Hon PETER DUNNE (Minister of Revenue) : I move, That the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill be now read a first time. Later I shall be recommending to the House that the bill be referred to the Finance and Expenditure Committee for consideration.

The main feature of the bill is a very positive measure for New Zealanders who have been working in Australia and who wish to return home permanently. Currently, they have to make compulsory superannuation contributions to an Australian complying fund. Those funds are then locked into the scheme until that saver reaches retirement age. For New Zealanders who have worked in Australia for some years this can present a significant financial dilemma when they make the decision as to whether to return home. New Zealanders who spend a period of time working in Australia are required at the moment by Australian law to make contributions to an Australian complying superannuation fund, which they are then locked into. When they make the decision after some years as to whether to return home, they are faced with a significant financial dilemma because of the fact that their funds are locked into Australian complying funds.

The changes proposed in the bill will help resolve the problem. They will allow New Zealanders with retirement savings in certain Australian superannuation funds to transfer their funds to KiwiSaver when they come home permanently. Conversely, KiwiSaver members who want to move to Australia will be able to transfer all of their savings in the scheme to the Australian complying superannuation scheme. This includes their New Zealand Crown contributions and any member tax credits that they might have. These changes will remove one of the obstacles facing New Zealanders who want to return home by allowing them to consolidate their financial affairs in their chosen country of residence. The changes also represent a positive step towards improving the movement of labour between our two countries and are the result of an agreement signed with the Australians in July this year that recognises the broader close relationship that we have.

The remainder of the bill focuses on a number of smaller but important technical measures. All of these measures are intended to improve the way the tax rules work, to make them easier to understand, and to reduce compliance costs for taxpayers. In this respect, a number of enhancements are being made to the KiwiSaver rules. Those enhancements include clarifying the enrolment rules for those under 18 years of age so that guardians and young people themselves have greater certainty about their future obligations under the scheme rules. Members may be aware of a number of issues that have arisen already where there has been confusion. People under the age of 18 have been enrolled in the scheme in a very well-meaning way by parents, guardians, and relatives, only to discover a little later on that they have picked up an ongoing liability. The changes will also allow scheme providers to send members annual reports via an email hyperlink, if the member agrees, in order to reduce the compliance cost for providers, while members will get the information that they need in a form that they increasingly prefer. It also removes a technical obstacle affecting the eligibility of certain members who apply for the KiwiSaver first home deposit subsidy. Taken together, all these changes will make the KiwiSaver rules easier for people to understand. They reduce unnecessary compliance costs and they ensure that the rules work in the way that they were intended to.

This bill also makes technical changes to the rules on gift duty. In particular, the bill introduces a number of changes to remove uncertainties around whether gifts such as amenities and artworks made to local or central government or to approved donee organisations are subject to gift duty. The change will make it clear that these gifts are exempt from gift duty, and will be welcomed by those who want to contribute to their communities by gifting items such as artworks or other items for public benefit. A previous uncertainty about whether donations made to public organisations would be subject to gift duty could be seen as a barrier to making such donations. We had the absurd situation whereby, for example, gifts made to the Auckland Art Gallery were subject to gift duty, and gifts made to Te Papa were not. There was no logical reason; that was just the way the law had developed over time. These changes will clarify that situation.

Finally, the bill makes some other technical amendments to make the tax laws easier to apply. They include changes to the legislation on binding rulings, which set out how the Inland Revenue Department will apply tax laws, to give greater certainty about the tax implications of business decisions. Other changes contained in the bill are of a remedial nature and remove certain unintended consequences following on from earlier reforms.

When taken together, all the taxpayer-friendly changes in this bill will help improve the way our tax rules work, and they will reduce compliance costs for taxpayers. Therefore, I am happy to commend the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill to the House.

Hon DAVID CUNLIFFE (Labour—New Lynn) : Thank you for the opportunity to take a call on the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill, and I thank the Minister of Revenue, Peter Dunne, for his introduction. Labour is supporting the bill, at least to go to the Finance and Expenditure Committee. We will be interested to see what technical arguments are raised by submitters at that point.

