Taxation (Budget Measures) Bill

Members, we come now to the debate on Part 3, which is the debate on clauses 25 to 32, “Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 31 July 2024”. The question is that Part 3 stand part.

Thank you, Mr Chair. I appreciate the opportunity to take a call on this. Part 3 looks incredibly dull, and I’m sure the Minister would agree that it looks pretty dull too. It really is a series of clauses which replace one number with another. For example, clause 26 amends section LC 13 of the Income Tax Act, and it just says, “In section LC 13(5), replace “$44,000” with “$66,000”. In fact, all the ongoing clauses pretty much look like that. So it’s a whole series of replacing one number with another number.

But, however dull it looks, it’s actually kind of important, because what it’s doing—and I had hoped the Minister would explain this himself, but perhaps not—is it’s setting the new amounts for independent earner tax credit, the in-work tax credit, and the minimum family tax credit. And then, following on from that, clause 29 amends an amount in Schedule 1. Part 3 then goes on to a whole lot of stuff that’s in the Income Tax Act.

Then there’s a whole lot of stuff amending various sections in the Tax Administration Act as well. But hiding in between these seemingly dull-looking changes, which do just substitute one for another, are some pretty important policy decisions that the Government has made. This will be one of our few opportunities to debate those policy decisions as to why they chose particular amounts. So I’m just going to go to, first of all, the independent earner tax credit, and in section LC 13(5) we’re replacing $44,000 with $66,000.

Now, that is a pretty technical change, but I think that for the benefit of the committee and for the benefit of people watching and for the benefit of people who actually want to understand what is going on with our Income Tax Act, it would be helpful if the Minister could explain exactly what that clause does and why that amount of $66,000 has been chosen. There will be some policy thinking behind it. I would like to have an explanation of that policy thinking. So, Minister, it would be great if you could just explain that clause to us.

Thank you, Mr Chair. Look, it’s a great opportunity to take a short call on the Taxation (Budget Measures) Bill.

Hon Member: A short call.

RACHEL BOYACK: It will be a short call, but it would be wonderful to hear from some members opposite about the questions that they might have for the Minister. I mean, they wouldn’t have had an opportunity, I don’t think, to take this through their caucus. I will just repeat the comments that I made at the beginning of my call on Part 2, which was that the reason that we do put these questions forward for the Minister—and the Minister is obviously able to seek guidance from his officials—is because we don’t get the opportunity to have the full scrutiny through that select committee process. So this is an important part of the House’s role to scrutinise this bill. Now, one of the things that I’m quite interested in is the overlap that we will see between the tax credits in terms of the threshold—the minimum family tax credit—and to ensure that the Minister can guarantee that every family will be better off regardless of where they fit in the margins in terms of the interaction between those different components of the tax system for families. And so the question, in particular, is: if a taxpayer would receive more from the independent earner tax credit than the in-work tax credit, because obviously we have different parts of the system that interact, the IRD would actually proactively go out and change it for them or, at least, advise.

One of the things we’re mindful of with how the IRD operates—and there were some really good changes brought in under our Government to allow the IRD to be more proactive with people when perhaps they were on the wrong tax rate or if they needed to get a special tax rate. One of the things is that regular interaction that occurs between the IRD and the other systems that are in place and whether there will be a system devised in this situation so that when the IRD identifies those families who have an interaction between different parts of the tax system that means they might actually be collecting the wrong benefits through that tax system, how do they know that? And is there advice that’s then provided to those families so that they can update their tax records and interact with the IRD in order to make those changes?

So, as I said at the beginning of my call, we do hope that the Minister will be able to engage in, as Dr Deborah Russell has said, a bit of a dry section of the bill, but it is actually important that we hear from the Minister. He has his officials here to advise him so that he can provide that advice to the committee—just reminding the Minister, and the committee as well, that the discussions that are had on the Hansard in the House can be very important for interpretative matters, perhaps in the courts or in times when clarity is sought around what was the intent of the Minister and what was the intent of the House when this particular piece of legislation was put forward? So I’d be really encouraged to hear from the Minister now. Thank you.

Thank you very much, Mr Chair. Part 3 is very routine and standard in nature and, I think, as one of the prior members has noted, a little bit dull. I wouldn’t quite go as far as that; tax legislation is never dull, but there is very little that one can say about this section. It is simply effecting the changes in terms of the changes in rates. In regards to the question around policy, around why $66,000 versus any other number, those are policy decisions that the coalition Government have landed upon, and there’s not much further that I can say other than that these are the rates that we’ve landed on, and this section effects those changes.

Thank you, Mr Chair. I’m taking a short call, quoting some of the regulatory impact statement (RIS) that’s been published about Part 3 and some of the changes around the tax brackets. I just want to quote a section of it because I’m curious to see the interpretation about the effective marginal tax rate (EMTR).

