Taxation (Budget Measures) Bill

Members, we now come to the debate on Part 4. Part 4 is the debate on clauses 33 to 39, “Income Tax Act 2007 amendments commencing 1 April 2025”. The question is that Part 4 stand part.

If we thought that the last part of the bill was exciting, this is even more exciting in this part. Ha, ha! I had hoped the Minister would be especially excited about it that he would stand up to explain what this part of the bill is about, but he’s been in the chair for a long time.

These are a whole series of Income Tax Act amendments. And it’s quite curious because it says, “Income Tax Act 2007 amendments commencing 1 April 2025”. We’ve already had a bit of a discussion way back in Part 1 about the starting date of a lot of the tax threshold changes—31 July. I did have one final question for the Minister on that part, and that was whether that was because it’s Milton Friedman’s birthday on 31 July. But perhaps not. Nevertheless, we would have expected that most of the amendments and changes would take place from that date.

But here we have this part of the bill that is talking about all the amendments starting from 1 April 2025. So that’s a curious question in the first place as to why it would start from 1 April 2025. So just before we really get going on this part, I’m going to invite the Minister, I guess—I hope he’ll explain exactly why we’ve got these ones starting on 1 April 2025. Can someone jump up?

Thank you, Madam Chair. Thank you, my colleague the Hon Dr Deborah Russell, who I know is very passionate about all things tax and very learned as well.

I think it would be good for the Minister (a) to provide us with that sort of foundation knowledge—that little bit of background that Deborah Russell has asked for. But when we think about Part 4 in particular, as opposed to Part 3, which was described as just a whole lot of numbers changing—but as we found out throughout that process, it ended up being not quite so technical and there were some real nuggets of interest in there that without asking those questions we wouldn’t necessarily have had those answers elucidated to us in lieu of, obviously, there being no select committee process.

So when I turn my mind to Part 4, I suppose, which is a very technical part of the tax change—flowing the tax threshold changes to all sorts of other thresholds in the actual Income Tax Act, if I have read that correctly. I wonder if the Minister could tell us a little bit more about how those threshold rates of the new tax thresholds—I think they’re on page 20, if I’m in the right part; clause 33 to 39. Yes, so if we look at page 20 about the fringe benefit tax rates, just as an example, it’s not clear from the bill. So could you just talk us through that table in particular in relation to those fringe benefit tax rates. I think that background will help inform the rest of the questions that we’ve got about this part in particular. But if you could do that, that would be much appreciated.

Just looking at colleagues here, I know that there’s a couple of other questions probably looking for that elucidation of that foundation work. And I know that Dr Deborah Russell has some other technical questions to ventilate on this part before we sort of move on. So that would be much appreciated if the Minister could do that, please, and I’ll come back and ask my other questions subsequent to that answer.

Thank you very much, Chair, for the opportunity to provide a little bit of context on what is a very exciting Part 4 of this bill.

Now, what, in effect, is happening with the dates here is that the overarching changes that we’ve outlined will be effective from 31 July 2024; however, there are a number of consequential tax changes which will occur from 1 April 2025. The member asked the question in terms of why that is the case. Well, primarily the reason is to reduce the compliance and administrative burden from the fact that we are starting a process part way through a tax year, so that when we make the other consequential adjustments on other tax groups, we want to start clean, in effect, and start from 1 April 2025.

So it’s very much just a very pragmatic and practical approach that officials have flowed through to enable us to deal with the reality of introducing tax threshold changes part-way through the year.

Thank you very much, Madam Chair. My question is also in relation to table 1, which is on page 20 of the bill in question. I would like to know how the range of dollar and pay threshold and rates relate to the new tax thresholds and rates that are stipulated in that table at the top of page 20.

So what I think I heard, and if he can confirm, is that if this table is, in fact, about fringe benefit tax rates—which is not that apparent from reading the bill, to be honest. Could you clarify that? Specifically, it would be good to know how the range of dollar and pay thresholds and rates relate to the new thresholds and rates that have been proposed through the changes. Thank you.

