3. Hon DAVID CUNLIFFE (Labour—New Lynn) to the Minister of Finance: Does he stand by his statement: “substantial gains could be made by aligning the top personal tax rate and the trustee tax rate”?

Hon BILL ENGLISH (Minister of Finance) : Yes, we could make substantial gains in the integrity of the tax system. Under the previous Government the number of people paying tax on $1 million did not change in 10 years even though the economy grew significantly. An Inland Revenue Department survey of the 100 wealthiest taxpayers showed that under the previous Government half of them did not pay the top tax rate.

Mr SPEAKER: Before I call the next member, I think the level of noise is simply unacceptable. I would ask members to be mindful of that.

Hon David Cunliffe: Will he concede that only those on the highest incomes would make “substantial gains” as a result of a reduction in the top tax rate to the trustee tax rate, and when will his Government show some decisive plans to close down the loopholes he has mentioned around loss-attributing qualifying companies and portfolio investment entities, as well as the trust rate?

Hon BILL ENGLISH: The Government is working on exactly those issues. It is a bit ironic to be questioned by a Minister in the previous Government, which put all of those inconsistencies in place.

Amy Adams: What considerations will the Government make in deciding the final mix of any tax system changes?

Hon BILL ENGLISH: Our most important consideration is the impact of a change in the tax mix on prospects for economic growth. As I pointed out earlier today, a stronger-growing economy delivers more new jobs and higher incomes for everybody. We will be looking to tilt the playing field so that people have stronger incentives to get ahead, to work, to save, and to invest, and less incentive to consume too much and borrow too much.

Hon David Cunliffe: Has the Minister received any advice that, under this trickle-down theory, the highest-income earners will receive substantial gains while low and middle income hard-working New Zealanders will be left, at very best, no worse off?

Hon BILL ENGLISH: The Government is putting together a package, and the key to that package is likely to be a tax switch, as we have explained, between GST and income tax, and additional taxation of property. As I pointed out to the member, investment housing and commercial property in New Zealand are largely in the ownership of higher-income people. Whether any individual is better off or worse off will depend to some extent on his or her personal circumstances.

Hon David Cunliffe: Does he agree that this “tax switch” would instead be better done as a change in tax thresholds, which would deliver more equal distribution of tax cuts, and can he assure the public that this will be a part of his “tax switch”?

Hon BILL ENGLISH: If the member is talking about equity, he can go to the website—it has been open for 6 months but he discovered it only after Christmas—that shows how the Tax Working Group calculated the impacts of various scenarios on equity. He can look at the Gini coefficients and the ratios between median and lower quartile incomes, and decide for himself. He can then go out on his bus trip and put his proposition forward, and I would like to hear what it is.

Hon David Cunliffe: I raise a point of order, Mr Speaker. It was a pretty simple question about whether the changes to tax thresholds would be part of the so-called “tax switch”. Instead of addressing that question, we heard a lot of invective about—

Mr SPEAKER: I listened very carefully to the member’s question. If he had asked just that, it might have been possible to get an answer on whether changes to the threshold will be part of the tax package. But the member made a whole lot of further statements about equity, and the Minister of Finance picked up on those statements and responded to them.