole stack of them; we’ve been talking about the fuel tax today—are just driving up the cost of living for people.

Here is a Government that is very happy to spend money. We’ve got the $15 billion light rail project. We’ve got the $500 million that’s going to be spent on the health reforms, and that’s only a part down payment. We’ve got the $1 billion that’s going to be set aside for the three waters change. Of course, that is about taxing people to fund that.

That is why we oppose the tax rates that have been put forward in this bill: because, fundamentally, we don’t believe that they are justified. That is why we have put up an amendment in my name which is about reducing tax rates. Of course, this was announced by our leader, Christopher Luxon, not long ago, and is actually a core part of what the Hon Simon Bridges has been talking about for a long time, which is adjusting tax rates to take into account inflation.

If we look back, for instance, and say “What has been the net inflation over the last four years, under the Labour Government?”, it’s been about 12 percent—just slightly under. So what we’ve proposed—and this is what the amendment deals with specifically—is that we should go back and adjust the threshold at which point people enter into the higher tax bracket.

For instance, at the moment New Zealanders pay tax at 10.5 percent on the first $14,000 of income. Under the proposal that we’re talking about, we would increase that to $15,600 because that is the inflation, taking into account the 11.5 percent that I talked about over the past four years. Conversely—just working through the next arrangement—at the 17.5 percent tax rate, we’re suggesting that that cut in at $15,600 and would increase to $53,500. At present, that rate stops at $48,000. There is a $5,500 increase in the threshold. Of course, that would mean, for people earning an average wage, they would still be paying tax at 17.5 percent rather than, as currently, flipping into the next tax rate of 30 percent. The next rate would be increasing from $53,500 to $78,000 for the rate of 30 percent. The 30 percent at the moment goes up to a maximum of $70,000; we’re increasing that to $78,000. The final adjustment is that all tax from $78,000 onwards would be paid at the 33 percent tax rate. Of course, what all this does, and what the proposals are around this, is put more money back into Kiwi pockets.

I know that the Government, particularly the Hon Grant Robertson—and it would be interesting to see what the Hon David Parker says—characterise this as a tax cut. They’re not tax cuts, actually. What they are is stopping the Government and reversing the Government’s tax take that has been imposed on New Zealanders over the past four years. It’s reversing that and giving it back to New Zealanders. It’s like saying, “Let’s go back to the status quo, before the Labour Government came into office four years ago.” That is hardly a tax cut. What it is is saying, “New Zealanders, you should keep what you should have been entitled to back in 2017, and we’re going to reverse it back there.”

What it means, ultimately, is that New Zealanders will have more cash in their pockets and more money to spend on vital things for their families. Of course, this is at a time when we’ve got these massive cost of living increases. We’ve been talking about fuel, about housing costs—rent’s up by $150 a week since the Labour Government’s come into play—and about all those increases around fruit and vegetables. That is making it so much harder for New Zealanders and New Zealand families to just be able to pay for the necessities of life. For the lower-income people, they are the ones who have little discretionary income, and this is about helping people on those lower incomes.

To put it in context, for an average wage, they would be getting about $870 extra per annum, and for someone earning over $78,000—which the Government loves to focus on—they’d be roughly about the same: about $1,000 extra. What these broad changes will mean is that every year people are about $800 better off. For superannuitants—which is a very important component—they’d be about $540 better off as a couple. Giving money back to them that the Government has otherwise taken off them over the past four years will allow them to meet their commitments and to look after their lives and to actually try and deal with this massive cost of living explosion that we’ve had.

Now, these tax cuts will cost about $1.7 billion, and I think what this will mean is that we move back to a situation where we stop taxing and taxing people and the Government taking that, putting it through all the administration that the Government has, and spending it on a lot of bureaucratic processes to get to a point where the Government then pays it back to New Zealanders. That is just a way to circumvent that, so that people keep the money at the time that they earn it and so that they can prioritise how they want to use it. It is about allowing New Zealanders to get on with their lives with less input and influence from the Government.

This is what my amendment is about, and I think—if I may say so—this is something that we’ve been talking about for some period of time as the National Party. It is an excellent idea. It has got good outcomes for all New Zealanders. It’s fair and equitable. There are further amendments that I’m going to talk to on this matter, but I know my time is drawing to a close. I think this is an excellent start in terms of the tax debate.

Thank you, Mr Chairman, for the opportunity to take the first call from the chair.

Now, listening to the last two contributions, you’d think that New Zealand’s an overtaxed country, that we’ve somehow got swingeing rates of taxation, and that the overall wedge of taxation, as a percentage of the economy, is high by the standards of countries with which we compare ourselves. There are 38 countries in the OECD. New Zealand, in 2020, was 24th of those 38 countries in the OECD for taxation as a percentage of GDP. Not 24th highest, but—yes, 24th highest. Of the 38 countries, we’re the 14th or 15th lowest as a percentage of GDP that goes to taxation—24th. I suspect, when those statistics come out in the next few years, looking at other countries, we’ll look even better compared with other countries, because, of course, since COVID hit, New Zealand’s actually, overall, had GDP growth compared with the European countries, United States, and the likes.

Where do we sit on that table? Our tax as a percentage of GDP in New Zealand is lower than the UK and slightly higher than Japan, not too different from Japan. The countries that have higher percentages of GDP collected in taxation include countries that we traditionally compare ourselves with, like Canada, most of the European countries that we compare ourselves with, and certainly the Scandinavian countries. All liberal democracies have taxation needed to fund the services that people desire from their Government and vote for them to fund. Health, education, and superannuation are the largest cost centres, justice is obviously also important.

In respect of the statistic that we heard from David Seymour, about 12 percent of taxpayers paying 48 percent of the income tax, it brings to mind that saying, “Lies, lies, damned lies, and statistics.”, because that’s true as a statistic but it’s really a misrepresentation of the underlying facts. So 12 percent pay 48 percent of the income tax, and I haven’t checked his number, but I’m accepting that that’s true. But, of course, in his population, he forgets to say, “Well, that includes children, that includes people who are out of the workforce raising children, that includes superannuitants.” He also conveniently overlooks the fact that GST, as a proportion of income—which is a regressive tax—is a higher proportion of income for lower-income earners than it is for higher-income earners, because lower-income earners consume all of their earnings, whereas higher-income people save some of theirs and don’t spend as much as a proportion of their income on GST-inclusive services. So, again, his statistics exclude the fact that GST is a higher share of the income of a lower-income person than it is of a higher-income person.

Final point I’ll make on that is that, if we compare ourselves with the Australians across the Ditch, their top marginal tax rate is higher than the 39c rate in New Zealand, it’s 45c in the dollar. So we compare pretty well on that one as well.