I note that, picking up from where my colleagues have left off, looking at the ESCT—which is the employer superannuation contribution tax—a lot of people may not have heard of that, but that is very similar to a fringe benefit tax, except that it applies to superannuation contributions.

We’ve heard a lot of discussion about what the change to thresholds are attempting to do, but I’m really interested to know—given my capacity as Opposition seniors spokesperson and the information that I’ve had and the calls that I’ve taken over the last few months about the impact of superannuation and the superannuation gap for women—what advice or consultation there was for the superannuation contributions in these tables around these thresholds? Was there a gender lens put on it at all? Because this would have seemed a really good opportunity, in my view, given that there is a big disparity about the superannuation that many women are left with because of the stalling in their careers—often they go off, have children, whatever, and they don’t get to contribute. Now, under the previous Government, we had committed to having a superannuation scheme that meant that those women who took time out from their careers would still be able to benefit and to close that gap. I see it a lot in my electorate with homelessness. It’s called the “invisible group”, a lot of women who don’t have that money are often left couch surfing and so on.

So it would have seemed like an ideal opportunity here, when shifting these groups and looking at superannuation specifically—which is what this table does—to consider a gender approach and see whether there would be any kind of policy intervention, policy tool, that could have been used cleanly in this legislation to try to leverage off that; to close that gap. Given the speed at which we’re doing this in, and given the fact we don’t have a select committee process, I can harbour a guess and I would say, in all likelihood, that the Minister probably didn’t even remotely consider it, because I don’t think it’s reflected in any of the policies that we’ve seen.

But I would like it on the record, if that’s the case, because we don’t have a select committee process. Women are concerned; aged-care groups are concerned about the gender gap. This would have been an opportunity, maybe not to fix it but to at least get advice on that. I’d like to know if the Minister sought advice or if the officials provided any advice, or if he even turned his mind to what the implications of this would be for the superannuation gap for women.

Thank you very much, Madam Chair. The member raises a fair point, and the reality is that if we go broader, the disparity for women, in particular, at retirement is a gap against men and that is a well-known factor. The reality of what we’re discussing here, though, within this bill, is the consequential impacts of changes in personal income tax rates. What the member is referring to is a broader conversation in terms of superannuation from a policy point of view, which is not reflected in this part of the bill.

Members, the time has come for us to break for the lunch break. We will suspend until 2 p.m. Thank you.

Sitting suspended from 1 p.m. to 2 p.m.

Members, before the lunch break, we were debating Part 4 of the bill. So just a reminder that Part 4 is clauses 33 to 39, “Income Tax Act 2007 amendments commencing 1 April 2025” and the question we’re on is that Part 4 stand part.

Before the lunch break, we were back to dates, and I did question the Minister over the 1 April 2025 start date for this part of the bill, in comparison to the 31 July 2024 start date for the changes to the personal income tax thresholds. I just want to make sure I’ve got the explanation from the Minister correct. The Minister explained that for changes to fringe benefit tax (FBT) thresholds and employer superannuation contribution tax (ESCT) thresholds, the decision was made to have those changes start from 1 April 2025 for compliance cost reasons.

The way the Minister’s nodding, I sense I’ve got the gist of that. OK, so that’s helpful. It’s a really interesting decision, and I’m looking to see if the Minister asked his officials to do any modelling of it, because what it means is that from 31 July 2024 until 31 March 2025, employers are going to be over-taxed on fringe benefit tax and on employee superannuation contribution tax in comparison to the personal tax rates of the employees on whose behalf they are paying fringe benefit tax and ESCT.

The fringe benefit tax thresholds are really, really carefully set. They look like very odd numbers, but they’re really carefully calibrated so that if an employee is paid entirely in money—you know, salary or wages—then their personal tax rates are as set out in the Income Tax Act. But if they are paid in a combination of money—pretty easily taxed—and benefits, say like the use of a car or whatever, then you have to do a whole lot of grossing up of the value of the benefit and then taxing it back, and there are some pretty complicated calculations that go into that space.

But the objective there is to ensure that if an employee is paid in salary and benefits—say, $100,000 worth of salary plus benefits—compared to an employee who is paid straightforwardly in just $100,000 of cash, that the tax rates that are applied, whether it’s through the personal income tax rates or a combination of the personal income tax rates and the fringe benefit tax rates work out exactly the same.

