Taxation Principles Reporting Bill

Good morning, members. The House was last considering the Taxation Principles Reporting Bill. We continue with that.

Well, good morning, Madam Speaker. It’s nice to be back in urgency but not nice to be discussing this bill. In fact, this is probably the most misnamed bill on the urgency motion. I had to laugh last night when Dr Russell, in moving the second reading, praised “the vision and insight of the chief architect of the bill, the Hon David Parker.”, only the chief architect of the bill has thrown his toys out and walked away from the revenue portfolio when the Prime Minister specifically ruled out the wealth tax that this bill sets the framework for. Now, he didn’t walk from Cabinet, he didn’t lose all the baubles; he just threw his toys out and said, “Barbara Edmonds, you can have the revenue portfolio.”, and then that esteemed tax expert Dr Deborah Russell gets the associate revenue portfolio. But we should be under no illusion that this bill is setting the information framework to enable a wealth tax to be introduced, and when the PM ruled it out, Mr Parker was off.

But here’s why I think a wealth tax is still on the cards. If the election delivers a cobbled-together coalition of the left, with Labour, the Greens, and Te Paati Māori, I think an absolute condition of the two parties who are overtly committed to a wealth tax—and the one party that likes the idea of a wealth tax but understands for political reasons that it can’t say so now—will, by coalition, be to bring a wealth tax to an economy near us.

The other reason I think that is quite simple: they haven’t thrown this bill out. If they truly believed that a wealth tax was not on the cards in the foreseeable future, why do we need this information framework? Because what this bill does is it repeats the report that David Parker had commissioned over the last couple of years to report on economic income that is not taxed under current income tax law.

Now, in his first report, he went after the 279 so-called wealthy individuals who have untaxed economic income and then threw that in the denominator, put the amount of tax paid in the numerator, and decided that they were paying half the tax of “Joe Average”. The issue with this bill is that the reporting requirements that the Commissioner of Inland Revenue has do not make such a distinction. The Commissioner of Inland Revenue is required to prepare a report every year on all of the principle measures and the impact on the tax system, and those principles include economic income as part of vertical equity. Now, they’re all fancy words, but they, essentially, boil down to the same thing. That is how much growth in wealth is being experienced in New Zealand that is not being taxed.

💬 Hon Dr David Clark: What has he got against transparency?

Nothing. It’s consistency, Dr Clark, that I want. Let’s lead on to consistency. We have discussion in here—and I’m prepared to argue against the regressivity of GST or at least to say that, among the economic commentators, there are arguments for and against the degree to which GST is progressive, regressive, or flat. What it shouldn’t be—particularly in a principled tax framework, Dr Clark—is cherry-picked and have fruit and vegetables, however they are defined, suddenly taken out for political reasons. It was not principles that led to the Government’s announcement last week, Dr Clark; it was politics.

I had to love Dr Russell quoting the 1776 tome from that esteemed father of capitalism, Adam Smith—the first Labour MP, I think, in my 15 years in this House to ever proudly quote Adam Smith. [Interruption] Yes, she was. She’d obviously gone to the Parliamentary Library and grabbed it, although, to be fair, she might be the only one, along with David Parker, who actually has a copy of Adam Smith’s The Wealth of Nations. I have it on Kindle. It’s a very good albeit long read. David Parker’s probably got it there beside his Piketty volumes, but being the anti-capitalist that he is deep down—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! And back to the bill.

It’s about the speech that Dr Russell gave in her second reading contribution. She quoted Adam Smith and said the tax system should be transparent, as Dr Clark said—but this tax system under Labour isn’t—and that compliance costs should be minimised—well, I dare say that that’s not going to happen when GST on fruit and vegetables is removed—and that the administrative cost of collecting tax should be as little as possible. Again, a gross breach of the very taxation principles that this Government purports to espouse.

And who is wealthy? We haven’t got a definition of it. Now, David Parker went after, I think, 279 of the wealthiest individuals. [Interruption] Chlöe Swarbrick will tell me—was it a 9 percent effective tax rate on their economic income? Something like that—terrible. Only, all of the difference is in unrealised changes in wealth, so those individuals would have to come up with millions and millions of dollars to pay for the things that Labour are spending money on.

When challenged on talkback radio, David Parker said, “Well, they’re worth on average a quarter of a billion dollars each. They’re bound to find some cash down the back of the couch.” I’m paraphrasing, but that was pretty much what he said. That doesn’t sound very principled to me.

Nor indeed if we are talking about principles and economic income overall, it’s all economic income, including on family homes. Now, I’m not proposing a capital gains tax or a wealth tax on family homes but the inconsistency is here: if in Deborah Russell’s electorate of New Lynn an average homeowner bought a house five years ago for $1 million, because of the Government’s profligate spending driving inflation up now that home is worth $1.5 million. In those five years, they’ve earned more in the increase in value of their house than they have working as a tradie—that’s untaxed. Now, nobody’s talking about that over there, and nor are we here.

But if the same plumber lives in Balclutha—listen up—owns a $500,000 house and buys a $350,000 rental property, which over the same five years increases to half a million dollars, the wealth increase, the economic income on that second house, is $150,000, and that plumber would have to pay probably $40,000 to $50,000 in income tax—a lower capital gain but a higher tax bill. How principled is that? But that’s what this Government will give us. The really sad thing about this is they’re not going after the big fish that they said they would. In 2017 and 2016 when I was the Minister of Revenue, the big issue was base erosion and profit shifting—multinational companies moving transfer costs and interest to reduce income earned in higher-taxpaying countries to record taxable income in lower-tax jurisdictions. And the OECD has been battling this for years.

After initially sending a bill to this House to, again, create an information framework, nothing has been done by this Government on the thing that they said was the number one revenue issue during the Key/English years. So this is a really disappointing piece of legislation, but it reveals much, much more about the Government’s intention for wealth. They are coming for unrealised economic income. They are coming for your cribs and your baches and the shares in the plumbing firm—they are going to tax them if they’re still in office on 14 October, and the public need to know about it.