The RIS, Annex 1, page 18, says that “The personal income tax threshold changes and extending the income range of the Independent Earner Tax Credit reduce EMTRs for 335,000 people (positive impact on work incentives) and increase EMTRs for 85,000 people (negative impact on work incentives). Adding the proposed family based tax credit changes (the In-Work Tax Credit and FamilyBoost) increases the EMTRs for a further 45,000 people (negative impact on work incentives). These people are in coupled families with children, and are spread across the first 4 income tax bands ($0 to $180,000). Modelling did not indicate an increase in EMTRs for sole parents.”

I’m curious about the 130,000 people who have been negatively affected by the changes in EMTRs. Does the Minister in the chair have specific analysis about who the people who have been negatively affected are? Like, is there a specific breakdown in terms of, perhaps, income quintiles or specific breakdowns in terms of ethnicities or even specific breakdowns in terms of geographic region or electorates, for example? Thank you.

Thank you, Mr Chair. That is an excellent series of questions that has been raised by my colleague in the Green Party, having a look at the effective marginal tax rates because there’s quite an interaction between—

James Meager: Oh, it’s a love-in. He’s well educated, that’s why. Otago graduate.

Hon Dr DEBORAH RUSSELL: I’m willing to yield the floor if the member would like to make a call.

I move, That debate on this question now close.

Point of order, Mr Chair. Mr Chair, my understanding is that when a member yields the floor in order for another member to make a contribution, that call may not be used to call for the end of the debate.

I’m not familiar with that rule, but, Mr Bates, there was an indication that you were taking a call, so—[Interruption] No, no. You’re bordering on an abuse of process there. Does the member wish to take a call on the bill, or was he going to take a closure motion?

Mr Chair, my understanding was that she was offering me the floor to make a call, and so I put the closure motion.

CHAIRPERSON (Greg O’Connor): All right, OK. Well, now, I think that’s probably clarified something now—that members on my right, if they do want a genuine call, they’re obviously welcome to it but it may well be through the nature that they’ll need to indicate to the Chair that they’re looking for a call on the bill. Otherwise, there is the assumption, given we know the problem of too much assumption, is that it will be a closure motion. So we will resume now.

Point of order. Thank you, Mr Chair. I just want to seek some clarity there. So we need to differentiate on this side between whether we’re rising to speak on the bill or whether we are going to be putting forward a closure motion. That’s the ruling you have just made there.

No, no; what I said was the assumption will be that members on my right, at this stage of the debate, rising as they have, will be taking a closure motion. However, it is only an assumption—there is no ruling—but I would always welcome a call on the bill, to my right. We’re very early on in the debate on this part of the bill. So it may well be that a call at this stage may well be a call on the bill. So it would be useful just to indicate to the Chair—myself and my fellow Chairs—that you are seeking a call on the bill. That might just help the committee act more smoothly.

OK, and just speaking to the point of order, when the Hon Deborah Russell took her seat, she cited that there was a Standing Order or Speaker’s ruling that said if a member in this House yielded the call, they would not be able to take the closure motion. Could you please let me know what that is?

As I indicated, that is not a rule that immediately leaps to my mind. I’m not saying it doesn’t exist, and I’ll put the Clerk’s Office to work now, seeing if such an order does actually exist.

Speaking to the point of order. Thank you very much, Mr Chair. As I understand it, the rules around yielding are quite restrictive. It’s an unusual procedure in the House, but it is prescribed in the Standing Orders and Speakers’ rulings: a member has the ability to yield time within their allocated speaking time if another member seeks that that is their intention. When yielding the time, that time is to be used to seek clarification from the speaker—the person speaking, that is—as to a point they are making so the House can better understand what they’re talking about. It is not to be used as an opportunity to make a debating point, a political point, or, in, this case here, a closure motion. So when the Hon Dr Deborah Russell offered to yield and gave up her time, it was in the hope that members on the other side would contribute to the debate, not use that opportunity to try and close the debate down.

All right, and thank you for that contribution. As I said, I’m vaguely aware there is such a thing. I don’t know the detail of that yielding—it certainly sounds like the member might know a little more than me—but I’m certainly going to take some advice on that so that I can advise the committee on the motion, because having now come to the fore, I’m sure it will be something to the minds of all the members present. So we’ll now resume with the Hon Deborah Russell, and I’ll treat this as a continuation of that call.

Thank you, Mr Chair. I think that’s appropriate, Mr Chair, and I thank you for your ruling in that matter. It is a shame—

James Meager: Stay standing.

Hon Dr DEBORAH RUSSELL: You’re welcome to take a call. Look, I want to carry on with discussing these effective marginal tax rates (EMTRs), in particular, following on from what my colleague Mr Hernandez was talking about. I want to draw the Minister’s attention to page 10 of the regulatory impact statement (RIS). It’s got something quite alarming in there. So this is the regulatory impact statement on the $25 per week increase, the in-work tax credit—it’s really all the adjustments to the Working for Families tax credits. So it’s not just the in-work tax credit; it’s also the minimum tax credit and the independent earner tax credit and so on. So they all kind of fit together. But there’s a really difficult overlap between the minimum family tax credit and the in-work tax credit and all the various sorts of tax credits that are available.