Now, of course, the employee never sees the fringe benefit tax rates; they are paid by the employer, because it’s the employer’s decision to use the benefit and things like that. What it means is that if these changes to the fringe benefit tax rates and the employee superannuation contribution tax rates are not changed at exactly the same time as the personal income tax rates, then employers—small businesses, large businesses, Government departments, medium-sized businesses, little one-person bands and the like—are being over-taxed on fringe benefit tax and employee superannuation contribution tax.

The amounts per employee are not going to be large, but it is still over-taxation, and by the time it goes across numbers of employees, it could add up to a fairly significant amount. So there are a couple of questions here. Since when does the party that prides itself on being the party of business—and that’s a bit dubious, actually—charge employers more? Since when do they add those sneaky extra costs onto employers? That’s exactly what’s happened here.

Now, there could be a good reason for this. It could be a good reason. It could be that by the time the calculations were done, the amount of extra FBT and ESCT per employee was outweighed by the compliance cost of doing the calculation. So you weigh up the amount of tax paid versus the cost of actually paying the tax, and sometimes you might as well just pay the extra tax rather than go through the hassle of doing the calculations. I’m hoping that was the explanation. I’m guessing that’s the explanation the Minister’s going to give to me in a moment, but I actually genuinely want to know what’s gone on there, because it looks odd.

Maybe I’ve got the wrong end of the stick on this, but I would like the Minister to explain it to me. Following his explanation, I do want to dig into this, because this is actually quite serious, so I’ll just wait for the Minister’s explanation on that.

Thank you very much, Madam Chair. We’re back from the lunch break on the home straight of this bill. We are nearly there. Kiwis will soon have the benefit of tax cuts which they’ve been waiting for.

The prior member’s question in regards to this—she used the term over-taxation; it’s simply not the case. I mean, the status quo in regards to the rates is unchanged. The changing of the rates will come in on 1 April 2025. So it’s not that anyone’s getting over-taxed or more tax. The rates as they sit today are unchanged until that point in the future. Therefore, the reasons and rationale, as I outlined previously in an answer to the same question, relate to some of the compliance considerations of what happens when you introduce a change in the personal income tax rates part-way through a year. We’ve made that decision assessment based on the cost compliance trade-off, but rest assured that the rates of fringe benefit tax that are paid today don’t change all of a sudden today. They will be changing on 1 April, so no one’s getting over-taxed.

💬 Hon Dr Deborah Russell: Madam Chair?

CHAIRPERSON (Barbara Kuriger): Francisco Hernandez.

💬 Hon Dr Deborah Russell: I want to pursue this, Madam Chair; it’s important.

CHAIRPERSON (Barbara Kuriger): Share around.

Thank you, Madam Chair. Just a couple of questions to the Minister. They relate to clause 34 all the way to clause 39. We know that from the tax cuts that result from this, some of it will probably have to be funded from borrowing, which will result in future taxpayers funding these short-term sweeteners while also taking on additional burdens due to the social and physical infrastructure deficit. These tax cuts will lead to about $17.1 billion of extra borrowing. The tax package costs $4.17 billion, which means that future taxpayers will be paying for them in terms of the deficits, not to mention the infrastructure and Public Service deficits.

So what advice have you had on the impact on future borrowing, and is this perhaps why they are not indexed to inflation, things like the pay rates? Because we won’t be able to keep paying for them in the future. And if we’re wanting to be providing services just at the same level of today—not even talking about improving services for the future, which is what we on this side of the House want—without raising any new revenue-raising measures and given that the operating allowance that the Minister announced yesterday is not even enough just to keep pace with current levels of service delivery—$13 billion of the $17 billion announced for the health spending is just to preserve existing services—what sort of analysis has been done on what the impact of these changes might be?

We’re really concerned that the impact of the changes that are happening in this bill will actually undermine the ability of future Governments to actually deliver on core public services, not even to improve them. What advice have you received specifically on the impact of the lost revenue from this tax package on future operating allowances? Thank you.