The Minister says, “Oh, this isn’t about collecting a single dollar of tax.” Yes, it is. She then went on and listed all the reasons why this Government needs more tax. Where are they going to get it from?

💬 Hon Member: Back to the bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): Order!

They’re going to get it from the untaxed economic income that is coming out of this bill.

I’m sorry to interrupt the member, but the members to my right who have continually questioned the relevancy of the speech and the context of the speech in terms of the Standing Orders and the Speakers’ rulings have a remedy. They can take a point of order and just see where that takes them.

What a load of scaremongering. What are the Opposition afraid of? If there was ever a myth that keeps poor people poor, it is the myth of fairness without transparency, especially when the conditions of fairness are assumed and not agreed or are conceptualised without data, and then they’re sterilised from political analysis because they’re deemed separate, distinct, discrete, and devoid of influence because they belong in the realms of an objective economy, an objective rules-based system. This is modern-day mythology. It’s lazy analysis, and one of the most powerful fabrications of our political system is that the tax system is based on generalised symptoms of fairness, which no diagnosing practitioner worth their reputation would ever attest to. It is classism disguised as a rules-based system in the 21st century, yet nobody really knows the rules, because nobody can test them against a backdrop of real principles.

Now, the Taxation Principles Reporting Bill is groundbreaking. It unpacks what is meant by “fairness” into six fundamental taxation principles, without hierarchy, so that policy trade-offs can be fairly understood. It doesn’t seek to rank them. Rather it seeks to inform those impacted about the trade-offs so they can understand what is understood as “fair” in the context. It also reflects a common understanding that a good tax system involves different trade-offs at different times. This is in the context of the high-net-worth individuals research data that reveals some people in our society pay a real tax rate of 9 percent while others pay around 20 percent. It requires income and wealth situations to be transparent, measurable, and comparable so that policies can be created against a backdrop of baselines, not assumptions.

This obvious yet revolutionary law sets up the ability for New Zealand to make tax rules based on real data and inequalities and disparities in wellbeing by setting out openly the accepted tax principles. It requires us to enunciate the principles at play, the trade-offs, and the anticipated benefits through the Inland Revenue commissioner. Anyone who sees this as hard to do is ducking for cover. Why wouldn’t they want a baseline of real data from which to make their policy? The legislation gives the IRD the tools to get real data to form a real baseline from which to make real policy. It shows, transparently, the principles at play, the trade-offs, and the assumptions underpinning the tax system. It allows for open, transparent discussions on tax.

We’ve heard about the principles: horizontal equity, vertical equity, efficiency, integrity, coherence, and flexibility. These are all well accepted—they are well-accepted principles, but what I’m really proud of—as a member of the Finance and Expenditure Committee—is that when we look at inequality, we are also able to consider comparative wellbeing. That puts wellbeing across the economy, both in the Public Finance Act and the Public Service Act, and now into the tax system in a way where we can really understand what the impact is of our policies, not just the inputs.

I’m really proud of this bill. I commend the Minister who shepherded it for so long through the process, the Hon David Parker, and I’m really proud to be standing here today seeing this come into the House. I commend it.

Thank you, Madam Speaker. For those who may be watching on their television sets or listening on their wirelesses, we’re in a strange situation in the Parliament—

💬 Hon Member: Wireless?

The crystal sets? Perhaps there are some people listening on their crystal sets. John Banks always used to say that people would be listening on their crystal sets. I remember him referring to that regularly. But here we are on a Thursday morning in parliamentary urgency. It’s a weird kind of a thing for people who are not part of the parliamentary process, because the calendars around the debating chamber still say Tuesday, 15 August. The reason we’re doing this is because we’re in the last, dying days of the current Labour administration. Their shambolic legislative programme is being pushed through under urgency, and this bill—the second reading of the Taxation Principles Reporting Bill—is just one of a suite of ideologically driven bills that the current Government is trying to push through before their term in office comes to an end.

On this side of the House, we oppose this legislation. We oppose it quite simply because we know, in the National Party at least, that we don’t need to have a piece of legislation that tells politicians about how tax law should be interpreted and applied. We don’t need a piece of legislation that goes through a set of make-work principles that are designed to do little other than lay a groundwork for even greater taxation. I had the dubious privilege of sitting in the debating chamber at about 11.50 last night listening to the Hon Dr Deborah Russell waxing lyrical. In fact, it was almost Shakespearean in its delivery, full of pathos and passion. It’s just a shame that, at 11.50 p.m., she had such a small audience, because I don’t think there would be too many people listening on their crystal sets last night. But, if anyone wants to go and have a look at the theatre of parliamentary debate, there was a good example of it last night. But it was mostly just theatre, and that has become the hallmark of this Government, a Government that is much bigger on theatre than actually principled actions. So we oppose this piece of legislation because we see it simply as a bureaucratic, make-work scheme, of which this Government has become so good.

Of course it’s obvious that a tax system should be fair, that it should be simple, and that it should be transparent and administratively easy and adequate to service the country’s revenue needs. But those things are all given. They don’t need a bespoke separate piece of legislation. They are a given; they have always been a given as part of the nation’s taxation regime, and they will continue to be, notwithstanding this piece of legislation. But what is happening here, as my colleague the very insightful and articulate Michael Woodhouse mentioned just a few minutes ago, is that the real thing that the Labour Government wants to try and do is lay the foundation for increasing tax for New Zealanders. They want to introduce a wealth tax. They want to introduce a capital gains tax. They want to tax New Zealanders more. In fact, it’s been the hallmark of this Labour administration over their time in office that they really only have three policies on anything, whether it’s tax or any kind of subject you might like to raise. They have only three policies, and their policies are to ban it, make it compulsory, or tax it. Often—often—they are a combination of all three: banning, making compulsory, or taxing, and then, for good measure, tax again and tax again; just keep raiding the pockets of New Zealanders as if they were tapping into an unlimited ATM.