It is interesting to note the context in which we are debating this bill. Yet another important step in the great tax debate has unfolded before us in the last couple of weeks. It pays to recall some of the salient events that have led us to this point today. First, there was the great global financial crisis that begun in September 2008. Then there was an election in November in which the incoming National Government promised 3 years of income tax cuts. Then in December of last year the House was thrown into urgency to pass the first step in a change that would result in the top 3 percent of New Zealanders getting 30 percent—one-third, nearly—of the tax reduction.

Then Budget 2009 effectively gutted the New Zealand Superannuation Fund, with a decade of deferrals of contributions, which no amount of papering over the cracks, as is being attempted in this bill, can disguise. That fund is now projected to be some $35 billion in arrears by the time those deferred payments are lost. A new survey put out by ShapeNZ has told us that 53 percent of New Zealanders—which is more than half—do not believe John Key when he said that it is possible to both defer payments to the Superannuation Fund and maintain existing levels of entitlements. It is a mathematical nonsense, unless the Government is saying that in addition to writing off tens of billions of dollars of pollution subsidies on our young people, it will also make them catch up the difference that it alleges today’s taxpayers cannot afford, at a time when half the taxpayers per capita, or per retiree, are trying to pay those bills.

Retirement savings portability is a good idea in principle, subject to the detail being worked through. Labour is prepared to support this provision going to the Finance and Expenditure Committee. But New Zealanders are right. They are deeply concerned about the provisions that this Government has instituted that undermine the security that they will have in retirement and that will undermine the New Zealand Superannuation Fund.

It is an irony that in the Crown accounts released last week the Government’s bacon has been saved by the increase in value of assets of the two funds that it has alleged were in crisis and that it has ceased paying into—the New Zealand Superannuation Fund and accident compensation. Were it not for those, the Crown’s books would be in far worse shape. The excuse from the Government is that it does not have a cash surplus so it cannot afford to invest. Well, that is great. It says that people will invest only if they are in cash surplus situations, notwithstanding the rate of return. That is clearly nonsense because the New Zealand Superannuation Fund’s long-term average rate of return is 10.25 percent, according to its latest annual report. The cost of capital to the Government is around half of that figure. So the Government is foregoing—

Charles Chauvel: Doubling its money.

Hon DAVID CUNLIFFE: It is just about doubling its money because of this vain principle that is really disguised as something else, which is that it never believed in the Cullen fund. One can only ask whether, if the National Government had changed the name to the “English fund”, it would have discovered a newfound love for it. It is petty politics and no amount of papering over the cracks with this worthy attempt at a bill will change the fact that National has gutted New Zealand superannuation and that a majority of New Zealanders no longer believe John Key. They did not believe him on the 3 years of tax cuts, they were not surprised when the promise was broken, and they did not believe him when he said that he could maintain entitlements to superannuation and cease pre-funding.

Savings and KiwiSaver, which this bill deals with, are important topics to all New Zealanders, or at least they should be. This Government said that it cares about the fact that our tradable sector is in decline, yet it turns a blind eye to the biggest part of our current account deficit: the financial deficit. There is an outflow of funds because our financial sector does not save enough—and New Zealanders do not save enough in it—and the profits are flowing out of the country to those who own our financial institutions. All New Zealanders should be concerned that we have to borrow more to cover that deficit, and they should be very worried that this Government’s only solution is to flog off what is left of the family silver to try to fix up that gap, rather than address it at source. I would have thought there was little doubt that KiwiSaver was a step in the right direction—not the last word but a very healthy step in the right direction—of lifting New Zealand’s savings rate.

So what has this Government, in its wisdom, done? When it came into office it cut by half the incentives for New Zealanders to increase their savings through KiwiSaver. It was a short-sighted and ridiculous policy that went back to 1975 and the ghost of Muldoon, which, by the way, stalked the 2025 report. In the last week we had Don Brash rising from the crypt again, and we have John Key ritually disowning the product even as he invests another $300,000 in paying for it. That report said it was not enough to have a 30c top tax rate, because that would be too timid. I see Roger Douglas nodding vigorously, or maybe he is just asleep. No, he is awake; he is smiling, I think. I say “Well done” to Sir Roger.

Hon Trevor Mallard: Awake, and alive!