In particular, I want to look at the issue around the impending overlap of the minimum family tax credit threshold and the Working for Families abatement threshold. Now, the minimum family tax credit is a really small tax credit. It only applies to a few people—or a few families. But the minimum tax credit is designed to ensure that between the operations of benefits from the Ministry of Social Development and tax credits and income earning and the complicated interweaving of all those different measures we have in place, it tops up a family’s income to a minimum level to ensure that a family who is in work—as in “work” as defined—actually ends up a little bit better off, even if only a tiny little bit better off, than a family on benefit. So that’s the idea of the minimum family tax credit. But it is continuing to go up as benefits increase because of the operation of wage increases or Consumers Price Index increases, because that’s how we set our benefits each year. That means that the minimum family tax credit threshold is going to have to increase over time. So that’s one aspect of it. But then over time, all these Working for Families tax credits, they abate. So once you earn a certain level of income, those Working for Families tax credits start to abate.

Here’s the problem—and I’m going to need to seek a little bit more time to explain this, Mr Chair, but sooner or later, that minimum family tax credit threshold is going to cross over the Working for Families abatement threshold. It’s set out really clearly in the RIS. It says that “As the [minimum family tax credit] threshold increases annually, it is forecasted that on 1 April 2027 it will overlap with the [Working for Families] abatement threshold.” Mr Chair, I’d just like to carry on with this call if I may, because this call is—I’ve just got to get through the problem. So if I can just carry on—thank you, Mr Chair. This means that Working for Families customers will face effective marginal tax rates of over 100 percent, so an EMTR—an effective marginal tax rate—of over 100 percent. So, in layperson’s terms, what that means is that if that family earns an extra dollar, then $1.10 might be taken off them in abatements. All right, so that’s kind of worrying. So when the EMTRs go over 100 percent, there is then no—well, why would you do the extra hour of work if more is going to be taken off you than you get paid for the work in the first place?

So what it means is—as the regulatory impact statement goes on to say—that “[minimum family tax credit] recipients who are some of the lowest income working families would face decreases in their income as they work additional hours.” So, as a result of the changes that are going through in this tax bill, we are now facing this very real problem at 1 April 2027. So it just means that the policy intent, and it’s set out in the regulatory impact statement, is they would owe—you know, they conflict. On the one hand, we’re trying to encourage low-income families into employment; on the other hand, we’re going to abate away every single dollar they earn. The problem is going to come about because of the way that tax credits have been changed about in this bill. Minister, it’s a real problem. I’d like to hear some of your thinking on it.

I’m going to call the honourable Minister, but just before I do that, if you would indulge me, please, Minister, I’ll just make a comment in relation to the discussion we’ve just had on yielding. When a member invites a member on the opposite side to yield, or offers to yield, it is actually part of that member’s call. That is why that precludes a member from taking a closure motion during the middle of a call. So if members intend to yield, it would be useful to actually use the word “yield”. It would just be useful, because then we know.

As far as the members on my right go—there was a question, in relation to the debate, about whether the fact he’s used a closure motion precluded him from another closure motion—that is not the case. It was only in the case of that particular call. So, Mr Bates, you’re welcome to continue your vigorous efforts at closure motions.

Thank you very much, Mr Chair. In regards to the member’s question in regards to the issue that has been highlighted in terms of the overlap between the minimum family tax credit threshold and the general Working for Families tax credit abatement threshold, look, this is an aspect of—technical in nature, obviously. It is an element which will, in terms of scenario, come into play, forecasted by IRD, on 1 April 2027. That overlap consideration is an issue and it is an issue that I’m aware of, obviously. I have asked officials to provide us with some advice later this year about how we look to address it. So that is an ongoing aspect and it is due to the uniqueness of some of the changes.

There was another question also in regards to tax codes and how IRD identifies the appropriate tax codes. IRD will use the appropriate and existing systems and processes in order to determine those tax codes. Obviously, if IRD is aware that employees may be using the wrong code, etc., which occurs occasionally, then it will be up for the employees to inform them. This is a standard practice, nothing sort of out of the ordinary in regards to this restoration to this bill.

Thank you very much, Madam Chair. Thank you for the opportunity to take a call. In terms of the amendments that this bill is making to the independent earner tax credit and also the in-work tax credit, I have a couple of questions for the Minister of Revenue, and it really comes down to how people are going to figure out exactly what they’re entitled to and how they know that those corrections have been done accurately, and maybe the Minister might like to shine some light on this.

When we’re going through the bill’s commentary that’s been prepared by the Inland Revenue Department, it gives some examples of how composite calculations for the 2024-25 tax year can be analysed, and it reads kind of like a sixth-form maths problem. You’ve got someone called Elizabeth, and they’ve got how much the abatement under the current settings is, which is 13c per $1,000. Then you’ve got the calculation of the number of days that the current settings apply, which, in this example, is 121, and then you’ve got the amount of the abatement under the proposed settings, which is 13c times zero dollars.