When we go back and have a look at the genesis of this bill, we find that the father of this bill was none other than the Hon David Parker in his capacity as the then revenue Minister. Now, he’s no longer the revenue Minister, and what’s been interesting is that his principled act of resigning as revenue Minister and then his reluctance, for instance, to back or endorse in any way, shape, or form the Labour Party’s election promise to take the GST off fruit and vegetables is very telling. It’s often the way in the Parliament, and indeed in the discourse of political debate, that sometimes it’s what’s not said that speaks louder than what is said. What’s not said speaks louder sometimes than what is said, and David Parker has not been saying much about the dancing on the head of a pin by the finance Minister, Grant Robertson, in terms of his flip-flop on what he previously referred to as a “boondoggle”. Well, this piece of legislation provides the very foundation for the work that Mr Parker and, I suspect, a small coterie of his colleagues had wanted to achieve, had they been able to convince their caucus and Cabinet colleagues that the introduction of a wealth tax was a good idea.

Well, they got rolled on that—they got rolled on that—when Jacinda Ardern exited stage left and Chris Hipkins fell into the spotlight. He immediately put those plans on to his policy bonfire, and they are no more. He’s gone from what David Parker would, I am sure, have assumed was a principled position, at least in his mind, to one of utter political expediency. We know the reasons for that. The reasons for that relate to an upcoming general election in less than 60 days. So here we are in urgency on a Thursday morning, in the dying stages of this Labour administration, debating an ideological piece of legislation that is little more than bureaucratic make-work—unnecessary; confirms principles that are well known, understood, accepted, and have been part of the taxation framework structure of the New Zealand economy for years and years and years. No one is suggesting that they shouldn’t be there, other than that they don’t need to be in a bespoke and special piece of legislation. So, when we look at the principles—and my colleague Michael Woodhouse, and even the Minister, the Hon Dr Deborah Russell, last night, was waving around in the debating chamber, towards midnight last night, a copy of Adam Smith’s four principles on tax from 1776, in The Wealth of Nations. I was surprised to know that Michael Woodhouse keeps a copy on his Kindle. I’m sure that he reads it regularly! Those principles have been part of taxation policy work for years and years and years, and enshrining them in a piece of legislation like this is little more than bureaucratic make-work.

So, on this side of the House, we don’t think this bill is necessary. We are very sceptical, very suspicious, and very understanding of what this Government’s aims and objectives are, should they find themselves in a position where they want to tax New Zealanders more. It was Damien O’Connor, the senior Labour Cabinet Minister, only a week or so ago, who said that the problem we have is not enough tax. In a moment of lucid clarity, he actually spilt the beans: they want to take more tax from New Zealanders. Well, on this side of the House, we take the view that Governments should have a much greater respect for taxpayers’ hard-earned dollars, that the wasteful spending should stop, that the country needs to get back on track, and that this piece of legislation doesn’t help that. It doesn’t help that. Help is on the way—help is on the way. A general election is imminent, and we think that, in very short order, New Zealanders will vote in the ballot box, in the secrecy and privacy of the ballot box, and they will make a decision about whether they want to have a Government that is determined to tax them more, determined to spend more money, determined to be more wasteful and have less respect for taxpayers’ money, or whether they will want a Government that is sensible, pragmatic, and sound, and that will lead the country to a far more rational and balanced economic approach that is going to get us out of the recession and the economic dire mess that we are currently in. We oppose this bill.

Thank you, Madam Speaker. What a wonderful bill this is. What an excellent bill. I mean, successive Governments down through the ages have made changes to the tax system in the name of fairness, without facts. The idea of fairness can be subjected and manipulated to suit political arguments, but here in this House we have a bill which encourages transparency so the public can debate the merit of tax changes with real facts behind them.

I want to congratulate the Hon Deborah Russell for bringing this to the House and the Hon David Parker for his work over a long period of time to achieve a bill which actually shines a light on our tax system so that we as New Zealanders can understand how it works. I hear opposite the frustration from the party that would want to defend the interests of the very wealthiest New Zealanders. You heard how often they referenced the wealth report that was done that showed that those earning typically over $20 million—sorry, net assets worth well over $20 million—pay around 8.9 percent as a tax rate, as opposed to middle-income New Zealanders, who pay around 20 percent as a tax rate. People know our system intrinsically is a bit unfair. People have always kind of known that, but we haven’t had the facts, and they don’t like seeing them out in the public. This bill would seek to make sure that we actually have regular reporting on how our tax system is functioning.

So I want to, just quickly in my contribution, look at the schedule, at the back of the bill, which goes through the different principles. In the select committee, we had quite a bit of time going through this with tax experts—I think around about a dozen submissions from tax experts—that helped us zone in, together with the help of Sir Rob McLeod, on the principles in this bill.

The first focuses on economic income, and it is the principle of horizontal equity. It looks at what the real wealth that people have is—not just the wealth they’re currently taxed on but their real wealth and how equal and fair that is looked at across the system.

The second looks at efficiency and, in my view, really gives us the opportunity to say: is the system itself efficiently functioning in a way that removes distortion? For example, is our economy focused on investing in productive assets which we’d all want to increase our exports and make us a wealthier country, a more prosperous country, overall?

The third is vertical equity, which looks at the progressivity of the system overall. We all know that lower-income people pay a higher portion of their income on taxation, and we all know that, actually, in real terms, wealthier people pay a bit more, typically—although not always—through the tax system. We want to know that the system overall is progressive.

Revenue integrity looks at whether there is coherency in the system and whether loopholes are emerging as changes happen.

Then we want to look at the compliance and administration costs—is it hard for taxpayers and Government to comply, does it carry a cost for them in doing it, and how do we minimise that?

Then we have certainty and predictability so that taxpayers can know what they’re likely to have to pay in tax and they can understand their obligations before their tax is due.

Flexibility and adaptability looks at the way in which the tax system continues to change to reflect current circumstances. Those are the principles in this bill.