In respect of the amendments that are proposed by the ACT Party and the National Party to get rid of the top tax rate of 39c over $180,000, and the other rate adjustments, we will be opposing those. And we do make the point that it really does show where both the National Party and the ACT Party sit, that they would give thousands of dollars of tax cuts to the highest income and $2 a week to someone on $45,000 per annum. So, for those reasons, the Labour Party will be opposing those amendments.

Members, the time has come for me to leave the chair. The House will resume after the dinner break at 7 p.m.

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

Thank you, Mr Chair. I thought my colleague Mr Watts was going to get the call, but anyway. Hey, I just want to respond to Minister Parker, and I thank the Minister for standing up just before we had our dinner break. I suppose the first question is, we were talking about the tax take and how this year the Government’s going to rake in—oh, I should acknowledge the members on the other side of the Chamber, as well. I’ve got the Hon Kris Faafoi here. I hope he’s going to make a strong contribution to this tax debate. The Hon Willie Jackson—he’s here. I’m sure we’re going to have an enlivened tax debate, because these guys are expert at these matters, and I’m looking forward to—Ginny Anderson, of course. So, hopefully, we will have a good conversation tonight.

Anyway, the Minister—

💬 Hon Kris Faafoi: While you talk, someone’s doing the numbers.

Yeah, we’re doing our numbers. The thing about tax, Mr Faafoi, is that, this year, the Government’s going to take in $100 billion of tax. In four years’ time, it will take in about $124 billion of tax: an extra $24 billion in one year. And, of course, under current scenarios, that is going to increase. The Hon David Parker spoke about the Government, saying we’ve got a reasonable tax base, and therefore—I think his argument was—“Hey, that’s fine, because we seem like we’re OK compared to most other people.”

I suppose the first question is: at what point do you think the Government should tax its population? At what point is it reasonable to say, “Gee, that’s enough. We shouldn’t take the money off hard-working New Zealanders, because it’s better that they keep it.”? That is the issue. I think, from the comments the Minister said before, my inference was, “Look, we’re OK—we’re reasonably OK compared with the rest of the world, and therefore we can continue to tax a whole lot of New Zealanders a whole lot more tax.” And, of course, we’ve seen all of the new tax that the Government’s trying to do. Obviously, we’re talking about them tonight: the imposition of the new 39 percent tax rate. We’ve seen the brightline tax rate. We’ve seen the loss of interest deductibility. We’ve seen a fuel tax. All these new taxes of the Government have come into play. I would say to Mr Parker, I think it’s really important that the Government is—

💬 Hon David Parker: The fuel tax just came off.

Sorry, the Minister’s saying the fuel tax has come off. Yeah, that’s right: it’s come off. That’s because there was a poll last week. That’s the only reason that tax has come off. The Labour Party are reacting to what Kiwis are finally saying to them, which is, “We’ve got a cost of living crisis.” That’s why we need to remove the fuel tax, Mr Parker—and I note it’s only for three months. And, of course, what I’ve heard a number of people say to me today: “What about my diesel tax?” Haven’t seen any changes to the diesel tax. I understand there’s regulations that have to be followed—45 days’ notice—before anyone who drives a diesel car’s going to get any relief. Wow, that’s a fast-moving Government! So, yes, the fuel tax is coming off, but only for a matter of three months.

This huge increase in tax raises a much more significant issue, and I think you need to see it in the context that, over the last 22 months, Mr Grant Robertson has doubled the debt in New Zealand to $60 billion to over $120 billion. That has got to be some record over 22 months—less than two years—and that is why the Government is keen to keep taxing people. That’s why it’s keen to take another $24 billion of additional tax in four years’ time. That’s why Mr Robertson keeps going on a spend-up.

I think we heard from Mr David Seymour before, talking about trying to keep tax to a minimum. We all understand the requirement to make sure we’ve got good health services, good education, all that sort of stuff. What we don’t want to hear from the Government is the wasteful spending that’s been going on—the huge amount of wasteful spending and, of course, the $6 billion that Mr Robertson’s set aside in his Budget, over atop of all the other allowances. So we need to make sure that we’ve got reasonable tax. This is why we need to change the tax rates, because Mr Seymour is correct: the top 12 percent of tax earners pay, roughly, about 48 percent of all tax. And, of course, if you have a family, Working for Families, many people who are on the lower income rates don’t pay any tax at all, after you net off the benefits. That’s why we need to—

💬 Hon David Parker: That’s not correct. What about GST?

They pay tax in stores, but after you deduct benefits—[Time expired]

Thank you—this is my first remote call and I am hoping that I am now unmuted, because I might have stuffed that up. Thank you everyone for letting me know.

Thank you, Mr Chair. So this is the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill and, as has been traversed, we, the Green Party, are going to abstain on this legislation. It was a massive missed opportunity for far more progressive change that really could have seen a tax system that finally—finally—starts to acknowledge that for far too long, the way that we redistribute and hold wealth has been completely unfair, unsustainable, continues to benefit the wealthy few, and pays little attention to those who are struggling the very most.

So, in my contribution at this stage, I wanted to again remind us—and I’ll be going to some of the Supplementary Order Papers (SOPs) as well—that we’ve recently seen the wealthiest in this country gain nearly $1 trillion in wealth, not through hard work, as far too many of the members in this House like to pretend, but simply through benefiting from the system that is rigged, simply through having capital and wealth already, and that is all.

The current policy settings continue to treat housing as a tradable commodity, as opposed to what we should be doing, which is, first and foremost, housing are homes for people to live in, are public good for the wellbeing of all and our community. We have missed the opportunity to make some real difference in this legislation. That is why we will be abstaining. We have continued to give high trust and support to businesses through this legislation but not to people who receive a benefit, people who are on the lower incomes. We, right now especially, need bold policy that properly redistributes that wealth, and this bill does not get us there. It instead tinkers with the brightline test, when we could instead just introduce capital gains and wealth taxes. It tweaks tax deductibility rules which mean even less opportunity to treat housing the way that we should be, and instead upholds treating housing like a pyramid scheme; it does not de-commodify the way that we look at housing and treat housing right now, including in our tax system.

So, in that—I’m keeping an eye on time, with the SOPs that both the National Party and the ACT Party are putting up, those SOPs from the National Party undo even the small attempts at trying to tilt the scales back to any sort of justice balance, and even the small attempts the National Party wants to undo. The ACT Party, as always, doesn’t even pretend to care about anyone on the lower incomes and continues to uphold a much-debunked trickle-down theory about tax cuts. So their SOPs are, in fact, not for anyone earning under $48,000 per year. So, Mr Chair, thank you for the time. We will be abstaining, and we will absolutely be opposing the National and ACT SOPs.