Thank you very much, Madam Chair. I’m just going to help the member a little bit in regards to this question, because the information is clearly available that the tax relief that we’ve outlined, as part of this bill, is fully funded. The tax relief is fully funded through both savings and revenue initiatives. The Government is not borrowing to fund this tax relief, so it won’t have implications around inflation. So the whole premise around the point of that question is not based on the fact and the reality. The fact sheet provided with this Budget outlines a clear articulation of the annual average, both tax relief and savings, that adds up to the total cost of the package, which is circa $3.7 billion per year.

I want to make it clear to those who are asking questions that we’re looking for questions now, rather than speeches or assumptions, so we’re really sticking to the questions.

Thank you, Madam Chair. I do have a lot of questions, because this is a very complex area of the bill. So, if the Minister would indulge me, I just wanted to ask a few questions around Part 4, and specifically clause 36 that replaces section RD 17(4)(c) with the low threshold amount. But in new section RD 17(4)(c)(i), they’ve got a secondary code of $0, and I just wanted the Minister to perhaps explain to us, as we might have been able to go through in select committee, on page 19 of the bill in clause 36 of the primary legislation, I just wondered if the Minister could just go through for the committee exactly the necessity—which I’m sure there is one, and I’m sure his officials, if he isn’t aware, will be able to tell him. But I’m interested in the answer of why have new section RD 17(4)(c)(i) when it just inputs a $0 factor into the piece of legislation. So that’s my first question.

The next question I had is in relation to clause 37, which looks at the different tax rates of taxable income that would apply. Now, in this particular explanation of it, obviously we’ve got the rows and then we’ve got the range of dollar in taxable income. I just wanted to know from the Minister, is this a convention that we only refer to a dollar amount when we’re obviously talking about a range of income? Why do we use the singular and not the plural in this instance? Is that convention or is that, in fact, an error in the bill? I’d be interested to hear that from the Minister. And you’ll see in table 1 over the page that’s also repeated.

In relation to the employer superannuation contribution tax (ESCT) rate, I know my colleague the Hon Dr Deborah Russell had some questions in relation to ESCT. This is a tax that I am familiar with, in the past when I’ve employed someone and done their payroll myself, having to go through that process of obviously paying the person, paying income tax, and then also paying the additional taxes in relation to superannuation. So I’m just interested, with that ESCT rate, I understand that that has not been changed but the tax rate has been changed. And I wanted to hear from the Minister: did he receive advice on also altering the ESCT rate in line with the change of taxation thresholds or is this not something he received advice on? I want to know what the advice is. And if he didn’t ask for that advice, why, in fact, he didn’t and why it wasn’t considered. So those are my questions for the Minister.

Thank you very much, Madam Chair. I’ll work through these questions succinctly. The first aspect in regards to clause 36 inserting new section RD 17(4)(c)(i), in terms of secondary code at zero—I mean, it is no more complex than one starts at zero and works their way up from zero in regards to tax bands. So that is simply just articulating that point, which is very consistent with any tax bands.

In regards to the employer superannuation contribution tax in clause 37(3), the thresholds are higher than the personal income tax thresholds. And the reason for this is because of the concessionary treatment that allows for the employer’s contributions to be taxed at the employee’s marginal tax rate. In effect, that’s what you’re seeing flow through in regards to that clause, and that’s why it is what it is.

We need to probe into this difference between the personal tax thresholds, the employer superannuation contribution tax (ESCT) rates, and the fringe benefit tax rates (FBT). If we’d had a select committee process, this is exactly the question we could have gone into in some detail, because it is complicated.

Now, the Minister of Revenue said in his last reply to me that the decision was made to leave the ESCT rates and the FBT rates at the same thresholds as they are at now, so there’s no change in how employers are being taxed—having to pay FBT and ESCT—in comparison to what they’re paying now. Here’s the problem with that answer—and there’s a whole series of things that flow from it—ESCT rates and FBT rates are set in comparison to personal income tax thresholds. They are very carefully calibrated to make sure that no matter whether a person is paid in cash or is paid in cash in kind, the tax paid is exactly the same. But now, we’ve got a difference. Because the ESCT thresholds and the FBT thresholds are not moving at the same time as the personal income tax thresholds, we have a mismatch between being paid in cash, or being paid in cash in kind. People who are paid in cash and in kind are, in effect, being overtaxed for the period from 31 July 2024 to 31 March 2025.