I just wanted to spell them out really quickly, to go once over quickly so that people can see there’s nothing to be afraid of in there. What we’re looking at is transparency in our tax system, and it’s just astonishing to me that the National Party are arguing against transparency. It is not clear to me—or maybe it is—what they’re trying to hide by opposing this bill. It is astonishing—astonishing. New Zealanders should have a good hard look at both sides of this debate—I think transparency is really valuable here—and see those who don’t want them to understand regularly what our tax system looks like and those that would really like everyday New Zealanders, middle-income New Zealanders, to understand how the tax system functions and how those who are in the very wealthiest class, for example, as one outcome of this, avoid paying the kinds of tax rates that middle-income New Zealanders do.

We need transparency in New Zealand. It’s for the long-term good of the system. I particularly want to congratulate again the Hon David Parker for his excellent work on this bill, and I commend it to the House.

Thank you, Madam Speaker. It’s a pleasure to rise on behalf of my ACT Party colleague Damien Smith, who, if you haven’t read his speech at the first reading, I really would recommend you go back and read. It is quite hilarious. He makes quite a few jokes that I don’t think I could do service to.

It is a pleasure to rise in opposition to the Taxation Principles Reporting Bill. We do it for a range of reasons, but I wanted to, firstly, talk about what this bill is hoping to achieve. It is hoping to achieve a statutory framework requiring that the Commissioner of Inland Revenue reports annually about the country’s tax settings against a set of core principles, and these principles are all set out in Schedule 1 of the bill. It says here—quite lovely—it’s “to improve the public’s understanding of the tax system”, but that’s a bit Orwellian, really, because that’s not really what it’s aiming to achieve.

Schedule 1 sets out these principles, and it says that the key principles here are “considered for designing or changing a tax system, as measured by the approved taxation principles measurements” as follows: horizontal equity, efficiency, vertical equity, revenue integrity, compliance and administrative costs, certainty and predictability, and flexibility and adaptability. While the purpose of the bill is to produce a report about the tax system and extent it will then meet these principles, the conclusion is always going to be, in every report, that no system can possibly meet all of these principles.

There’ll be people from all sides of this House that will have different opinions. There’ll be people at times who are in Opposition and will think what comes out of these reports is bad because certain parts of these principles have not been met, and there’ll be people in the Government that will think it’s good because other certain aspects have been met, and vice versa when people flip-flop back and forth from Government to Opposition.

It will be true of every single debate that we ever have about taxation in this country. There will be no new information that this bill will bring to a debate about taxation and whether or not it meets the principles of horizontal equity, efficiency, vertical equity, revenue integrity, compliance and administrative costs, certainty and predictability, and flexibility and adaptability. These are all principles that underpin a lot of taxation and the system, but there’s not actually going to be any new information. It’ll just point out that there are different goals to meet some extent, or all extents, of the Taxation Principles Reporting Bill.

So, in effect, what we’ll end up with is simply a new layer of bureaucratic requirements on the Public Service to produce a report, and, when you think about that, that’s just another level of bureaucracy. This Government always wants to pass new laws that add more levels of bureaucracy, more working groups, more reports—more reports that get written and then never read, even by the Government, and never acted upon. But there is actually no need for legislation to create reports like this, because the Minister could simply just request at any time that a report like this is written by the Commissioner of Inland Revenue. There’s no need to set it out in legislation that the Commissioner of Inland Revenue must write this report. I mean, David Parker will know, having been Minister of Revenue, that you could simply just request for a report to be made.

But the biggest problem that I have with this is that it didn’t actually go through the generic tax policy process when creating this bill. And when you go on to the IRD website, it says: “How [is] tax policy … developed”? Well, since 1995—only a little bit after I was born—it has said that the “tax policy has been developed using the Generic Tax Policy Process”. So, for our entire lives there has been a standard, and the policy result of following the generic tax policy process means that “major tax initiatives are subject to public scrutiny at all stages of their development. As a result, we have the opportunity to develop more practical options for reform by drawing on information provided by the private sector and the people who will be affected.” The whole process of going through the generic tax policy process “gives us greater opportunity to explain to interested parties the rationale underlying [the] proposed reforms”, thus improving the long-term stability of the tax system.

This bill didn’t go through the generic tax policy process. It didn’t go through a formalised consultation period. There was only a small number of stakeholders that were informally consulted. Now, that goes against how we’re supposed to do changes to tax law. I don’t think that is right. I also don’t think it’s right that the first reading of this bill went through urgency. Less than three months later, we’re sitting through the second reading under urgency on an issue to do with tax, and it didn’t actually go through proper scrutiny and proper consultation. That can’t be good for the long-term sustainability of our tax system.

The third reason that the ACT Party is opposing this bill is that we do not believe that the Inland Revenue Department is the right department to be reporting on the tax system, because it is responsible for giving policy advice on and administering the tax system.

Number four: we don’t believe that this report is actually going to be requiring an explanation of the trade-offs and the different weightings of these tax principles. You see that there are quite a few tax principles that have to be met—the horizontal equity, efficiency, vertical equity, etc., certainty and predictability. Now, in designing any tax system, there will be trade-offs, and that will be open for discussion and debate about how we weigh or make those decisions. But this bill just means that the report will say that there are different principles and you can’t satisfy all of them. It’s not necessarily going to go into great detail about why various weightings have been given. The tradeoffs really should be explained and the principles given a weighting so it’s clear why one principle has been met rather than the other. I think it’s important that that is there for transparency for people who are reading these reports.

But, all in all, we don’t believe that this is a necessary piece of legislation. It’s going to add a new level of bureaucracy by requiring a report that’s not needed. If it really was needed, the Minister could just ask for one rather than requiring it under law. It’s not going to go into great enough detail to actually explain the different trade-offs and the weights given behind the different principles underneath it. And, actually, the IRD really shouldn’t be the one issuing this type of report on the tax system, given that they are at the same time administering it. So I am opposed to the bill on behalf of the ACT Party and my colleague Damien Smith.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. Let’s be really clear about what it is that we’re debating today in the Taxation Principles Reporting Bill. This is not a piece of legislation that proposes any amendments to how we collect tax in this country or where the burden of taxation should lie. All it does is outline a way in which we can collect and then go about reporting on the way that our tax system currently operates in this country, against a set of seven principles that are outlined explicitly in this bill. I have not heard any arguments from any members of the Opposition—who have stood up and bandied about their red herrings, I would say—against those principles. In fact, we had quite collegial discussions about what those principles are at the Finance and Expenditure Committee. What it is that they are apparently fighting against is the process of collection and publication of the apparent distortions within our taxation system in this country and therefore the flow-on impacts with regard to productivity, inequality, and otherwise.