When you’re trying to calculate the differences between how those settings have changed, it is not really that straightforward for members of the public to ascertain what, in fact, they’re entitled to. If you’re a salary earner who’s getting paid, then a lot of that is already done on your behalf, but if you are, in fact, generating your own income and if you are having to also pay staff, there seems to be quite a complicated sort of formula in terms of trying to establish what the number of days are that you are entitled to, the periods that it applies to, and how that increases.

In particular, what I would really like to know is what the role of the IRD is in this to assist people to understand what they are entitled to, and if a taxpayer would receive more from the independent tax earner credit—which I’ve just referred to—than the in-work tax credit because of these changes, what the role of the IRD is to proactively change it for them. I don’t think it is made clear that it is incumbent upon the taxpayer to do those calculations and to ascertain the interactions between the independent earner tax credit and the in-work tax credit, and also I think that that sort of bleeds into the minimum family tax credit.

So, while people can go online and plug their details into the calculator, I actually think that there’s additional information that people out there who have figured out that they get maybe $80 a fortnight—how does that actually work for them, and what do they do to ensure that they get that money coming back to them? I think, to be honest, that there’s a high level of suspicion sometimes when it is said that you’re going to be getting this extra money, but what happens if those calculations are being done on your behalf, and what if those calculations aren’t quite accurate? What is the recourse for those people who believe they are entitled to a greater share of tax relief, but who haven’t managed to realise this increase in their back pockets?

I think, just from looking at how people calculate it through this document, it seems incredibly convoluted in terms of establishing the process, particularly in this transitional period of changing where the thresholds are, and the interactions that that makes for people. So I would really appreciate it, on behalf of the people who have contacted me since the Budget has been announced—for those people in our own areas who are interested to know how they would access this—how it works for those people who are not necessarily salary earners, but who are generating their income either from their own business or from a range of other sources. If the Minister is able to address some of those questions, I’d be really happy to hear that.

Thank you, Madam Chair, for the opportunity to speak on this Taxation (Budget Measures) Bill. We are looking at Part 3, “Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 31 July 2024”. Now, looking at clause 27, “Section MD 10 amended (Calculation of in-work tax credit)”, I want to draw from the regulatory impact statement on the $25 per week increase to the in-work tax credit (IWTC), particularly around the impact on child poverty, and the increase of the IWTC by $25 per week. I’m really interested to understand what ongoing work there will be to model what hasn’t been done yet, which is the independent model on the other tax packages due to those time constraints.

It says that “the tax package may slightly reduce moving-line BHC50 child poverty, since the poverty line for this measure is set at 50% of the median household income.” Well, when we’re talking about child poverty in Aotearoa New Zealand, as the child spokesperson for the Greens, I go back to Jonathon Boston’s quote about raising tamariki in New Zealand, which was that above all, New Zealand should be a great place for raising children. Now, for some children in New Zealand, it’s far from a great place. Their reality consists of living in cold, damp, overcrowded homes, moving homes frequently, experiencing hunger, suffering Third World diseases like rheumatic fever, and missing out on many things which the majority of children take for granted.

Furthermore, looking at the table on page 21 of the regulatory impact statement, where it says that there will be an average weekly increase of $16.97 for 170,000 households, I want to understand what $16.97 actually achieves. Well, if we’re talking about it at the flaxroots for families, that’s about a block of cheese and 500 grams of butter. So how is that really going to help when we’ve got more children going into poverty?

Furthermore, on page 22, what I’m really keen to understand is how these tax credits can actually help lift children out of poverty, because we can actually be the best place in the world for children to grow up. New Zealand can achieve that, but when we’re looking at the table on page 22, the analysis is saying that the impact of this wider tax package is very low. The impact on child poverty reduction from the increase of $25 per week has not been modelled independently of other tax package changes.

We really want to focus on lifting children out of poverty in New Zealand, and I really want to understand when that independent review on how this tax package will actually affect children—particularly children in poverty in New Zealand—when this table itself says that the impact on child poverty is going to be low. Thank you.

Thank you very much, Madam Chair. Obviously, the implications of reducing child poverty are a significant priority for this coalition Government, and the Budget that we released yesterday, by reducing the cost of living pressures for low and medium wage households, will aid in supporting that.

In respect of the specific question around what are the implications that the changes to personal income tax, the IETC, the IWTC, and FamilyBoost will have—now, all of those acronyms are, basically, the different changes that have been made as part of this tax bill—there is an estimation that child poverty will reduce by 17,000 children, plus or minus 6,000 by the 2027 tax year, and there is a margin of error on that, using standardised measures. That is statistically significant. If you refer to a status quo model, then the expectation is that without doing any of the changes that this Government is driving through, then child poverty, potentially, could increase by 2,000 children, plus or minus 500—again, acknowledging that there are margins of error—by the 2027 tax year.