The fact is the individual employees never see that particular tax—the FBT and the ESCT—but the employer does. The explanation given, sitting in the regulatory impact statement, says that the other consequential tax type rates—portfolio investment entities, FBT, ESCT, retirement scheme contribution tax—would be adjusted from 1 April 2025. “This will allow more time to make the changes and reduce the complexity of the changes.” So it reduces compliance cost. It is a straightforward trade-off between compliance costs, on one hand, and paying extra tax, in comparison to personal income tax rates, on the other hand.

Here’s the question that flows from that: first of all, what modelling was done on how much extra FBT and ESCT employers would be paying in comparison to the personal income tax rate—not in comparison to what they’re paying now, but in comparison to the personal income tax rates that apply from 31 July 2024 to 31 March 2025—in order to make the assessment that it was better to incur more compliance costs rather than pay more tax? There would have to be an assessment of how much extra FBT and ESCT was being paid. So what modelling was done to calculate that? So that’s the first question.

The second question is: were employers consulted? There’s a choice there. Now, we’ve actually already got choices in the FBT system. There’s a really significant choice that employers already make between a couple of methods of calculating FBT. One ends up with them paying a bit more FBT, but it’s a simpler way of calculating it. So there’s a straightforward trade-off there—already in the FBT system—between compliance costs and tax and the actual tax paid. But that’s the employer’s choice. In this case, the Government has made the choice that the employers will pay more tax rather than having more compliance costs. So instead of allowing employers to make that decision, the Government has made that decision for them. Now, I’m assuming it’s going to be on good grounds, but I would like to know if the Minister consulted employers about what treatment they would prefer to have. Because in a case where there’s a trade-off between compliance costs and the amount of tax paid—and it’s compliance costs, so that’s the cost to the individual employer, not the Government’s administration costs—that should surely be the employer’s choice. So there’s a real problem there.

So I want to know from the Minister: what modelling was done to assess the amount of extra FBT and ESCT that would be paid in comparison to personal income tax rates—as the personal income tax rates are set from 31 July 2024 to 31 March 2025—so that that assessment could be made, and were employers consulted about it? So, as already happens in the FBT system, were employers enabled to make that choice about whether they would prefer to pay more tax or prefer to incur more compliance costs? Please, Minister.

CHAIRPERSON (Barbara Kuriger): Arena Williams—and just a reminder, because some people have now come into the Chamber—and I’m not referring to this particular member, but we’ve had people coming in—that we’re just looking for questions now, not speeches.

Thank you, Madam Chair. I take your point and I heard your earlier ruling. You’ll forgive me—this is a new a brand of inquiry and I’m struggling to not explain it, so instead I will ask the Minister of Revenue a question, but I hope he will explain to the committee what it is that I’m getting to. My question to the Minister is: what are retirement scheme contribution tax (RSCT) and resident withhold tax (RWT)? In light of the previous contributions by my colleagues about the effect of the income tax changes on employer superannuation contribution tax (ESCT) and attributed fringe benefits, there’s also a flow-on effect for RSCT and to RWT, so we need the Minister to explain that to the committee. Then—

CHAIRPERSON (Barbara Kuriger): Can I just ask the member to repeat that question, because the Minister was taking some advice.

Absolutely.

CHAIRPERSON (Barbara Kuriger): So if you could just repeat that, because that was quite specific.

Yeah. Two questions for you, Minister: (1) what are RSCT and RWT; (2) what is the effect of making the changes that you have made without further amendment to RSCT and RWT?

My third question is: given the last time a National Government proposed to make similar changes to those you have made in clause 7, amending Schedule 1 of the Income Tax Act 2007, they made the flow-on changes to ESCT, RSCT, RWT, and attributed fringe benefits, why have you chosen not to make changes to RSCT and RWT in this bill?