Hon DAVID CUNLIFFE: He is alive, and he is smiling because he knows that one day, when the Māori Party has what it wants, the Government will have to fall back on the ACT Party to pass legislation. Then he will drag the 2025 report and all it contains out of the closet and say to the Government: “That is the price of doing business.” I ask what that is. It is a 20 percent flat tax rate and a cut of the minimum wage by a quarter. For a Cabinet Minister, that equals $600 extra a week. For a worker on the minimum wage, that equals $100 less a week when he or she is already struggling—down from $500 to $400 per week.

I say to Bill English, who was sitting here showing great interest in this debate—yes, I see the Minister of Revenue, Peter Dunne, straining his head towards the boss and wondering where he is, but I cannot refer to that. Bill English is taking a great interest in this debate. We know he is so fiscally prudent that he believes it is impossible to live on $400 a week—goodness me!

So here is that Minister presiding over a bill that papers over the cracks of fundamental contradictions in this Government’s tax policy. It has gutted KiwiSaver, it has gutted the New Zealand Superannuation Fund, and it is trying to place a veneer on it whereby people can just take their money across the Tasman, retire in sunny Queensland, and it will all be all right. Is the Government’s solution to closing the gap with Australia to export older New Zealanders? Will it try to raise the national IQ or the national income by exporting our senior citizens? Is that what lies at the heart of this debate? Is that what is behind this bill? We have seen nothing more sensible out of the 2025 Taskforce report, at all. It is a return to the failed policies of the past. It is an absolutely shameless shift of net income from the poor to the rich, and at the same time a gutting of the New Zealand Superannuation Fund and of KiwiSaver, just when the assets in those funds have saved the Crown’s bacon, as was revealed in the last monthly Government accounts.

This bill deserves to be scrutinised. Labour will support it going to the select committee, but it can do little to save the contradictions already built into this Government.

CRAIG FOSS (National—Tukituki) : Talking of contradictions, I am not quite sure whether the previous speaker, the Hon David Cunliffe, wants the Government to borrow a whole lot more to fill up the New Zealand Superannuation Fund. Right now we are borrowing $250 million or $300 million a week simply to keep the lights on, and that member wants us to borrow $600 million a week to top up the fund. I just cannot work the numbers out. I am looking forward to discussing those facts with the member as Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill moves through the Finance and Expenditure Committee, which that member is a part of. I just cannot understand how in one breath those members are concerned about the debt under any measure, and then, every time, they want to spend more. And right now they want us to borrow more money to put in the fund to invest in New York or somewhere. I just cannot quite work that one out. It is the same with the accident compensation scheme. The sage-type investment advice we are getting from those members, on whose watch we lost $10 billion to $12 billion last year, is very interesting. I think we need to test them against that. But I digress somewhat.

It is a pleasure to rise and speak to the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. I will speak briefly to it. The Minister outlined the key points to it. There are a couple of points that I am very interested in, and I look forward to further discussions in our committee. I think we will have quite a few submissions on those particular points about providing certainty to some of the binding rulings, and improvements such as the ability to rule when matters are before the courts and clarifying existing legislation and intent. This has been an ongoing issue for the professional sector. The sector has been concerned about the uncertainty and the bottlenecks in disputes procedure in taxation law and looks enviously across the Tasman, where the sector has that nailed down in a much better way than we do. Having said that, I am looking forward to many submissions on that particular part of the bill when it comes before the Finance and Expenditure Committee after its first reading.

The bill finally removes one of the two barriers to the 500,000-odd New Zealanders who now live in Australia coming home. Sadly, many of them will now be permanently there, but this will remove one barrier to their mobility back home. The other barrier that was removed to allow New Zealanders to return home was on 8 November last year with the change of Government. Many New Zealanders are starting to look fondly towards moving home. I look forward to debating this bill further in the House.

STUART NASH (Labour) : I find it astounding that Mr Foss believes that a lot of New Zealanders are looking fondly across the Tasman and wanting to come home. Maybe they are doing so if they earn more than $100,000, but if they are earning $40,000 or less than the minimum wage, why would they? The Government gave no tax cuts to anyone except the wealthy.