Mr Chair, thank you very much for the opportunity to talk at this committee stage of the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill. I was actually hoping—listening to that last contribution, it sounded like a party that were opposing this legislation, but, no, they’re going to be abstaining. So what that says is a vote for the Greens is a vote to sit on the fence, and that is completely opposite.

But I want to talk about Part 1, “Annual rates of income tax”, because that’s what we’re here to talk about. I think, listening to the Minister’s contribution just before, the Hon David Parker, he gave us a bit of a lecture in terms of how lucky—how lucky—Kiwis are to live in a country that were 24th on the list in terms of taxation, like some sort of—you know, the people sitting at home are going, “Jeez, I’m lucky to be getting more tax out of my hard-earned income that I do and contribute to this country every day.” And that’s sort of what we heard from that.

What wasn’t recognised is that what we’ve seen, and what we’re seeing as part of this bill, is an increase in taxation on hard-working Kiwis and the opportunity, really, in terms of what’s available for this Government in terms of the huge amount of tax take that they are going to be taking in the next three to five years. There’s actually the ability to spread that benefit back to Kiwis and, I guess, that the ideological difference between National and Labour primarily is that National trusts individuals to spend their own money better than this Government. And that is key and a fundamental ideological difference. That’s why National opposes this bill, particularly because all it does is it increases the amount of taxes.

Yeah, don’t get me wrong. There’s some remedial actions around GST, etc., that, you know, is part impartial and partly is sensible. But the key elements of this, the three elements that make up this bill, are really around increasing taxes. And you can’t take your way out of a deficit, right? You can’t take your way out of a hole, and you can’t expect that this is going to create more economic value and more economic benefit for this country. Actually, our view is it’s going to do the complete opposite.

So, look, the annual rate element, I guess we’ve talked and we will talk a lot more about some of our changes that we want to see made in this bill. But the 39c tax rate is one element that’s going to be coming in, in terms of Part 1; we are obviously strongly opposed to this. We see that that is not going to create the benefit that this country needs. Actually, you know, as a result, I think what we’re really going to see is just a burgeoning of the benefits for tax accountants out there, and other compliance matters—of people just getting their way out of it. And, you know, that’s just a complete waste of time. There’s been a lot of commentary from members, including those that presented at the select committee, that the payback on that isn’t going to be there. And, you know, that’s a great shame.

But, I guess, in terms of tax rates, National has proposed a number of pragmatic solutions in terms of what we would do differently around the way in which people are taxed, and, right at its heart, we believe that the rate at which people are taxed should take into account the impact of inflation, and haven’t we seen the impact of inflation, and Kiwi households have seen the impact of inflation, in the past year. And I think what this shows is a Government and a Minister that are out of touch with hard-working Kiwis out there in New Zealand at the moment. They’re seeing a Government that’s simply saying, “Look, the only solution that we see for you is to increase taxes.” and what people out there, I think, in hard-working Kiwiland are saying is this, “Look, we’re doing it tough. Times are tough. Costs are going up across the board.” And, you know, at the end of the day, what they are looking for is a little bit of relief to allow them to do what Kiwis want to do and that’s, you know, live aspirational lives in this country. And I think this bill, and particularly Part 1, “Annual rates of income tax”, is going against it.

So, look, overall, National will be opposing this bill. We don’t believe that, as I said, it’s going to make any significant difference; actually, quite the contrary, and we will look to hear a little bit more about that soon.

Thank you, Mr Chair. It’s my pleasure to rise to take a call in the committee of the whole House on the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill. I wanted to talk about the tax take and, in particular, what it means for the country that we want to live in. I—and, I know, the rest of my ACT Party colleagues—want to live in a country where people don’t feel bad for wanting to work hard, where people get rewarded for their efforts and they know that the money that they’re putting aside and setting aside and saving responsibly is actually going to go some way to helping them feed their family and set up some financial security for the future.

It’s really unfortunate that over this term of Government, and since the Government was elected, New Zealanders are now paying around $2,000 extra or more than they were four years ago. It’s a frustration that I’m hearing up and down the country. It feels as though people are working harder and feeling even more tired, especially through this COVID pandemic, and yet it feels harder and harder to actually get ahead, and more of the money that people are earning is going to the Government and not to their own pockets—not to their children to help pay for their uniforms and pay for food on the table, but going into the Government to be spent on stupid projects and getting wasted. We know that there has been a huge amount of Government wasteful spending, and that’s a real tragedy when, you know, New Zealanders should actually have a little bit more of the money that they earn for themselves and their families going back to them, so that they can actually provide for themselves.

We are living in a cost of living crisis. You know, you only have to go to the supermarket to see the cost of fresh fruit and vegetable going through the roof. And if you’re like me and you’re just buying for one person, it seems remarkable that you can just take one bag to the supermarket and, before you know it, you’ve spent 150 bucks just walking out with one bag. I hate to think how that feels when you’ve got children that you’re providing for too, and you’ve, you know, got a growing kid and they’re wanting to go through half a box of Weet-Bix in the morning. It’s just incredible how much money people are needing to spend every week at the supermarket, and that’s on top of the cost of petrol going up. You know, there are so many outgoings that people need to set aside their own money for and, since this Government was elected, $2,000 extra per year is going to the Government. What are they actually getting back? There hasn’t been any significant improvement from what we’re actually seeing being spent by this Government that would actually contribute to it being worthwhile.

I’m constantly hearing from people who feel like they have a good income, but the pull to go overseas is getting stronger and stronger, and a lot of people talk about wanting to go to Australia because they know that their wages will be higher over there, and that’s a real shame because it’s about the type of country that we want to live in, and we should be rewarding people with aspiration for their hard work, the dedication for wanting to get up in the morning, earn a living for themselves and their families. Instead, the type of situation that we’re in in New Zealand is more and more people are saying, “You know, I actually think another country would reward me for my efforts and would be more welcoming for that type of person.”

We want to make sure that we’re keeping people who want to work hard, and so Supplementary Order Paper 140 that’s been put forward in David Seymour’s name would go some way to helping make sure that that would be a reality. And that would be by reducing the income tax bracket down from the $48,000 to $70,000 bracket to 17.5 percent. So that would mean that any bit of money between $14,001 to $70,000 would be taxed at a rate of 17.5 percent, and that would mean that the average person would get another $40 in their pocket per week to help pay for their groceries, to help pay for their kids’ extracurriculars—making it that much easier, when they say that they want to join a rugby team this year and they actually need some new boots, to say, “Yep, you know what? We can actually, as a family, afford that.” And it’s a real shame that people are actually having to struggle to make those changes to their own lives.

This Government’s borrowing, spending, taxing, and regulating has added to the cost of everything. There’s so much wasteful spending. We need to give New Zealanders a break, give them more of the money that they earn for themselves, and the ACT Party has a solution that would actually help the middle-class battlers who are being squeezed in every direction. Thank you, Mr Chair.