Thank you, Madam Chair. I just want an elaboration of the Minister’s answers to me about the deficit. If you’ll forgive me, I’m new to this place, so I’m still learning how it all works. If the projected Government deficit is $13.4 billion, how does the Minister’s assertion that there is not any borrowing for the tax cuts align with that kind of reality? Is it coming from the so-called magic money tree that members from the opposite money benches like to refer to? Is it not being borrowed? I have no idea.

I have a second question as well, which relates to all the acronyms that were being thrown out here. Can you tell me what the acronym “RESPCT” stands for?

I call Dr Deborah Russell, and specific to something that hasn’t been answered, please.

I’m just going to say, Madam Chair, I do—

💬 Hon Kieran McAnulty: Point of order, Madam Chair. Thank you very much. We acknowledge your direction to the committee in terms of questions, the issue being, though, as the Hon Dr Deborah Russell pointed out, the line of inquiry she has is regarding an area that is specifically complex, and her follow-up question was as a result of the response from the Minister that then drew other questions.

CHAIRPERSON (Barbara Kuriger): I accept that.

💬 Hon Kieran McAnulty: But the direction that you just gave was that you’re seeking questions in a different area. So what I’m seeking to clarify is: if there are follow-up questions within the same area—

CHAIRPERSON (Barbara Kuriger): Follow-up questions are fine as long as they’re not the same questions.

💬 Hon Kieran McAnulty: So the issue isn’t so much around relevance, as repetition? Fair enough. Thank you.

Madam Chair?

CHAIRPERSON (Barbara Kuriger): The Hon Simon Watts just wants to take a call and then I’ll come back to you.

I’ll disregard the member’s last statement, which was not a question; it was quite irrelevant. But RSCT is “retirement scheme contribution tax”; RWT is “resident withholding tax”. So that’s the definition around that.

The question before, previously, around modelling and consultation—Budget secrecy, a number of restrictions around the ability to consult specifically with these impacted aspects around fringe benefit tax (FBT). But what we do know, from historic terms—and the member will no doubt be aware of that, from their prior experiences—is that any introduction of changes part-year brings high degrees of complexity and compliance. That aspect is what has been the basis in regards to the decision.

No specific modelling was undertaken as a result of that, but we do know from the evidence that we’ve seen over many, many years that part-year adjustments do bring compliance and complexity, and the sector feedback consistently is that their preference is to start the year off clean, versus doing part-year. So that’s why the FBT changes are what they are.

I do have one other set of questions around clause 39 that I would like to go to, but to keep things straight, I just want to go back to this issue that we’re really pursuing right now. I am a little surprised, to be honest, that no modelling has been done. Now, it would take a bit of time with a spreadsheet and a calculator to work out the difference in fringe benefit tax (FBT) and employer superannuation contribution tax (ESCT) that would be paid per employee given the changes in the thresholds. It could be done—and I note the bank of excellent officials there. It’s a set of numbers and it could be calculated, and it could have been calculated within IRD. I take the Minister in the chair Simon Watts’ point about consultation, but I notice that they did consult with payroll providers, so some consultation’s good and some consultation is bad? Let’s have a little think about that.

I am actually genuinely serious about this, because what is happening is that employers will have to pay more tax in comparison to the personal income tax rates. This is extra tax—not in comparison to what is being paid now but in comparison to what will be paid from 31 July—being loaded on to employers. Now, I take the point about the trade-off with the complexity of the compliance costs. That is a known phenomenon, and the Minister and his officials are quite right to say that there are compliance costs there, but why was the choice not offered? That’s the thing, and the Minister hasn’t answered that question yet. I asked it previously and it hasn’t been answered yet. In the FBT system as it stands at the moment, there are two ways of calculating fringe benefit tax: one has higher compliance costs; the other one has higher actual FBT. So we already have the concept of a choice being over to employers sitting within the FBT system. Why did the Minister not allow employers to make that choice as to whether employers wanted to incur higher compliance costs or whether employers wanted to incur higher FBT tax rates in comparison to the personal income tax rates that are in force from 31 July until next year?