Thank you, Madam Chair. It’s a pleasure to make a contribution on the in-work tax credit and to really pick up on content specifically around what the Minister was just answering in the child poverty space. On page 3 of the regulatory impact statement, there is a paragraph headed “There will be reductions to child poverty”. It goes on to say, “The impact on child poverty of option 2 (increase the IWTC by $25 per week from 31 July 2024) has not been modelled independently to of the other Tax Package changes, due to time constraints.” There appears to be a missing word here. And there’s some thoughts on that.

One is: what is that referencing—“to” something “of”. What should the missing word be? But more than that—more than that—the concern is that this work has been rushed, potentially done too fast, and that the matter of child poverty hasn’t been given the serious weight and consideration that it deserves. It also begs the question: if such a glaring omission is made already by page 3, is there the possibility that, on deeper reading of this, we will find further errors, further omissions, further concerns? I’m really interested to know from the Minister what word should be in there. Any word, just about, could be inserted in there and this paragraph and this statement would start to mean completely different things.

Now, if the target is to reduce child poverty—and the Minister has just given us some numbers, albeit with a rather large margin of error around what those child poverty reductions should be—surely the task of reporting and measuring child poverty becomes all the more critical, given that the Living in Aotearoa survey was developed because it was determined, probably by leadership at Stats New Zealand at the time, when the legislation was being drafted, that New Zealand did not have the appropriate data, either in our existing surveys or collected through administrative records, to measure persistent poverty or persistent hardship.

I realise the Minister doesn’t have responsibility for statistics, but given the context of yesterday’s Budget showing significant cuts to Statistics New Zealand, and already the cut and cancellation to the Living in Aotearoa survey—

Carl Bates: It was your idea.

REUBEN DAVIDSON: Sir, if you wish to take a call, we’ve just discussed the procedure for that. I’m happy to yield.

CHAIRPERSON (Maureen Pugh): Order! Please do not debate across the Chamber.

REUBEN DAVIDSON: Sorry, Madam Chair. If the member on the other side of the Chamber wishes to take a call, I would be happy to yield on the provision that he is going to deliver a proper speech—

James Meager: Point of order. Speaker’s ruling 62/4: “it is not for the member with the call to invite another member to intervene”—so I’d ask you to reflect on that Speaker’s ruling, please.

REUBEN DAVIDSON: Thank you. I’ll reflect on it deeply! But I will get back to what I was discussing, and I’m concerned that I may run out of time in my allotment to actually raise this issue. And it is a serious issue.

To refresh on what I was saying, for us to know if people are persistently in income poverty or material hardship, we need to collect longitudinal data—that is, we need to go back to individual households, families, children multiple times, across time, to ask their income, the age and relationship profile of the people that are living in a household, and their material hardship. Now, a set of 17 questions collected on surveys can never be obtained through administrative data. At a minimum, we need longitudinal surveys that follow families for five to six years. And that’s exactly what we saw confirmed as cancelled in yesterday’s Budget. That’s a real shame, and it makes a mockery, in my opinion, of claiming that there is any meaningful intention on this part of the Budget or on the actions in the in-work tax credit to reduce child poverty. So my questions to the Minister are—[Time expired]

CHAIRPERSON (Maureen Pugh): I’ll call Reuben Davidson to finish his contribution.

REUBEN DAVIDSON: Thank you, Madam Chair. Just to recap, before we ended there, the loss of a longitudinal survey that followed families for five to six years is a huge loss. And in the regulatory impact statement—

CHAIRPERSON (Maureen Pugh): I’m sorry to interrupt the member. I extended your call so you could complete your contribution—the questions you were asking.

REUBEN DAVIDSON: Sure. Thank you, Madam Chair. My questions to the Minister are: what engagement has the Minister had with the Minister of Statistics to ensure meaningful longitudinal—and that’s the really important part here; not admin data, longitudinal—research and surveys to measure the real and enduring effects and impacts of child poverty?

Thank you very much, Madam Chair. I’d direct the member Reuben Davidson to the Child Poverty Report 2024 that’s been released this morning. That will outline a number of aspects in regards to the member’s question, not necessarily directly related to this bill.

I move, That debate on this question now close.

Thank you, Madam Chair. I want to revert to something that my colleague the Hon Ginny Andersen was discussing and take the question a step further. Now, in her call, the Hon Ginny Andersen was talking about the interaction of the minimum family tax credit, the in-work tax credit, paid work, all the sorts of sources of income and tax credits that people interact with, and she was concerned that people wouldn’t know what their entitlements were. I realise, from my previous time in a similar role to the Minister in the chair, Simon Watts—that, often, people who are getting minimum family tax credit and sort of wavering between benefit and paid work, they do go through complex calculations. One of the standard ways they work out whether or not to take on those extra few hours of work is that they ring up Inland Revenue and they ask questions of the call centre, and they go through that whole process of engaging with Inland Revenue directly in order to ascertain what their entitlements are.