So, just to really dig into this—and I guess I should first foreshadow that of course the Green Party of Aotearoa New Zealand will be supporting this bill. I just wanted to commend the former Minister, the Hon David Parker, for the mahi that he has done in this space, not just this year in bringing this bill to this House but also in the production of the high - net-wealth individuals report as published at the beginning of this year, which, of course, as many other members have alluded to—and, again, it’s worthwhile putting on the record—made it patently clear that our tax system is fundamentally unfair and that there is a disproportionate tax burden borne by those who work in this country, not those who make their money off of the further and further accumulation of wealth.

So the Opposition are fighting against the collection of this data, and the Hon Michael Woodhouse said—and I quote—that “this is setting the information framework [for] … a wealth tax.” Well, I think you may be saying the quiet part out loud there, because if in fact the publication of this data and this evidence and this information provides the information framework and, therefore, a rationale for the implementation of a wealth tax, well, that’s a political decision and one that I guess would be mandated by the general public demanding something like this happen because they for the first time have the evidence which very clearly points out the discrepancies and the unfairness in our tax system.

Further to that point, we heard from the Hon Scott Simpson that this is ideologically driven. Of course, this is one of those arguments that I’ve got to stand up and argue against every single time, because, guys, I’m sorry to tell you, all of us here are ideologically driven. We have these things called ideologies or values, which underpin our political parties and colour how we interpret and conceptualise of evidence—the things that we’re willing to look at, the things that we’re not willing to look at; the communities that we’re willing to listen to, and the communities that we are not willing to listen to. We are all ideological, and I would say, actually, the antithesis of ideology is being open to collecting the evidence and the data and looking at it as objectively as is possible—i.e., the very point behind this legislation: to put out objective facts which all of us can interpret subjectively through our ideological values, political parties, and partisan lenses. So what is it, in fact, that is ideologically driven? Well, I’d say it’s the argument ideologically to not collect objective data to prove a point, which we could all then go about debating from our different ideological positions.

I also heard from the Hon Scott Simpson, and again I quote—I wrote all these down—that he’s “very suspicious” of what we might do with this data. Again, that will be a matter of public debate, because all this bill does is set up a framework for collecting evidence and then reporting that publicly. There is absolutely no impetus—nothing in here—that says that you must do X, Y, and Z with it. In fact, that’s the point of an election campaign. That’s the point of fiscal policy. It’s the point of everything that we do in this place—to interpret data. But the point of this bill is that we don’t have the damn data to do that meaningfully or objectively—or subjectively—in the first place.

The other point made by the Hon Scott Simpson is that this shows a disdain or a lack of respect for taxpayer dollars. In fact, I’d say quite the opposite, because, again, as outlined in the research from the Hon David Parker in his former role as Minister of Revenue, commissioned by the IRD, it made it explicitly and abundantly clear that the average taxpayer in this country pays more than double the effective tax rate of the wealthiest in this country. There is a disproportionate burden on those who earn their income from work as opposed to those who earn their income from wealth. I’d say the greatest disrespect that you could pay to the average New Zealand taxpayer is to tell them that you’re not interested in lifting the lid on that issue.

In fact, I’d say that the most responsible thing that we could do as ostensible leaders of this country is to try and get all the more evidence and data to have an all the more informed public debate on this stuff, because, otherwise, all we’re doing in this place is vibes, and that’s not good enough. It’s how we’ve gone about facilitating and creating tax and economic policy in this country for far, far too long. There’s a reason that people have an intuition out there that this stuff is unfair, because as the data is beginning to bear out from the IRD and Treasury research as reported at the beginning of this year, it is unfair.

I also need to respond to the point, raised by Brooke van Velden from the ACT Party, that we can’t meet all seven principles. Well, that, again, is part of the point. We are reporting against those seven principles—again, I’ve not yet heard any member of the Opposition argue against any of those seven principles, just simply the collection of and reporting of this data. So I’d really, really ask them to respond to which of those seven principles they’re against. But if you can’t meet those seven principles, then let’s be explicit as lawmakers about which ones we’re willing to prioritise and the weighting that we’re wanting to put on each of them, because that is the political decision. All this does is set up a reporting framework against principles which, again, it appears there’s relative consensus in this House on. The debate is whether we actually report on this stuff in the first place and, therefore, whether we have an objectively informed, evidence-based debate. Brooke van Velden was here saying that there’s not going to be any explanation of the trade-offs within the IRD research. That’s not their role. Their role is to provide us with the evidence, and then it is our ideologically driven positions as politicians which will then decide to interpret and make decisions on how we make those trade-offs on those variables.

To that effect, it’s already been made abundantly clear, in the likes of that high-wealth individuals report from the beginning of this year, that we’re already making quite substantive trade-offs with regard to productivity in this country, because what we see is that as a result of our tax system being 136th in the world, based on Oxfam’s reporting, for addressing inequality, we know that there are massive challenges right now with how capital flows continue to go into land speculation at the expense of productivity, small businesses, innovation, and research and development. We also know that there are distortions which continue to suppress talent and skills and people’s genuine want to participate in our society in lower-income neighbourhoods and communities across this country.

I just for the life of me can’t understand how we’re here having a debate today about whether we just want this data out there in the first place. This bill does not do anything in terms of actual changes to our tax system, which, I’d say, I wish that we were actually debating about, because we do have quite substantial evidence that was released at the beginning of this year. But what we’re debating about is whether we just have baseline access to what I would say is fundamental information that is useful for having an informed public debate. I thought that was the point of this place. So I really, really would appeal to members of, particularly, the National Party to stand up and to point to which of the seven principles they oppose being reported against, because, otherwise, all I’m hearing from them is ideological drivel and that they do not want objective evidence and information out there which we can pick over and debate explicitly from each of our ideological and values-based standpoints.