That is the last question I’ll ask on this topic. I do have another set of questions, but I’d like to hear from the Minister on that, and then I’ll go back to the one further set of questions that I would like to ask on this part. [Time expired]

CHAIRPERSON (Barbara Kuriger): Perhaps if the Hon Dr Deborah Russell could ask that one more set of questions that you just referred to.

Oh, I’ll ask the second—right. May I have a five-minute call on this? It’ll take a little bit of extra.

CHAIRPERSON (Barbara Kuriger): It is a five-minute call—as long as it’s based on questions.

It is. The same thing is applying now in clause 39 of the bill, and this is the new portfolio investment entity (PIE) rate, the prescribed rates for PIE investments and retirement scheme contributions. This one’s even more interesting, because what is happening, as far as I can tell, and the Minister will be able to confirm this with a nod; you might want to wait, Minister—but the rate at which tax is paid in PIEs has a series of thresholds, and for most of us on the higher rates, we get a concessionary tax rate. So if you’re on the 39 percent rate, your PIE rate is, nevertheless, 28 percent; if you have a 33 percent rate, your PIE rate is 28 percent; 30 percent rate, your PIE rate is 28 percent; if your income tax rate is 17.5 percent, your PIE rate is 17.5 percent; and if your income tax rate is 10.5 percent, your PIE rate is 10.5 percent. So there’s concessions at the higher end.

Now, as far as I can tell, the PIE rate thresholds are not changing until 1 April next year either. That’s correct? OK, I’ve got that correct. What that means is that low-income people who nevertheless are putting savings aside, as they would do through KiwiSaver and the like—you know, making contributions to KiwiSaver—are getting taxed at the same rate from 31 July this year until 31 March next year at the rate that applies right now. So those low-income people sitting in PIEs are not going to get the benefit of the lower rates until 1 April next year. I just wondered if the Minister could confirm that that’s correct. I’m trying to read this and get my head around it. So, as far as I can tell, those PIE thresholds are not changing till then. It means that low-income investors in KiwiSaver are going to keep on paying the same rates as they are now. Now, sure, it’s in comparison to the same rates as they are now, but they are not going to get the benefit of the changes to the income tax thresholds until 1 April next year. So it’s not just employers who are having to pay more FBT and more ESCT in comparison to the personal income tax rates; now we have low-income investors.

I think that’s what it’s saying. I would really appreciate it if the Minister would confirm that that is exactly what is going on. It’s even more important, given that those of us who are on higher incomes and are on the higher tax rates—on the 39, 33, and 30 percent marginal tax rates—

💬 Carl Bates: Is this a question or a political statement?

Oh, please take a call, Mr Bates. If you’re interested in this, please take a call. So if I could just get that confirmation from the Minister that that’s what’s going on, because it does make a difference. Thank you, Minister.

Thank you very much to the member Deborah Russell for that question. The member is correct that the implications around the portfolio investment entity rates will not change until 1 April 2025, and the rationale, again, is consistent with the other concession tax rates that we’ve outlined today. To be more specific, the implications around that will be in regards to the managed funds entities and the compliance burden that will fall upon them.

The reality is that, again, this Government, on this side of the House, is implementing and putting in place tax relief and personal tax reductions; on that side of the House, they’re opposing that. So to be talking about a concept of not having increasing tax, the status quo of the rate in which someone is paid today versus where they’ll be in 2025—they’re not getting over taxed; that concept is just simply not correct. And I hope the member, through the process of what we’ve been through in this committee of the whole House stage, may be at a point of deciding, “Actually, maybe we should support this bill, because, actually, we do want to support hard-working Kiwis with tax relief.” That would be a really good outcome from this committee of the whole House stage, but I’ll leave that with the member.

I move, That debate on this question now close.

The Hon Dr Deborah Russell, you said to me that you had one set of questions that was going to be relayed in your five-minute call—this is it, right? So I’m going to give you another call.

Thank you. So I am focusing very specifically on clause 39, and I just want to express my shock at what the Minister has just said. The decision this Government has made is to ensure that low-income people, people who are on the lower tax thresholds—their marginal rates are 10.5 or 17.5 percent. The Minister has just confirmed that they are going to tax them more. That is appalling.

I move, That debate on this question now close.