I stand in support of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. It is common-sense legislation that simplifies the law for many. As mentioned by the Minister of Revenue, Peter Dunne, the bill also includes a number of technical changes to rules surrounding KiwiSaver, gift duty exemptions, and binding rulings, in order to improve the way the rules work and to reduce compliance costs for taxpayers, and other remedial matters.

I suspect that the main talking point will be that the bill introduces changes to the tax rules, as alluded to by other speakers, to allow New Zealanders returning home from Australia to bring their retirement savings with them. This is good for a number of reasons. It is a way of future-proofing New Zealand.

We all know that the current Minister of Revenue was a Labour member of Parliament for a number of years—10, I think it was—and he worked with the Labour Party for a number of years. But he has fluctuated, philosophically and politically, and has now gone back to the past. In coming from a background such as his I personally cannot see, as a Labour man myself, how the honourable member could possibly align himself with a National Party that has overt philosophies around privatisation and tax cuts for the wealthy. What was that figure? It was that one-third of tax cuts went to the top 3 percent of income earners. How could a former Labour MP for 10 years sit over there and agree with such philosophies?

Hon Member: Under urgency.

STUART NASH: Especially when they are brought in under urgency. It is amazing, is it not? It is absolutely astounding.

Hon Trevor Mallard: It was a hell of a lot longer than 10 years. It felt like a century.

STUART NASH: Yes. But I suspect that deep down he still retains those social democratic values that define our philosophies, which the next Prime Minister of New Zealand, the Hon Phil Goff, personifies so clearly.

I say that this bill is future-proofing the country, because the Minister must know that precious few Kiwis will be returning to this wonderful country as long as the National Government is in power. After all, what is attractive about privatising the accident compensation system? In fact, I will tell members who will be coming across the ditch in a great hurry. It will be the Australian insurance companies, who will be wringing their hands in glee at the anticipation of the privatisation of the scheme. It is coming, and I ask members opposite what is next, because that is what the voters in Napier and New Zealand are asking. Will the Government force children who play sport to pay their own accident compensation levies? And what about the elderly? Let us face facts: the elderly use up a fair bit of the accident compensation budget, so will the Government start charging them, as well? What about primary school kids? Will there be another tax on their parents? Of course, kids fall out of trees, and they use the accident compensation scheme. So what is next? What sort of country is the National Government turning this wonderful New Zealand into?

Shall we go further? I wonder whether the Government will privatise Kiwibank. After all, Mr English refused to recapitalise, so the bank had to start borrowing offshore. It was disgraceful. What about privatising Television New Zealand, or even the Department of Conservation. Well, the Government has already done so, to a certain extent, because it is allowing a preferential planting right on Crown land for selected groups.

I wonder whether National will accept the advice of its former leader and privatise schools. There is a plan for Mr English and Mr Key: let us make money out of education. Well, let me tell members something. Kiwis are not simply pieces of data on a spreadsheet to be manipulated and manoeuvred in a sick attempt to save a dollar here and a dollar there, at the expense of our long-term future and well-being. We are hard-working mothers and fathers, sisters and brothers, who are struggling at this point in time, and this just makes it worse.

We have seen too much of this with the axing of the KiwiSaver contributions, as my colleague the Hon David Cunliffe mentioned. As for adult and community education courses, I ask whether members know that in Napier there will now be no night courses run next year. A total of 6,000 people took night courses in Napier this year, but none will be doing so next year, because there is no money to fund them. Those courses survived for decades, even under the Rt Hon Sir Robert Muldoon, who really stuffed this country up. But at least he understood the value of education. For a lot of people, it is second-chance education.

What about the axing of the tertiary incentive allowance, through which the honourable Minister who cut that allowance got her degree. She stood up and said that if it had not been for the tertiary incentive allowance she would not have got her degree. Then she cut it. And now we have a former leader of the National Party appointed to the head of a Government working party called the Productivity Commission. The Prime Minister stated that this report had some nuggets in it. Well, I wonder what those nuggets are. Maybe they are doing away with interest-free student loans or cutting the minimum wage by $100 a week. Imagine that! Imagine cutting the minimum wage by $100 a week. Wow, that is amazing. Or maybe there will be a flat tax structure. That would be great if we earn over $100,000 a year and do not give a damn for ordinary Kiwis. For the vast majority of Kiwis this sort of productivity report is a slap in the face for ordinary, good, hard-working New Zealanders, and the Government should be ashamed of itself.