Thank you, Mr Chairman. These people that the last speaker for the ACT Party, Brooke van Velden, said would move overseas because of tax rates—well they’re not going to move to the United Kingdom, because that would be to a country that has taxation that’s a higher proportion of the economy, nor France, nor Italy, nor Canada. Maybe they’d go to the United States, but, of course, there they’d face state taxes as well as central government taxes, and, of course, they wouldn’t have a decent health system funded out of their taxes, and they’d have to get private health insurance to cover their health costs if they could—if they could—and they might not be able to, as many people in the United States can’t. So I think those apocryphal stories that we’re somehow going to lose people to New Zealand because they can go to countries with lower tax rates are not going to come to pass.

So we will be opposing the Supplementary Order Paper from the ACT Party, and I would again note that the majority of the tax cuts that they propose compared with the status quo—because all this bill does is carry on with the status quo—would be going to wealthy people, and people who are middle-income earners and lower would get less.

Kia ora, Mr Chair. Thank you for that, and, look, I want to absolutely endorse the comments of Minister Parker in this matter. I heard Brooke van Velden speaking before about the average New Zealander, and, of course, the danger with the average New Zealander is that if we have a small amount of very wealthy people, then it skews entirely what the average is. I want to talk about people who are earning under $48,000 a year, of which there are many, and, of course, the tax proposals put forward by the ACT Party would do absolutely nothing for them—but everyone over that, including the people who would benefit most? Those earning over $180,000 a year. It’s absolutely extraordinary to me that Brooke van Velden can come to this committee and talk about the costs of her $150 shopping bag, when some people are struggling to feed many children on that. Yet she’s trying to create tax breaks through her Supplementary Order Paper for people who are earning even more than she is. Truly extraordinary.

And, of course, the cost of living crisis: we know the costs are real. We know there are difficulties there. But the ACT Party’s proposals do nothing at all. As for the suggestion that people are going to leave for lower tax rates: well, over in Australia, the top tax rate’s 47 percent; Canada, 53; the UK, 45; and even the United States is 43 percent on those top income brackets. So it is absolutely fictitious to suggest that there is some kind of “El Dorado” out there. As the Minister said, you might want to escape to the United States if you’ve got lots of money, but you won’t be getting State-funded healthcare. You won’t be getting a consistent education system.

And as for the National Party saying that the Government’s engaging in wasteful spending and that they can somehow make up the $3 billion hole of tax revenue that they would see, I’d like to know: other than cameras on fishing boats, no one yet has said what they would cut. Are they going to cut nurses’ salaries, at this time? Are they going to cut teachers’ salaries? Are they going to address care workers? Are they going to lower the minimum wage? We are yet to see a single meaningful suggestion.

Even from here, from 400 kilometres away, I can hear Andrew Bayly yapping in the background there, but he’s got nothing to say. He should get up now, and he should tell us right now what the National Party will cut. What is this alleged wasteful spending in this time of crisis? The budget is better than the Treasury has projected. We have lower debt than projected, we have lower unemployment than projected, and we have a better fiscal outlook than projected. And yet the National Party says they can do better. I challenge them to stand up and say: what will they cut? Where will they find the money to cut? Thank you, Mr Chair.

We had the Minister speak before about tax rates relative in other countries, so would he just like to expand on that with relative income rates for, say, a teacher, a nurse, a doctor in Australia, for example, and give New Zealanders a fair estimation of the income levels that somebody, if they were a truck driver in Australia would get compared to a truck driver in New Zealand, so that it can be a relative discussion, rather than the tax rates necessary as part of the income for those things. Then you can add on the housing cost in Australia as well—what’s the cost of a house compared to the cost in Auckland, which has gone up horrendously under his watch.

So would the Minister like to give a fair representation of the income and expenses of somebody moving to, say, Australia or those other countries that he wanted to acknowledge, rather than trying to purport to just give one view of what the economic cost may be?

I won’t go too far into this, because it’s straying a fair way from the bill. But I would say that the rate of increase in salaries for nurses and teachers since we came to office exceeds what occurred during the nine years prior in the National Party.

Thank you, Mr Chair. It’s a delight to speak on this bill, albeit remotely. I want to just add a little bit of clarity to some of the numbers that have bandied about here, especially by members of the Opposition parties.

We had the leader of the ACT Party, David Seymour, standing up and ranting and raving, telling us that it was horrendous that 12 percent of individuals in this country paid 48 percent of the income tax. I checked the numbers out; indeed, those are correct. There’s a table on the Treasury website, and if you go to that table and look through the numbers, indeed, 12 percent of income earners do pay 48 percent of all the income tax. However, there is no table on the Treasury website which talks about the amount of income they earn in the first place. But if you dig a bit further and do your homework properly and head through the IRD website, you can find a table there which will give you an estimation of income distributions in this country. So, if you’re sitting there and crunching through the numbers and working with them a bit, and it doesn’t even take a lot of effort to do it, what you do find is that 12 percent of income earners in this country earn 38 percent of all the income. A huge proportion of the income is earned by just a small proportion of people in this country. That’s not even taking into account people who don’t earn any income at all. The particular spreadsheet I’m working off only works with people who are aged 16 and older, and does not include people who earn no income at all. So, in actual fact, that 38 percent of income is likely a lot higher.

So if we’re talking about a fair distribution of income tax, then it turns out that the fairness we need to speak in terms of is fairness in relation to the income earned, not just the single headcount—the single individualistic headcount that the ACT Party relies on. Tell the story, but tell the whole story, and that is what the ACT Party neglected to do; they neglected to look at income distributions. We have a long-established principle in this country that if you earn more income, then you pay more income tax. This is a principle that goes way back to Adam Smith in The Wealth of Nations, writing about the principles of fair taxation. Adam Smith said that the more income a person earns, the more that person ought to contribute to the general good—to the general good. So I think we can ignore the stats—the dubious stats—that the ACT Party have presented us with, with only a partial view.

And then from the National Party we had the idea that, in fact, we’re all paying outrageously high income taxes in this country. That is just not the case. The Minister presented it early on in this debate; he pointed out that in terms of the 38 OECD countries, in terms of what our overall tax take is as a percent of GDP, we are 24th. That is, that there are 23 countries that have higher tax takes than we do—23. And that’s countries like the United Kingdom and Canada, and the Scandinavian countries; places where it’s actually good to live. So other countries have higher tax takes than us. And, of course, Mr Bayly also ignored—by concentrating only on income taxes, he ignored the other taxes that are in our system, things like GST and company tax and the like. So, again, only a partial story; a partial picture of what was going on.