So, given these changes to tax thresholds, the in-work tax credit, the minimum family tax credit, and so on, which are really quite complicated, and what we anticipate will be the number of people who really don’t understand what they’re going to get, my first question in this regard is to what extent the Minister has, as a matter of prudence, I guess, ensured that Inland Revenue is resourced—I do have another question, Minister; just hold your fire—in order to handle all those incoming queries. Now, obviously, there’s the tax calculator on the website, but that probably won’t work for the people who we’re talking about who are making that very marginal decision about whether to take on more work or to continue as they were, and so on. So there will be some pretty complicated stuff going on in that regard. So just a resourcing question there.

There is another point here that I do wish to consider, and it’s one that we were working on when we were in Government and I’m sure the current Government is continuing to work on, and that’s the people who end up in debt to Inland Revenue—sometimes to the Ministry of Social Development (MSD)—because they’ve gotten their numbers wrong or they don’t understand the complexity of the law. So they get too much of a tax credit—their Working for Families tax credits get overpaid and they end up in debt. Now, some of the time, this is pretty easily sorted with the end-of-the-year tax calculation and so on, but, again, for these families who are in a pretty marginal state, who are on pretty low incomes, then getting too much Working for Families tax credits creates a problem for them because they then have to start paying it back on an already marginal income.

Now, the standard strategy for a lot of families is just to, when they’re claiming those tax credits, overstate their income, and that means that they get a lower tax credit during the year and they get the difference sorted out at year end. It’s a good strategy, I know, particularly for lots of families where their income is earned from a business or something where the flow is a little bit uncertain and it gets sorted out that way. But these families who are really marginal, they actually want their tax credit as they go. They need that money on a week-by-week basis, so they are actually more vulnerable to falling into debt if they don’t get those tax credits right.

So, again, it comes down to a resourcing issue for the Inland Revenue Department, and do they have people on hand to help with that? But, also, has the Minister given any consideration to ensuring that families don’t end up in debt to Inland Revenue, to MSD, as a respect of getting the tax credits wrong? And is there any ongoing work in that regard to ensure that when these tax credits and the tax threshold changes flow through to people, they get the right amount and not more than the right amount so that they don’t end up in debt, which then just creates a further burden for them?

Thank you so much, Madam Chair. I wanted to expand on and bring some lines of question on clause 27 in relationship to the increase of the in-work tax credit. I particularly wanted to focus on whether the Minister has sought any advice from the Ministry of Social Development particularly around whether the increase to the in-work tax credit would widen the wealth and income gap between those in work and those out of work. I wanted to particularly, I guess, get an analysis from the Minister about whether there’s any concerns that that increased income gap between those on the benefit and those in employment would have negative impacts. I mean, the regulatory impact statement (RIS) on the in-work tax credit changes talks about how the effectiveness of this tax credit has diminished over time, particularly when it comes to people being able to take up and stay in employment.

I wanted to ask whether the Minister knows where that assertion had come from and whether there was any research around the effectiveness of the in-work tax credit at all in its effectiveness to support people into employment, because, I mean, one thing is to have a value statement and an assumption that if you have this tax credit, people will take up employment; the other one is actually having that based on any substantive research. So that’s my second question: what research has the Minister seen that substantiates the statement in the RIS that the in-work tax credit supports people into employment?

We’ve talked about how the in-work tax credit is seen as make-work pay, but that takes me to my third question, which is whether he considers caregiving as work and labour that actually deserves to be remunerated as such. Right now, the way that the in-work tax credit is laid out completely ignores caregiving responsibilities that sit outside of employment relations. So my third question is whether he has a view on whether caregiving is work; if not, why not? At the moment, that line of work, which the Greens do consider to be work that is currently undervalued and under-resourced, fails to be acknowledged in the in-work tax credit. So when we’re thinking about, for example, caregivers, parents, people who support disabled people—they’re not eligible for this payment. They don’t benefit from the increase in this payment, and those who may be receiving a benefit, for example, to do that work, which the Government doesn’t officially consider work, will continue falling behind compared to those who will benefit from the in-work tax credit.

The other question that I had—and I wanted to pick up on where my colleague Francisco Hernandez took over from—was whether he actually had any information around the people who will have an increased effective marginal tax rate as a result of the changes outlined in Part 3, and whether he could give us, or whether he even received, a breakdown on who these people are. I think it’s one thing to have in the regulatory impact statement a kind of broad assertion about how some people will have a higher effective marginal tax rate, but, as I said, I’m starting to get really concerned around the robustness of the work the Government undertook to put forward these tax cuts, the inability for the Government to actually give us a population breakdown on how these changes will benefit or widen issues that already exist.