What will we see next year? The whole of New Zealand will hold its breath in anticipation. We will watch the rush to travel agents as Kiwis book their tickets to Australia for a couple of years before coming back to New Zealand once Phil Goff becomes Prime Minister in 2011.

Amy Adams: The next Labour Prime Minister hasn’t been born yet, Stuart, I am sorry to tell you.

STUART NASH: I say to Amy Adams that he is a man of integrity, honesty, and substance, and he will make a great Prime Minister.

As mentioned, this bill is future-proofing the country for when Kiwis choose to return. This is a sensible arrangement that allows New Zealanders to bring their Australian superannuation funds back into New Zealand and consolidate them under one account. This is a sensible and common-sense measure for a number of reasons, but one of the most compelling is that there is potentially $16.6 billion in lost contributions from New Zealanders working in Australia who under this scheme could come back to New Zealand. Even if a fraction of that money was to come back home, it would have a positive impact. Let us look at the problems that are going on in Australia at the moment. Australia is into its fire season—I think it has 52,000 fires a year—and it has a water shortage problem. Water is our competitive advantage. New Zealand is an oasis. New Zealanders will be coming back in 2011—members should not worry about that. Like I said, if even a fraction of that figure were to return once Labour regains the Treasury benches, it will be good for the country. It is only 2 more years, but those are 2 years too long for many hard-working New Zealanders who are struggling to make ends meet under this Government.

Members can imagine the outflow from this country if Don Brash’s suggestion that the minimum wage should drop by $100 a week was one of the nuggets that Mr Key and Mr English liked. That is not a way to achieve parity with Australia, unless parity means emptying out the country of people who simply cannot afford to stay here. As we know, the Australians actually have a compulsory superannuation fund, which makes this bill look like a very attractive proposition for us in New Zealand. In fact, believe it or not, New Zealand used to have a compulsory superannuation fund. So when Mr Foss stands on the other side of the Chamber, looks across here, and says that the Australians seem to have that side of things better sorted than us in New Zealand, he is dead right—they do; they have compulsory superannuation. We used to have compulsory superannuation over here, did we not, I say to Sir Roger. We had compulsory superannuation over here. I ask Sir Roger who designed the scheme that was in place, until a chap called Sir Robert Muldoon—illegally, apparently—abolished it. I ask members to imagine how much better off this country would be if he had not done so. Goodness me—it is unbelievable.

We are on the way a second time. The first step, which was implemented by Dr Cullen, Phil Goff, and Labour, was to introduce KiwiSaver, which is very popular. But, true to form, National cut the employer contribution from 4 percent to 2 percent. That is amazing. How will that increase productivity? It will not.

I will support this bill going through to the Committee stage. Labour members will go over it with the level of scrutiny that it deserves and that New Zealanders expect. We will end up with the type of robust legislation that New Zealanders came to expect over the 9 years of a Labour Government. However, under this Government they have been let down recently, due to a lack of process and too much urgency resulting in poor legislation. Thank you.

RAHUI KATENE (Māori Party—Te Tai Tonga) : A key aspect of this Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill is that it completes another chapter in the story of trans-Tasman relations. The relationship between Australia and New Zealand is given another boost with this bill, which gives effect to an agreement signed by the Minister of Finance and the Australian Treasurer on 16 July 2009. In the aftermath of the 2025 Taskforce report and a conservative monthly economic indicator report for November, the bill gives another push to those who already believe that the grass is greener on the other side of the Ditch. The bill allows those with retirement savings in a KiwiSaver scheme and the Australian equivalent to consolidate them into one account in their country of residence, exempt from entry or exit taxes. The bill also amends the rules for KiwiSaver for those in the scheme who permanently emigrate from New Zealand to Australia.