I put it to you and to the members of the House that, in actual fact, we could debate about tax rates all we like, but I think we should talk about other principles. Mr Bayly has suggested that our income tax thresholds should be indexed to inflation, but that suggests that they are already at the right level. It suggests that no Government should have a very careful think about the overall structure of our income tax rates; we should just leave them permanently indexed and set in relation to what they are now. Who knows what the future may bring? We need to remain flexible, we need to have the flexibility to adjust income tax thresholds as we need for the benefit of all New Zealanders, because we are all in this together. Thank you, Mr Chair.

Mr Chair, thank you very much. I was thinking that there would not be a reason to speak in this debate, because members would see common sense, but I couldn’t help it, having listened to the anaemic speech of the last member, Dr Deborah Russell, calling from somewhere else in the country. You see, for every single member of the Labour Party, the mantra that they teach them before they become MPs is “There is not a problem that can’t be fixed with a new tax.” And that’s what we’ve seen over 4½ years. You know, Minister Parker can be quoting other very high tax jurisdictions around the world and patting himself and his colleagues on the back for being better than them, but this is a high-tax Government at a time when Kiwis are doing it hard. What we’ve seen this week, in a reaction to ongoing pressure from the Opposition, from the National Party, about cost of living, is, finally, the Prime Minister said, “Well, I suppose there’s a little, tiny bit of a crisis, and we’re going to give a little bit of the extra, extra, extra tax we’re getting, because fuel rates have gone up so much, back to you for just three months, and could you be grateful to us, please.” That was the message that was delivered to Kiwis.

Then we saw, in the House today, Minister Woods, who is completely out of touch with what the energy companies are doing, saying that, actually, the announcement yesterday of 25c a litre that’s being given back—well, it’s not being given, because it’s actually already been taken. So they’re taking it with one hand and giving it back with the other. The 25c tax per litre is being given back. The oil companies have already applied that. Well, of course they have, and the reason for that is—and this is a problem with Labour Party members of Parliament: they fundamentally don’t understand business. Of course the petrol companies had to implement that straight away, otherwise few people would buy petrol until the Government gave the tax back at midnight last night. And that’s the thing about a business: when you have costs, you have to meet them. On the forecourt of a petrol station, you have costs when you’re sitting there, whether you’re selling gas or not, and, because of the Government’s announcement, they wouldn’t have been. So they have forced them to implement it straight away.

The Government cannot take credit for what the fuel companies did—taking a cut, waiting for them to get around to it. And, by the way, that cut to petrol tax should have taken place a long time ago. In fact, if they really believed there was a crisis, they would take the extra tax [Interruption] that they have placed—well, this is a debate about tax, Mr Chair—but they would have given—

Not this broad.

💬 Hon TODD McCLAY: I’m coming to the point very quickly: they would have taken that extra Auckland tax off a long, long time ago, and not kept it in place, asking people to be grateful.

We should be seeing changes to the tax system in New Zealand, and this isn’t a philosophical debate. Kiwis are taxed too much. You know, when somebody on the minimum wage who works 44 hours a week pays a 30 percent tax rate—well, that’s just ridiculous. It’s crazy. It’s a Government that’s out of touch. When the middle-income earner is on the 33 percent tax rate—remember when that used to be the top tax rate? Well, what the Government is saying is, actually, if you are an average earner in New Zealand, you have to pay the top tax rate, except we don’t want you to, so we’re going to create a whole other, higher tax rate, to take some more off people. But when the average income earner is paying the 33 percent tax rate, the system is not working. And don’t get me started when they go out there with what, in the end, for some, would be an “envy tax”, a 39 percent tax rate—not because, actually, they’re making the case of fairness in the tax system; because they need as much as they can get to spend on projects that are not delivering for Kiwis at all. Fifty million dollars on a bridge for cyclists that’s never going to be built: well, that was a great use of somebody’s tax! Put the tax rate up a bit higher, so you can spend more money on more bridges you’re never going to build, I say to the Labour Government!

New Zealanders are overtaxed. There is a cost of living crisis. Twenty-five cents a litre of tax being handed back at a time when the Government doesn’t need it because they’re getting more tax from fuel than they ever have before, than they dreamed of, actually speaks to the challenge here. This isn’t a philosophical debate. It’s not about the practicalities; it’s about a Government, the Labour Party, that believes—entrenched deep in their DNA, their psyche—that there isn’t a problem that can’t be solved with a new tax. And there are many, many problems in New Zealand today, up and down the country. That means many, many more taxes from the Labour Party.

Thank you, Mr Chair. Wow, we’re having a good time tonight. I just did want to, first of all, respond to Dr Duncan Webb, because he challenged me to say what has been wasteful spending of this Government, and, of course, you know, this is a Government that has spent $60 billion over the last 22 months, and so I just wanted to respond to that because it was raised in the debate. So, obviously, Dr Duncan Webb wasn’t watching before tea but, of course, we’ve talked about the $500 million that’s been set aside for the health reforms. We wouldn’t be doing that. We wouldn’t be spending the $15 billion on the tram down through Mt Roskill, and we wouldn’t be spending the $1 billion that’s just been the down payment for the three waters. Those are obvious examples. We certainly wouldn’t be spending the $51 million that the Hon Michael Wood spent on the Auckland cycle bridge, which is going nowhere—

💬 Simeon Brown: How is that going?

Going nowhere, Mr Brown. And then we certainly wouldn’t spend $50 million—actually up to now—doing the investigation in the Auckland tram which, of course, is going to go nowhere, because when will that be finished, Mr Brown?

💬 Simeon Brown: Oh, 2090-something.

2090 was the suggestion. And, of course, we wouldn’t be spending the $35 million on the Let’s Get Wellington campaign moving again, so called; $35 million on consultants and, what, not one piece of work—

💬 Simeon Brown: They want to build a pedestrian crossing.

Want to build a pedestrian crossing. And so there are six examples, but I can say to Dr Webb that we’ve got 149 projects that we know have been examples of wasteful spending of this Government. So the other contribution, of course, came from our resident tax expert, and I was watching the Hon David Parker’s face very carefully during the last speaker’s contribution, and I just don’t think Mr Parker was agreeing with what Deborah Russell was saying and, to be honest, I had trouble understanding it. But, the reality is, Mr Seymour is right: 48 percent of tax is paid by the top 12 percent earners and, in fact, when you get to over $100,000—and there are very few people earning over $100,000 currently—actually, they still pay a significant contribution. So the issue that Dr Deborah Russell was talking about is you’ve got to take into account their income. Well, the tax does take into account their income. I found the argument very, very confusing, and I don’t think it helped assist anything in the debate tonight.