So, to recap, I’m interested in whether he’s received any advice around what the gap will be between those out of work, which includes many disabled people, and those who will receive the increase in the in-work tax credit; whether he’s engaged with the Minister for Social Investment in this; a breakdown in the population groups who will have a higher effective marginal tax rate as a result of these changes; and whether the Government, and whether the Minister himself, considers caregiving to be work, and, if not, why not? So far, these changes will widen the gap from those who have, primarily, caregiving responsibilities as opposed to those that are in paid employment.

Just in response to the member’s question, I mean, Part 3 is a very tight section, but I will provide a little bit of context outside of that, just to elaborate. So, as part of this process, Inland Revenue and officials have engaged extensively with the Ministry of Social Development throughout in regards to the interaction with this point. The point of this payment is to incentivise people to leave the benefit and get into work, and I think that’s a pretty sensible objective. The reality is—and the member may want to reflect on why this was the case—that this has not changed or been adjusted since Budget 2015. So what we’re, in effect, doing is making a change to reflect that implication, to incentivise moving from benefit to work and provide that benefit to nearly 160,000 households. That is good news and should be something that should be celebrated. So I’m looking forward for the member to support this aspect.

I move, That debate on this question now close.

I think there is still a bit of scope for interrogation of this part, but I am aware that we have started to get some repetition.

Thank you, Madam Chair. The South Island thanks you, Madam Chair. Look, I wanted to come back because I appreciate that there has been—

James Meager: Oh, new material, Rachel Boyack.

RACHEL BOYACK: Look, I think Mr Meager should take a call, but I appreciate—

Hon Member: Yield.

RACHEL BOYACK: —we’re not going to go there again—that on this side of the Chamber there have been some questions that we put to the Minister again. I guess I’ve made this point, and I often make this point during urgency at this stage of a debate that we—

Hon Member: New material?

RACHEL BOYACK: I’m going to make it again. The reason I’m making this is that tax is actually the most significant topic that we can discuss in this House, I would put on record, and the Minister is agreeing, so I’m really hoping that he’s actually going to come back and answer the questions that have been put already by myself, by my colleague Deborah Russell, and by my colleague Ginny Andersen specifically around the interactions between these tax credits. I note that we do not have the opportunity to interrogate this matter in front of a select committee. The Minister has access to his officials to help guide him. So we would like to have a response to that question. We’ve been discussing this on this side of the Chamber; we would like to hear about it.

The particular issue we have is that when all of these different tax mechanisms interact with each other, there are times when a person could end up, as the Hon Dr Deborah Russell noted, even being in debt to the IRD, which is not something, I think, any member in this Chamber would like to see—

Glen Bennett: Not at all.

RACHEL BOYACK: Definitely not at all, Mr Bennett. So the question I had specifically for the Minister was that, under Labour, we introduced payday filing, which, I’m sure, everyone understands is when there is a real-time tracking between the employer making the payment, and the IRD, to ensure that we have that real-time record. I’ve certainly been contacted by the IRD before to say, under that system, that I was on the wrong tax code at one point. The question we had that was quite specific around this piece of legislation is: what mechanisms is the Government going to look at in terms of ensuring people are advised, rather than waiting until the worst happens at the end of a tax year and they have a debt to the IRD? I’m sure none of us would want to see that, particularly—let’s be clear—with low-income families; I think we would all like to make sure that they are receiving the correct mechanism throughout that year.

I see the Minister jumped up, but the last time that happened, I didn’t get an opportunity to complete my call. The other thing I just wanted to ask the Minister specifically, because he did, earlier in the debate, bring in the conversation around child poverty. I note, yes, this is a tight debate, but the Minister has actually introduced that matter himself into the debate. We on this side of the House do have questions about child poverty. My specific question is that we have seen from the Budget figures that there is an indication that child poverty numbers will increase in New Zealand as a result of these changes. On this side of the House, we are concerned about that. We put in place measures to ensure that we knew what the position was for the country, and we’re very concerned to see that going backwards. So my question to the Minister is: what specific advice has he received on the interaction between the tax changes that the Government is making through this bill? Again, I note we do not have the opportunity to get a departmental report. The Finance and Expenditure Committee—

Todd Stephenson: It’s just normal. Normal practice.

RACHEL BOYACK: —would get an independent adviser to come in and actually ask these questions and provide this advice. We are not having that opportunity. I’m just noting, under the Standing Orders, Mr Stephenson—go read a book—that this is an important part of the debate. We do have officials here who can advise the Minister, who could answer these questions. We on this side of the Chamber would like to hear those answers. Thank you.

Thank you so much, Madam Chair. I do want to echo the fact that we haven’t had a select committee hearing. I also want to respond to the Minister’s comment that while he may claim that the clauses in Part 3 are tight, actually this is regarding the increase to those base rates. Those have significant impacts. So let’s not conflate short language in legislation to a small impact to our communities; I think that’s a disservice to the people who this bill claims to serve.