Just finally, because I’ve got another minute and a half, the tax system is unfair, and the Greens have outlined our policy going to this election in 2023. The National Party, of course, are waving around the bogeyman that perhaps the Labour Party might be foreshadowing a wealth tax, but I’d say to those who are listening along at home that so far, it’s only really the Green Party that I’m aware of who have meaningfully outlined how we would implement something like that to pay for a guaranteed minimum income and to make the political choice to end poverty in this country, because, after all, that’s the point of this place.

It gives me pleasure to rise in the second reading debate. Can I thank the Hon Deborah Russell for carrying forward this legislation, and the select committee for the work that was done by select committee members—who did work collegially on this bill; even though some members disagreed with it, they drilled down into the principles to articulate them as well as can be—the IRD officials, and Sir Rob McLeod for his very wise advice to the Finance and Expenditure Committee. This is actually a very important bill, and you can see its importance from the strength of feeling it engenders from the Opposition, who don’t want transparency as to the outcomes of our current tax system.

Do you know that when the high-wealth individual work was done earlier this year, after that work was done, the Treasury re-estimated the distribution of wealth in New Zealand. Prior to that work being done, they had estimated that the top 1 percent of wealth-holders in New Zealand held 21 percent of all assets in New Zealand, including family homes—21 percent. It’s quite an extreme amount of wealth to be held by the 1 percent. After the study was done, they re-estimated it to 26 percent of all assets held by the 1 percent. If you think about that, well, that’s pretty extreme, but then if you think about investments outside of the family home, they re-estimated that of all of the investments in New Zealand outside of the family home, 35 percent of them are held by 1 percent of the population—35 percent of all investments, all net wealth outside of the family home, is held by 1 percent. That’s what data-driven analysis of the tax system shows to New Zealanders.

We heard reference from the ACT Party that this didn’t go through the generic tax policy process and, therefore, is flawed. The generic tax policy process wasn’t used to increase GST or change income tax rates. That’s about technical stuff like what you are going to do for foreign investment rules and double taxation and really technical things like that.

Who’s on the generic tax policy groups? Major corporates and their tax accountants, essentially, and the occasional lawyer, but it’s mainly—I go to those meetings with those groups that are in that, and that’s who they are. Those people have themselves told me that they can’t involve themselves in the bigger tax debate. I had one of the partners of one of the major accounting firms, a real leader in taxation, tell me that when he publicly expressed an opinion in favour of a capital gains tax, they lost clients to the firm because the people who would have been charged a capital gains tax said, “I’m not going to use you as my accountant”—this is one of the big six firms—“if you talk publicly about that.”

It’s impossible for those people to, by and large, talk publicly about what they really think about the big issues in the tax system. That’s the job of this place, and this place needs information upon which to have those debates, and that’s all this bill does. It sets out principles, which are settled principles, against which that information can be provided through us to the public.

What’s one of the other trite phrases we hear in New Zealand? I hear it from the National Party: “broad based - low rate”—“broad based - low rate”. New Zealand doesn’t have a broad base - low rate tax system. We have a broad-based GST system, and its rate is lower than if it was a narrow base, but GST is a very high proportion of taxation in New Zealand, relative to other OECD countries. We do not have a broad base - low rate tax system, as shown by the high-wealth work earlier in the year, which showed that the people who had an average wealth of $256 million pay tax at less than the rate of 10 percent, which is less than middle-income earners in New Zealand by a factor of a half to a third.

So what are the principles set out here? “Horizontal equity is the extent to which people with similar levels of … income pay similar amounts of tax.”—the next part of that is important—“In considering horizontal equity, the time value of money matters and the tax system should generally recognise the economic effect of income.” What happens now? Why do the National Party hate that? Why don’t they want that in our system?

When you borrow money from the bank and you take out a $300,000 mortgage, wouldn’t you love for the bank to say, “Oh, by the way, we’re not going to charge you any interest or get the money back for 30 years. You can have the money free for 30 years.”? Well, that’s what happens in New Zealand for some people. Their tax on any income can be delayed for decades, so their effective tax rate is much, much lower compared with a wage or salary earner, who pays tax every week or every fortnight when they’re paid. Some other people, if they ever pay tax, can delay it for decades.

One of the reasons that the National Party hates this—and they didn’t like the fact that Rob McLeod agreed that the tax system should look at economic income, not necessarily realised income—is that they know that the people that they back have forms of income that are never taxed, or, if it is taxed, taxation is delayed for decades. That’s who backs the National Party. That’s who backs the ACT Party, and the ACT Party have become so divorced from their original position as the Association of Consumers and Taxpayers that Sir Roger Douglas recently came out and said that they are now the party for the wealthy and that they’re not actually backing fairly all New Zealanders.

So horizontal equity is important. “In considering horizontal equity, there are important areas where exemptions … are justified”, like the family home. We’ve put that in there, because otherwise the right wing tries to tell everyone that we’re going to tax the family home. We’d never propose that. That’s now clear in these tax principles.

I won’t go through efficiency. Vertical equity is really important. You know, if Jeff Bezos lived in New Zealand—the richest man in the world—he would pay virtually no tax. How is that fair? That’s an example of how vertical equity is important, and it could be done better in New Zealand.

Compliance and administrative costs—really important. No one wants to waste a lot of money on unnecessarily obtuse tax rules forcing people to fill out extra forms, but you do need to not allow that as an excuse for gross unfairness. That’s why this says, “Compliance and administrative costs is the extent to which compliance and administrative costs for taxpayers and the Government are reasonable, but minimising costs is not justification for substantial unfairness in the tax system.”, and why do the National Party hate that principle? It’s because they always use that excuse—always use that excuse.

This is good legislation. This is really important for the future efficiency of the New Zealand economy. Chlöe Swarbrick’s contribution—the misallocation of capital caused by inappropriate tax rules driving speculative asset classes, highly leveraged, offered to minimise taxation at the cost of productive investment is one of the reasons why Australia is more productive than New Zealand, because their tax system is better than ours. I commend this bill to the House.