The sheer fact, the simple fact is, this Government loves—in the words of the deputy leader of ACT—to borrow, spend, tax and regulate, and that’s what they’re doing. They’ve been borrowing $60 billion over the last 22 months, they’ve been spending something chronic—and we don’t mind good quality spending—but the reality is there has been truckloads of wasteful spending and, of course, when you do that, what is your option? You can either try to grow the economy. That’s a difficult thing and, actually, this Government hasn’t really focused on growing the economy, improving the incomes of New Zealanders; what they’ve done is gone for the easy answer, which is simply to tax more. And this is why we do not support this bill, and this is why we’re opposing it.

Mr Parker said, “Well, you know, all it is is the status quo.” Well, it’s not the status quo. The status quo—what we want to return to—is what the tax situation in New Zealand was prior to this Government coming into power in 2017 and before they started imposing all these new taxes. And that is why we oppose this. That is why we want to return to the original tax rates. That is why the Supplementary Order Papers are on the table, because that means, at the end of the day, hard-working mum and dad looking after their families are going to keep more money at source, rather than being collected by this Government that just loves spending it on wasteful stuff, and actually leaving it in their wallet before you nick it to spend it on some Government project.

Thank you, Mr Chair. Just for the sake of the argument, Mr Bennett’s question wasn’t actually answered by the Minister at all. Minister Parker alluded to the fact that other jurisdictions, in terms of the tax that they were paying, were significantly higher than here in New Zealand. But, equally, when asked by the member Mr Bennett what they were actually earning relative to that tax, he didn’t answer it, and I think this committee deserves to know—or perhaps he simply doesn’t.

Thank you, Mr Chair. I’d like to talk a little bit about these tax rates, from the point of view of small business. The Mt Eden Village is one of the life centres of the Epsom electorate that I’m proud to represent. I think a lot of people would say that the life centre of the Mt Eden Village is the iconic cafe of Frasers. Anyone who’s been to Mt Eden will know the place that I’m talking about. Mt Eden Village is reeling, at the moment, on the news that Frasers may close. I happen to know the proprietors of Frasers—as a good local MP should know the people that are trying to do business and serve their customers and employ people and make the place a little bit vibrant. What they’ve said to me repeatedly is that they have been beaten down by four years of anti-business sentiment by this Government. The relevance of that to this particular piece of legislation is that income tax—a lot of people miss this, but income tax is a cost that businesses pay, because they are desperate to get people—hasn’t helped that this Government closed the border for two years. They’re desperate to get people in a tight labour market, and one of the costs that business faces when they try to employ people is that they have to pay those people, and those people have to pay income tax.

So every time you go to Frasers and you order a coffee or a piece of toast, or any other small business at Mt Eden Village or in the wider Epsom electorate or anywhere up and down from Cape Reinga to Bluff, part of the cost of everything you pay is the income tax that is taken out of people’s pockets by this Government. People forget that; they think income tax is something that you pay when you earn money, but, actually, it’s something that you pay when you spend it. I’d just put it to this Government that by keeping the income tax rates they have, particularly that punishing middle income tax rate of 30 percent as soon as you hit $48,000, they are not only taxing people who are trying to make ends meet, they are actually taxing the businesses that are trying to employ them and the customers who are going to buy things at those businesses. After two years of COVID restrictions, with global shocks, we are starting to see those costs actually knock off iconic and beloved businesses up and down New Zealand.

One of the most powerful reasons why this Government should support Supplementary Order Paper 140 that I have put on the Table—to cut that top 39c envy tax and to drop that middle income tax rate from 30c down to 17½ on all income, from $48,000 per year to $70,000 per year—is to give relief to those businesses that are struggling, because we can’t afford to keep seeing the life centre of the villages and suburbs that make up this country being decimated and pushed over the edge, and having proprietors, when their lease comes up, say, “I just don’t want to sign up to another lease. There’s too much cost. There’s too much uncertainty.” One of the biggest costs that is being put on to people like that is the income tax that their staff are forced to pay.

But here’s another aspect of income tax that some people don’t think of. We are told that when you buy a litre of petrol, around about $1.40 of that is excise tax and GST and emissions trading scheme levies and a couple of other minor levies that are put on to a litre of petrol; they add up to $1.40. But what they don’t tell you is that if you do a full economic analysis of what people are paying in terms of total tax to buy a litre of petrol, you’ll also have to go out and earn the money, and when you do that, you pay income tax.

If I can go back to the heady days through the mists of time, when a litre of petrol 91 was only $3, I’m talking about, sort of, last week, before the latest increases, think about what it actually means to go out and earn a dollar so that you can fill up the tank and actually pay to take the kids to hockey practice or rugby practice. I’ve heard from people having to decide which kids to take to practice, because they just can’t afford to go anywhere. I’m getting on social media, young people sending pictures of their whole flat sitting around at home because they can’t afford to go anywhere. I’m hearing from people who are saying, “We are not going to work anymore because by the time you factor in all of the costs, including petrol, we can’t afford to do it.”

But let’s go back to that full analysis of how much tax people are paying to get a litre of petrol. Well, it’s not $3—if we just take round numbers—and then $1.40 on tax, and $1.60 for the oil and the refining and the retailer. By the way, does anyone remember when, “We’re going to reduce the price of petrol by having a market study.”? I think that was Kris Faafoi. I think he said that the 18c importer margin was going to go down 32c. He actually believed that BP and Mobil and Z Energy, they were all going to pay 14c a litre for the pleasure of selling it to you.

But the thing is, it’s not just that $1.40 of tax that you’re paying. Actually, if you’re paying a marginal rate of 33c on the dollar, and if you’re on the average wage, you almost are, actually, to spend $3 at the pump, you have to earn $4.50, then you pay 33c in the dollar in income tax. And you’ve got $3, and then you buy a litre of petrol from BP or Mobil or wherever—I hear it’s cheaper at Waitomo—then you pay $1.40 of that in tax. So the total tax that people are being hit with, when you talk about the income tax, is not just the $1.40; it’s the $1.50 of income tax, then the excise tax, then the GST, then the levies. Actually, you’re paying $2.90 of tax, in order to buy 1 litre of petrol. People don’t often say this; they just focus on what you pay at the pump. But, actually, when you buy a litre of petrol, you have to earn $4 50, if your marginal rate is 33c, pay $1.50 in tax, $1.40 in taxes that are in the petrol, and to get $1.60 litre of petrol, you pay $2.90 in petrol.

Now, of course, that was back through the mists of time, you know, two weeks ago, when you could actually get a litre of 91 for three bucks, that’s no longer the case. But it makes the point that these income tax rates that we are debating make a very real contribution to what people are paying at every stage of life. It has a huge impact on the cost of living crisis that people face, because it’s not just petrol. People are finding that if they want to buy a 2 litre bottle of it—

CHAIRPERSON (Ian McKelvie): Can I just remind members that if I have to wear a mask, it’d be good if everyone in the Chamber wore a mask. Sorry.