But as Tapu Misa wrote so convincingly in yesterday’s New Zealand Herald, it isnot the gap between New Zealand and Australia that we should target; it is the gap between rich and poor in New Zealand. Misa suggests that the gap between rich and poor in New Zealand is actually the gap we should be addressing; it is the gap that holds us back. Yet the 2025 Taskforce had the gall to suggest that in order to close the wage gap with Australia, all we needed to do was to reduce the adult minimum wage to $9 an hour. Such a move would result in a wage cut for half a million low-paid workers of $140 a week. It is not as though we can comfortably accommodate such regressive policy; the Gini coefficient, an internationally recognised measure of income inequality, rose from 26 in 1981 to 31.7 in 2007. Zero in this scale represents perfect equality, whereas 100 is absolute inequality. Set against other nations, New Zealand, when measured against the Gini index for inequality, is ranked sixth worst for inequality.

So, with the levels of income equality being as marked as they are, one can understand the enthusiasm that is being expressed for making a number of amendments to the Income Tax Act 2007 and other related legislation, such as the Tax Administration Act 1994 and the KiwiSaver Act 2006. The thinking is that boosting the incomes of mid to high income earners through tax cuts and tax exemptions will create economic benefits that will trickle down to lower-income earners. We call this the trickle-down effect. Just like those infamous buckets in Cuba Mall, the theory is that boosting the incomes of mid to high income earners will create more room for spending, which will create more jobs, which will bring about a greater demand for services, and which will mean that those at the bottom will be supported to climb out of poverty into a better quality of life—except that what we have experienced in recent years in Aotearoa is more like a trickle-up effect, which lands us back in the state of growing income inequalities.

This bill aims to take a couple of immediate steps to address the inequalities of income for New Zealanders. One is the enrolment of under-18-year-olds into KiwiSaver. The bill will enable discretionary entry for those under 18 to be amended to allow those who are now under 16 to be enrolled by their legal guardians, and to allow those aged 16 to 17 to co-sign with their legal guardians in order to enrol. In itself this is a good thing, in that it creates an opening and an opportunity for young New Zealanders to respect the savings culture—to invest in their own financial well-being and future. Another related aspect of this is the new relationship between KiwiSaver and the first home purchase. Basically the rules excluding individuals with an interest or past interest in a leasehold estate, such as having their name on a rental lease agreement, are amended so that they are eligible for first-home withdrawal.

We have been particularly interested in the opportunities for Māori to benefit from any initiatives that can address the lower levels of Māori homeownership. One of the greatest tragedies during the time of the previous Government was watching the decline in the homeownership rate amongst Māori, with the proportion of Māori who own their homes falling from 61.4 percent in 1991 to 45.2 percent in 2006. Māori Housing Trends 2008 reported that Māori had been hit by the same challenges as other New Zealanders who have found that property prices and rents have got out of reach in recent years. So it has been really exciting that the Māori Party has been able to work alongside the Minister of Housing with a whole bunch of initiatives to help Māori first-home buyers, such as streamlining the Resource Management Act and the Building Act to make building cheaper, reducing taxes so that there is more take-home pay to service the mortgage, and keeping interest rates under control through better Government spending at a time when interest rates might otherwise rise as the economy recovers. These are all important steps in our economic recovery, but there are other initiatives in train, including this one related to KiwiSaver.

The Māori Party is also proud of the developments associated with the Housing Innovation Fund, particularly in extending the scheme to make it available for new builds and for buying a first home on multiple-owned Māori land. The opportunity for first-home withdrawal is a positive amendment to the tax law that we hope will pave the way for more Māori to own their own homes.

There are some other interesting amendments in the legislation. Cure Kids is added to the list of charitable donee organisations in schedule 32 of the Income Tax Act 2007. This enables donors to obtain a tax deduction on their donations to Cure Kids—previously known as the Child Health Research Foundation—which was established over 30 years ago to address the lack of research into life-threatening childhood illnesses in New Zealand. We are talking about illnesses like asthma, childhood diabetes, childhood heart problems, liver diseases, and spina bifida—all areas in which Māori and Pasifika children are disproportionately overrepresented.

Then there are amendments to the gift duty exemptions. The bill exempts the following gifts from gift duty: gifts to local or central government bodies, gifts to donee organisations, and gifts of property made via a court order under the Law Reform (Testamentary Promises) Act 1949 or the Family Protection Act 1955, which will apply retrospectively from 24 May 1999.