The Minister alluded to the fact that he had engaged with the Ministry of Social Development (MSD), that there was engagement with the Minister of Social Development. I want to ask what was fed to him and to the Government from the Minister of Social Development in those consultations. Because I do think that we didn’t have a select committee hearing; we could have had robust engagement and evidence in relationship to what the Minister of Social Development said. He’s got the officials behind him. So I think this is one of the flagship things in the Budget. The Government owes the public to have a robust discussion on who exactly will be impacted. We haven’t received any form of engagement or even an address to, for example, the evidence that the in-work tax credit and increases to the in-work tax credit actually support reducing unemployment. I think the Minister owes the public a bit more robust engagement with the evidence behind this.

The Minister has also not been able to address, and has refused to even take note, who the people who will face a greater effective marginal tax rate are. Who are these people? He’s got the officials behind him. If he cared about a robust debate, he actually would be seeking greater advice, because this, like I said, isn’t just a casual bill; this is one of the flagship things in the Budget. I think, if members of the Opposition are trying to ascertain the robustness of the work, the Minister owes us some answers.

Finally, I know that we’ve talked about the impact on disabled people in relationship to other parts of the bill, but I did want to get a sense of, in relationship very specifically to the increases in the in-work tax credit base rate, how many of those parents who are in work, who will receive a top-up, have disabled children, and have other additional needs. I wanted to get a sense as to whether he had had any interactions with MSD specifically in those interactions in the system.

Then, I wanted to get a sense of what engagement with Whaikaha had been specifically on the increase to the in-work tax credit.

With not risking more repetition, but I will note again that we have undertaken significant engagement with multiple agencies in regards to this. One of the uniquenesses—and maybe this is an incentive to try and accelerate and close this out, but we’re talking about legislation that hasn’t yet passed. It needs to pass before we know what impact that will have exactly. We won’t know who the individuals are by specifics until they file their returns in the future. So asking questions about who these people are and what they are in the specific nature is just simply not possible. So the theoretical element of the question is without basis.

Thank you very much, Madam Chair. I’ve got a very specific question in relation to the independent earner tax credit. The Minister might want to revisit his last answer, because I think what he just said was we should pass legislation and see how it works and then we’ll know what it does. Like, that’s just loopy. That’s like, “Let’s just pass some stuff and see what happens, and then we’ll know what it does.”

I think it’s incumbent upon lawmakers within this House to go through some regular process, a regulatory impact statement, some analysis, some data, some evidence, to understand what the potential impacts of legislation would be on the population of New Zealand, instead of just decreeing law and seeing where it lands. So I’m quite struck by that comment by the Minister and he may wish to revisit it because it isn’t really that sensical to a lot of New Zealanders—who will be at the other end of this legislation. I think it would be within their best interests to understand that he’s actually turned his mind to how it might impact upon them before he simply passes this legislation through urgency.

So my question, specifically, to the Minister is in and around the independent earner tax credit. We know that what this bill does is it lifts the upper-income threshold from $48,000 to $70,000, but that lower threshold limit remains at $24,000, and this all comes to into effect on 31 July. So we know that the independent earner tax credit is available for those individuals who might not be eligible for other kinds of Government support. So they won’t be eligible for Working for Families or a main benefit or even superannuation. So the abatement rate for this tax credit will remain at 13c and this will apply to every dollar of income over $66,000 per annum.

But I would like the Minister to confirm and specify—because I’ve had some queries from people who are sitting right around that threshold, so this is where families are looking at what they earn, looking at where they’re eligible, whether they’re under that limit or over that limit. Can the Minister confirm that this would mean that there is, or there is not, any remaining entitlement to that independent earner tax credit when a person’s income exceeds that $70,000 annual amount? I think that’s where a lot of people are really doing those sums and looking to see whether that works for them or not.

The second question that I have for the Minister relates to increasing the in-work tax credit rate. I think we haven’t actually had this clearly answered, and so what I want to know is that if taxpayers receive more from the previous one, the independent earner tax credit, than they would the in-work tax credit because of the change, does the IRD do that, or not? Or is that incumbent upon the wage earner, the person who’s paying the tax, to figure that out? Are people required to do those sums, figure out which one they get more on and do it themselves, or is that work that the IRD will do on behalf of New Zealanders?

Furthermore, can the Minister speak, is the IRD well-resourced enough to be able to be doing all this work? There’s going to be hundreds of thousands of New Zealanders coming forward with questions about which tax credit they’re eligible for, how they interplay with each other. Is the IRD going to have their 0800 number up and running without two hours of waiting time, so that New Zealanders are able to get answers to these questions and figure out how they go about getting additional money each week?

So they’re my two specific questions to the Minister. It’s around the $70,000 tax threshold, whether they’re eligible; and the second one is on that interaction—whether IRD proactively makes that change for them or whether that is incumbent upon the person.

I move, That debate on this question now close.

The question is that Arena Williams’ tabled amendment to amend clause 27 be agreed to.