Thank you, Madam Speaker, and thank you, everyone, for the applause. That’s a great way to start my speech off, with such appreciation—I haven’t even said anything yet, but I do welcome that.

It is a pleasure to actually speak on the Taxation Principles Reporting Bill. Isn’t it a pity—isn’t it a pity—that David Parker doesn’t have that same passion about allocating our taxpayers’ money in a most efficient way, minimising waste in the public sector. If he had done that, then we would not have the current account balance that we do today. He’s caused a whole lot of issues—or his Government has—by not actually carefully spending other people’s money, and that’s what you do when you gather tax.

I was going to raise it later on in my speech, but I’ll do it now seeing the Minister mentioned Sir Roger Douglas. I think he seeks to make a mark in the Labour Party, in the history books, up to that sort of level, but unfortunately he will never get to the level of Sir Roger Douglas—the best Minister of Finance I would argue, ever. He was a Labour Minister, and I think it would be good if more of the Labour Ministers aspired to reach the level of effectiveness of that Minister, because he made a massive mark on New Zealand’s history and set New Zealand down a path of success for many years after he retired from Parliament.

No debate on taxation, I think, would be complete without a quote from Jean-Baptiste Colbert. Now, Jean-Baptiste Colbert was Louis XIV’s most trusted adviser. He was accredited with developing trade, and with developing industry and, of course, the Merchant Navy, which made all of those things possible. His quote on taxation was: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” I would argue that this bill lays the groundwork to test the upper limits of the hissing and the tolerance of the goose—that being the taxpayer. This is definitely laying the groundwork for a wealth tax. I don’t think anyone disagrees on that—they might say otherwise, but I know deep down that is exactly what it’s all about.

Why wouldn’t we want a wealth tax? Well, I’m going to tell you that. The countries that have tried it are backing off from it. In the OECD, there’s only three countries that have wealth taxes now. That’s Norway, Spain, and Switzerland. Norway, now they’ve brought in their wealth tax, have had to actually bring in, or are considering bringing in, an exit tax, because the wealthy are leaving. The problem, they forget, with wealth is the wealthy people don’t own all the houses in New Zealand and so they they’re not rooted in this area. They can take their money with them and go elsewhere. Their money is used to create wealth. It creates wealth for all of us. So I think that’s something that’s been forgotten in this debate.

I think the GST nonsense that David Parker was going on about—we did have a good GST system, but they’re going to ruin it—that’s if they win, of course, on 14 October—by taking fresh fruit and frozen fruit and vegetables out of the out of the GST system. That makes it more complicated, more expensive to run, and it actually breaches one of—I know David Parker, who spoke earlier, is a great fan of Adam Smith’s The Wealth of Nations, but it breaches several of his maxims for tax: equity and fairness. It certainly doesn’t meet that, these proposals for his wealth tax. If we’re going to have a tax on capital gains and if it was to meet the first equity and fairness test, it would also be able to count the losses as well as the gains. It would count everyone’s gains and losses, not just a select few, which a wealth tax seeks to do.

I can’t go through all four of them, but what I can say is that this is definitely setting the groundwork for a wealth tax. We oppose it, and it’s actually quite a waste of Parliament’s time.

Well, it’s very easy to stand up and speak after the previous National Party speaker, Stuart Smith, but it’s actually very hard to speak after the Hon David Parker giving his synopsis and reflection on this. He makes it very, very clear what this piece of legislation is about, and that is around establishing that framework that will require officials to provide data on, and assess the performance of, our tax system—clear, simple legislation.

I want to thank the Hon David Parker and specifically the Hon Dr Deborah Russell for bringing this piece of legislation to the House. This is part of our Government’s revenue strategy. It’s focusing on a fairer tax system, and because of that, I commend this bill to the House.

It’s an absolute pleasure to take a call on this bill, because this is one of the things I am truly most proud of in terms of what the Labour Government is achieving for this country. I am going to take my copy of this bill, and I’m going to get David Parker to sign it, and I’m going to auction it off, because it speaks to our voters and our backbone. This is the situation: before the high-wealth report, New Zealanders didn’t know that the high-wealth individuals who have $20 to $30 million worth of income—that’s what the target was—are paying 8.9 percent tax on average. Middle-income New Zealanders are paying 20.2 percent tax, and that is so unfair. That is so unfair.

We have a problem in this country with a gap between rich and poor, and it shows itself. It shows itself in things like poverty. It shows itself in crime. It shows itself in all sorts of ways that are costly to this country, and we must, must understand what we are doing. What we had was we had a tax department that did not understand that 35 percent of assets were held by 1 percent. We must understand those things; they must inform us, and they must inform our public. In a time like now, we need to know those things and make decisions based on real information. I am shamed by the ACT Party, which is supposed to be all about transparency. I am ashamed that they are actually fighting transparency. They are fighting people knowing what is going on in this country.

We have to know what’s going on in order to make policy, and nobody should be afraid of us examining the tax policy in terms that have been thought about for generations: fairness, certainty, convenience, efficiency, thinking about wellbeing, and thinking about economic income. That’s an empowering thing, and I urge the New Zealand voter to think about this, because this debate is the stark contrast between parties. If you vote in a right-wing Government, you will lose transparency, and more money will go to the 1 percent. That is the reality, and there we are. That is why I am commending this bill to the House.

Thank you very much, Madam Speaker. What an interesting discussion on this Thursday morning that’s also somehow a Tuesday still because we’re in urgency. While the parliamentary calendar is delayed by a couple of days, I can assure New Zealand that we are in fact still a couple of days closer to the election and the change of Government that so many people want in order to get their country back on track.

But it’s been an interesting discussion from the three Smith brothers. We’ve had Stuart Smith and, before that, the reference to ACT’s Damien Smith and, of course, Adam Smith, their older brother—their contemporary—but also other interesting discussions around the House. I do want to refer to a couple of those, because I think it’s quite illuminating the way that different parties have approached this. I enjoyed, for example, in David Parker’s valedictory statement, the reason that he set out why in his time in Parliament he’s been fighting the Labour Party on these things. I didn’t find all his remarks particularly persuasive, but I do like that he gave a really good go at persuading the Prime Minister and the finance Minister of the wisdom of his tax principles. At least he has shown that to him the Groucho Marx quote does not apply, that if you don’t like these principles, then I have others.