No problem, Mr Chair. It’s good to see everyone observing the COVID restrictions.

If you want to buy, for example, 2 litres of milk, and if you think you can get it very cheap for $4, but let’s be realistic, it’s actually, for most people, $5. And the thing is, of that $5 they’re paying, well, there’s 15 percent GST in there. So that’s about 70c of GST they’re paying. But what people miss is that if you’re over $70,000, you have to go along and earn an extra $7.50 to pay for that milk and pay the income tax that comes with it. So, really, when you buy a $5 bottle of milk, you’re paying $2 50 income tax, then 70c of GST, you’re actually paying $3.20 of tax to get a 2-litre bottle of milk.

We need to reduce these tax because it’s everywhere.

Just going back to those questions that we asked Minister Parker before, would he like to actually answer them? They weren’t actually that difficult. You know, as somebody that represents himself in this House as understanding the details, to give a childish answer and try to go back to look at percentage increases over the last decade or so as an answer for what real New Zealanders are making a choice about—what are the income differentials in Australia against New Zealand for those kinds of jobs? What are the cost differentials in New Zealand against Australia for those kinds of jobs? Give the public a fair perspective, and not the slant that the Labour Party wants to put on this issue. Is the Minister going to answer, or is he just going to look at his phone and hide and not going to reply?

Thank you, Mr Chair. I think those are some very good questions from my colleague the Hon David Bennett, asking questions about whether Minister Parker is actually going to give the public transparency around the actual tax rates that we are paying in comparison to other countries. It’s one thing for the Government to come in here and try to confirm the tax rates and say that, “Oh, we’re paying low taxes here in New Zealand,” but he continues to hide the fact that in New Zealand, it’s not just the income taxes: it’s the GST, it’s the fuel excise, it’s all of the other taxes and regulations and the impact that they have on New Zealanders which actually need to be compared if he’s going to be open and transparent in this debate here in this committee.

I come here as the member of Parliament for Pakuranga and the hard-working people of my community who are facing a cost of living crisis here in New Zealand. Members on that side of the House might say, “Oh, well, the people out there, they earn plenty of money.” Well, I’m sorry, someone earning $70,000, $80,000, $90,000, on average wages in New Zealand, is actually struggling with the cost of living crisis that we are facing in New Zealand. Average rents: up $150 under this Government. Petrol prices: over $3 a litre. Food prices: up 14 percent. And we have not seen any tax relief ever given by this Government when it comes to our income taxes. I actually don’t remember ever—yesterday was probably the first time in my life that a Labour Government’s actually ever cut any form of tax that I can recall.

💬 Andrew Bayly: That’s how desperate.

That’s how desperate they must be: first time I’ve ever seen it. But the point about it: it’s only temporary. It’s for three months. That’s as much as they could give: a three-month temporary cut to the excise for fuel.

The point I’m making here is that what we’ve seen over the last number of years is the increase in inflation and how that continues to put pressure on people’s real incomes after tax, and pushes people up into higher tax brackets, and means that, effectively, they go home with less in their back pockets, less to spend on the necessities that they need to pay, less that they need to be able to pay the bills and do all of the things that they need to be able to do. So the question that the Government needs to answer is: are they ever going to consider any form of indexation of the tax brackets? Are they ever going to think about any form of trying to shift the tax brackets to take into account the effect of inflation, or is this Government going to sit on the side and constantly let inflation eat into the back pockets of New Zealanders, eat into their after-tax income, meaning that they’re, effectively, left poorer under this Government?

I can tell you, I get the sense this Government is, rather, going to sit on the side, where they are going to take as much as they can, because they like doing three things. They like taxing. Tax, tax, tax—any tax that they can try to take, and any amount of money, they will do it. They spend like drunken sailors. I just listened to my colleague Andrew Bayly listing off just a few examples of some of the absolute wastage of money under this Government. Tens of millions of dollars—they just blink an eyelid.

The Minister of Transport stood up this afternoon, and he said, in response to $50 million being spent on the Auckland cycle bridge, “Oh, well, I’m a little bit disappointed we didn’t quite get the outcome that we were after.” Fifty million dollars: for most New Zealanders that is an eye-watering sum of money. The people on the other side, the Government members on the other side, need to remember: that is not your money. That is taxpayers’ money. They are the ones who work hard every single day, and they pay their taxes expecting some benefit for it, not for it to be thrown down the drain in some form of experiment, which is what we’re seeing far too often. Fifty million dollars! Let’s Get Wellington Moving—$35 million, I heard Andrew Bayly say; $35 million for consultants. Let’s Get Wellington Moving sounds like it’s “Let’s Get Wellington Consulting”. Well, there’s probably already too much consulting happening and not enough doing, and that’s another problem, that we can discuss on another day, with this Government.

The reality is New Zealanders are facing a cost of living crisis. There is a need to adjust those tax brackets in a way which gives New Zealanders some tax relief at this incredibly challenging time—not what we just saw from the Government yesterday, which was a small concession that there’s an issue, but, actually, addressing the question and the issue properly.

I move, That the question be now put.

Thank you, Mr Chair.

💬 Kieran McAnulty: Point of order, Mr Chair. Thank you, Mr Chair. I apologise to the member. However, this is a debate on Part 1, and that was the fourth member in a row where you did your signal to keep to the bill. We’re more than happy to have the debate, but it should just be relevant to Part 1 of this bill.

CHAIRPERSON (Ian McKelvie): Thank you for your advice, Mr McAnulty.

Thank you very much, Mr Chair. I apologise. I didn’t realise that was the signal that you were making; I thought that you were resisting the urge to clap through my speech. I thought, “He agrees with me, but he’s too professional to show it audibly.” But now that I know that you were talking about narrowing the debate, it will certainly be clear that my contributions are about this very important topic. It’s the only real debate that this Parliament has all year about the most important thing it does, which is pass laws so that taxation is done with representation, and the amount of money taken out of people’s income is at least debated in this House, even though many people don’t agree with it.

I want to talk a little bit about the implications of these tax rates in relation to administration and compliance costs. Now, it was very interesting to hear Simeon Brown, from Pakuranga, get up and say that the Labour Party in Government has never cut taxes in his lifetime. I thought that’s interesting, because in 1986, with Sir Roger Douglas as finance Minister, the Labour Party in Government halved the top tax rate from 66 percent to 33 percent.

💬 Simeon Brown: I wasn’t here in 1986, my friend.

He’s just corrected us. He wasn’t born in 1986. I was worried that he might have been misleading the House, but, actually, he is just too young to remember a Labour—

💬 Simeon Brown: I raise a point of order, Mr Chair. I wasn’t misleading the House. I wasn’t born until 1991. I just want to correct that. Thank you.

CHAIRPERSON (Ian McKelvie): That, I’ll remind the member, is not a point of order.

Mr Chair, I’ll tell you what: he’s older than he looks, then.

In any case, that was an important period in New Zealand history, because, by halving the top tax rate, the amount of revenue collected off the top tax rate actually increased. The reason for that is that when Governments have a wide range of rates of tax, it creates more and more opportunities for people to change the incidence of their tax—to change how they pay it, what entity pays it, and in what time period. If they can shift some of their income into another time period, then they can reduce the amount of income tax paid. Now, to some extent, that’s an inevitable result of any tax system, but the more complex our taxation system gets, the more difficult it is for Government to collect tax and the more difficult it is for citizens to comply with tax law. The net result is that New Zealanders spend more time on administering tax, from the IRD side, and complying with tax, from the citizens’ or the taxpayers’ side. That leaves less time to do the kinds of things that make life worthwhile. Nobody, as far as I’m aware, actually enjoys tax compliance or, even in the case of Inland Revenue staff, tax administration.

This is a very important feature of this debate that is often missed. We have an increasingly steep and complex tax structure that leads to more time spent on administration and compliance, and that is the reason why we should be trying to have lower, flatter, fairer taxes: so we spend less time on administration and compliance. This 39 percent rate is going to raise very little revenue, but it will mean that, for a whole range of people, it’s worth—for 6 percent of your income over a certain level—paying accountants more to avoid it. That creates a cat and mouse game between the Inland Revenue Department; the Finance and Expenditure Committee, which oversees tax lawmaking, which I used to sit on; the tax accountants; and the taxpayer. It’s wasteful behaviour.

You only have to look at other countries to see how bad it can get. You look at the proportion of New Zealanders who can fill out their tax return without a tax accountant, and we’re actually one of the best systems in the world. You go over to Australia: most people need a tax accountant to do their returns because their system is complicated, it has more rates, it has more exemptions, and they just spend more time paying tax. That is not helpful. You go to Canada, or, worse still, you go to the United States, where their levels of taxation have more rates, more exemptions, and more complexity—a tax system like Swiss cheese—and people spend an enormous amount of time on tax administration and compliance.

That is one of the reasons why I’ve put amendments on the Table for this legislation that would go some way to improving the simplicity of our tax system by getting rid of that 39 percent rate and dropping the 30 percent rate. So instead of having five different rates of tax, we’d have three. Up to $14,000, you pay 10.5 percent. From $14,000 to $70,000, you pay 17.5 percent. Above $70,000, you’d pay 33 percent, up to the sky. If we had that system, we would just be moving a little bit closer to the ideal of a low, flat tax system that does not have all sorts of incentives for people to come up with trusts and schemes and arrangements to try and avoid paying tax—because that’s no longer profitable when you have fewer rates—or less profitable. And it means that tax law is less complicated and we can get on with being productive and making stuff and doing stuff that makes life worth living.

Now, actually, we really need to go further, because even with the proposals that ACT has on the Table, that are fiscally affordable under the current circumstances—the Government just borrowed 60 billion bucks, and so on; closed the border and decimated the economy; and printed a lot of money and can’t know what to do with it—even then, there’s still a lot of work to be done. For example, we have a trust rate of 28 percent, a company rate of 28 percent, and three different income tax rates above that. ACT would take that to one tax rate above that. But you’d still have a 5 percentage point gap between the top income rate and the trust and company rate.

The place we’d like to get to is actually to say we have one top rate, and the incentive of that is that suddenly it’s not profitable to get your accountant to try and change the kinds of arrangements that you have. We have a simpler tax system. We spend less time administering and complying tax; more time doing stuff that makes life worth living.

If we were to go that extra step, then we would find ourselves in a position where, actually, we started to be looked at like we once were: as a country that had policies that led the world; instead of a has-been policy environment that is slowly degrading into all the problems that were got rid of just in time for Simeon Brown to be born. We were clearing the way for you, mate!

💬 Simeon Brown: Thank goodness!

Yes, I know. If only you’d made more of it. That is what we could be doing. We could be having that debate about New Zealand being the best in the world—about having the simplest, fairest, flattest tax structure. Instead, we have a Government that wants five different income tax rates, plus another different rate for companies and trusts and a growing amount of administration and compliance opportunities that are not actually good for New Zealand’s future as a place where people have time to get on with making life worthwhile.

That will probably be my final contribution on this part—unless, of course, we get some answers from the Minister, and hope springs eternal. But I think people need to consider, first of all, the culture that you get from your tax system. If a large group of people pay little tax and vote for a small group of people to pay most of it, I don’t think that’s good for cohesion in our society. When we have a Government that’s taken $2,138 more per person, adjusted for inflation, in the last 4½ years, that leaves a hole in household budgets, and that’s why people are struggling at the supermarket checkout and the petrol pump. Income taxes are not just a cost that you pay after you get paid and buy stuff; they’re also a cost that increase the prices that businesses charge, and they’re also something that you have to factor in when you look at the true cost of things you buy. It’s not just the price that you pay at the pump or the checkout; it’s the money you had to earn to pay the income tax to get there to pay that price. When you look at it that way, the amount of money that the Government is taking out of New Zealanders’ real resources to provide for themselves and their families is actually greater than is commonly believed.

Those are all reasons why I hope this House will support the amendment I’ve put forward to drop that 39 percent rate down to 33 percent and drop that 30 percent rate down to 17.5 percent and go from an increasingly complex system of five different tax rates down to a system with three rates that is flatter, fairer, and simpler for the prosperity of all New Zealand. Wouldn’t that be something to get behind and something we could be proud of as a country? Thank you, Mr Chair.

Yeah, look, again, Minister, with the greatest respect, this third iteration where we ask the same question we routinely seem to have you obfuscate that reality—we’ve talked about productivity, we’ve talked about wages offshore relative to tax, you still haven’t answered the question. I believe you made iterations about nurses etc. offshore. We said, hey look, the deputy leader of the ACT Party made inference to the fact that people were leaving New Zealand to get jobs overseas. You then inferred that they were paying higher rates of tax. Now, that is not contestable. What is contestable, on this House by this side, by both myself and Mr Bennett, was what they were actually earning and what was relative to that. You haven’t answered it, and I think anyone who was on Parliament TV tonight, and God bless them, might actually want to have an answer for that.

Those that are listening to the debate will know that this is a debate about the tax rates for the year, not wage rates.

I move, That the question be now put.

Members, I just remind you that the amendments to the rates of income tax were put at the end of the Part 3 debate. The question is that part 1 stand part [Interruption]—apologies, I’m out of order.

Members, I just remind you that, as I was doing before—I remind you that the amendments to the rates of income tax were put at the end of the Part 3 debate.