Anyway, it’s been an interesting discussion, and I think actually at the heart of it is a question that was asked by my colleague and friend the Hon Michael Woodhouse, leading the debate from the National Party side of things, which was to ask why we need a framework scheme divorced from actual tax policy or law that would actually have a real-world meaningful effect. Because, actually, what we have here, Madam Speaker, as you’ll be aware, having heard the debate, is not a particular proposal in terms of rates or bans or even types of taxation that should be levied—which is not, you know, technically accurate—or, you know, imposed if you like. I was trying to find some more neutral way of putting that. Anyway, the taxpayers of this country have particular proposals that are made by political parties ahead of an election. Of course, the Government of the day can introduce policy by way of a Budget, or at other times too, for that matter. But we don’t have that. All we’ve got is a set of principles and permission to display and gather data about wealth and income, and we can talk about the specifics of that, but I don’t understand why legislation should be needed merely to put in place an ideological world view.

Of course, everyone’s entitled to their ideology. I agree with our colleague and friend Chlöe Swarbrick, who notes that, at some level, we do all have an ideology, so we shouldn’t shy away from that. But the point that was being made on this side of the House—I think by my colleague and friend the Hon Scott Simpson—was that if an ideological basis for a law comes through that isn’t founded in any kind of reality, in any real-world outcome that would be positive and productive, then, actually, that’s a very dangerous thing, and we should resist that, and we should call that out when we see it. We see it here precisely because a law is being passed in this House by the current Government that has no foundation in reality, in terms of any real-world outcome, positive or negative, except, of course, in the gathering of the data and the presentation of these so-called principles.

If this isn’t necessary in itself to authorise the fishing expedition or the witch hunt that we’ve already seen, then what is the value of having it in law? I mean, potentially one has a sort of framework legislation like the New Zealand Bill of Rights Act (BORA), because that’s the yardstick against which you can measure other legislation. In the case of NZ BORA, it would be the case that if someone doesn’t like the way another law is operating, then they can actually go to the court and say that that law should be declared inconsistent with NZ BORA. Obviously, we can have a debate and discussion about that, and the former revenue Minister, before he found his position untenable, understands that well in his position as Attorney-General.

I presume that no one’s going to go running off to the court and say that the tax law that’s passed by a duly elected Government isn’t consistent with the Tax Principles Reporting Act and, therefore, should be struck down or declared inconsistent. But this is the door that we open when we have framework legislation that sets up principles against which other legislation can be measured and does not in itself provide anything useful or concrete or tangible to affect the taxpayers and, indeed, the other citizens and residents of this country.

We’ve heard from the Hon Dr Deborah Russell, as the Minister who led the contribution for the Labour Government side of things, about Adam Smith, the father of economics, back in 1776. I find it interesting and amusing—actually, I found the discussion genuinely quite interesting, despite the fact that it was very nearly midnight last night and I was wanting to do a Cinderella routine and leave the House as quickly as I could before the clock struck 12, with or without my glass slippers. But, you know, we go all the way back to those centuries of economic thought. Indeed, he was credited with starting the idea of economic thought and how markets work and so forth in his seminal work The Wealth of Nations. Yet, relatively recent application of principles by no less than the Minister herself and the Hon David Parker and the finance Minister have been discarded as being all the way back in the distant past of 10 years ago, and we heard that exchange in question time yesterday.

So if we’re talking about tax principles and the tax principles Act, as it will be soon enough, I think we do need to understand as a House and as a country that the principles appear to be very malleable on that side of the House, and they seem to be a way of justifying the things that one side of politics wants to do and could do anyway if it were minded. It has a single party majority. It can pass tax law whether we like it or not, and then the people can speak. I think Chlöe Swarbrick came so close to understanding and getting it right, actually, when she said that we’ve got to be wary of discussion that’s only based on the vibes and, actually, we should be talking with people about what tax policy should be. That’s, of course, the main criticism of this bill, as far as I’m concerned. It is just about the vibes. It’s not actually doing anything real. It’s not doing anything concrete—again, good, bad, or indifferent. It’s just not actually achieving anything.

So, yes, let’s have a discussion about it. Let’s discuss it in the next 60 days with the people who matter, which is the taxpayers and other residents and citizens in New Zealand. We look forward to doing so, and we’ll do so in a way that will produce real positive outcomes for all New Zealanders and not be an ideological witch hunt enabling tax principles bills such as this. We do not commend the bill.

It’s my pleasure to take a call on the Taxation Principles Reporting Bill. As has been discussed in the House today, it establishes a statutory framework requiring the Commissioner of Inland Revenue to report annually about this country’s tax settings against a set of core principles which have been widely traversed this morning. The purpose of this bill is to improve the public’s understanding of the tax system and to encourage informed debate about tax going forward.

This bill came to the committee—it was actually my first day on the Finance and Expenditure Committee, and it was a bit of a schoolhouse for me to hear a lot of clever people discuss this bill and then also to learn about the principles that underpin this bill. Adam Smith has come up on a number of occasions, and so initially I thought, who was this Adam Smith dude? What I like about the Finance and Expenditure Committee is you get to do a lot of deep thinking, and so I got to read about a couple of his books and learn a bit more about the tax system.

Interestingly, Sir Michael Cullen, when he first became the finance Minister, was unsatisfied with the information that he was getting from Treasury at the time, so he wrote to Treasury and told them not just to read Adam Smith’s The Wealth of Nations but also to read up on The Theory of Moral Sentiments, because it was the social aspect that he really wanted our officials to drill into. That was really good reading about that, and it’s great that that theory of moral sentiments and that social aspect have found their way into this bill. It’s a good bill and I commend it to the House.

The question is, That the amendments recommended by the Finance and Expenditure Committee by majority be agreed to.