All of these measures are perfectly legitimate, valid ways of making changes to the tax laws, and, as such, they give us grounds to support this bill. But I cannot leave this debate without raising again the need to do better in addressing inequality. In The Spirit Level, which was produced this year by Richard Wilkinson and Kate Pickett, the authors suggest that in highly unequal countries like New Zealand, the cost is almost always high rates of social dysfunction. They draw upon more than 30 years of data to demonstrate that in an unequal society there are more people in prison; there is more violence; more people suffer from ill health, mental illness, or drug or alcohol addiction; there is more adult and childhood obesity; there are increased infant mortality, homicides, and teenage births; and educational outcomes and performance are lower. If anyone is under any illusion that this tax bill will address those issues of profound inequality, I would caution against it.

But that does not mean we should abdicate all responsibility for change. We must do something to address rising food prices and the impact that that has on the ability of those in low-income households to purchase healthy food, by exempting this food from the goods and services tax. That is the substance of the next member’s bill that I will be submitting, and I would appreciate members’ support for it. The other wider issue, of course, is the need to include broader economic measures, such as unemployment and income levels, with growth measured using a genuine progress index.

The Māori Party will vote for this bill to go through to a select committee today, and we look forward to the future discussions on it. Kia ora.

AMY ADAMS (National—Selwyn) : I am happy to take a call in the first reading debate on the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. Although the debate has been reasonably wide ranging this afternoon, it is probably worth coming back to the fact that the provisions in this bill are reasonably simple, straightforward, non-controversial, I would suggest, and, from what I can garner, very well supported in the House.

Those provisions are very simple, really. The main provision is around the portability of superannuation savings between Australia and New Zealand. It will take us a step closer to that common, single economic market between us and our closest neighbour and friend. I think that is an important point, because a huge amount of money gets left behind, lost, and disassociated from its owners in superannuation schemes, particularly in Australia, which has had a history of compulsory superannuation. Those schemes have a vast pool of money that does not find its way back to its appropriate owners. There is a good chance that a large chunk of that money relates to New Zealanders who have done some work in Australia, come back here to live, and really forgotten about it or lost track of it. This bill will allow New Zealanders coming home to consolidate their financial affairs in New Zealand, bring that money back, put it into their KiwiSaver scheme, and run their retirement savings through one pool, which is very sensible. It is a good initiative, and certainly one I support.

The bill also confirms the annual tax rates and makes important remedial changes to the KiwiSaver provision, specifically and most important to how it applies to those aged under 18—getting them into the scheme, whose consent is required, the deductions from PAYE where child rates apply and the like, and a number of other tidy-up measures.

The only other point that I wanted to touch on—and I did hear the Minister talk about this in his opening remarks—is the removal of gift duty for gifts made to donee organisations, which is income tax language for charities. That is a very important step forward, because for too long a gift to charity has certainly been deductible for income tax purposes, but if one was not careful it would attract gift duty if one managed to cross the threshold of $27,000 a year. That is a significant barrier to large-scale donations to charities. It is a provision that I could never see the sense in, and I am very pleased that it has been picked up on and addressed in this bill. I hope that encourages New Zealanders in their philanthropic efforts. It is a good bill and I commend it to the House.

Hon DAVID PARKER (Labour) : As prior speakers on behalf of the Labour Party have no doubt already said, Labour will be supporting the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill to the select committee. We are particularly pleased to see that the KiwiSaver provisions introduced by the previous Labour Government have led to an arrangement being possible with the Australian Government for the portability of savings under Australian superannuation schemes, so that they can be brought back home to New Zealand KiwiSaver compliant schemes.

It is interesting to reflect upon the divergence of the New Zealand and Australian economies in the last few decades, particularly given some of the, I think, simplistic analysis by the 2025 Taskforce, which was chaired, of course, by Dr Don Brash. The big difference between New Zealand and Australia over the last three decades is when it comes to savings. The Australians save well; New Zealanders do not. Australians have been saving for their retirement for decades; New Zealanders have not been. Indeed, if any member in this House can speak authoritatively on that issue, I would have to say it is Sir Roger Douglas. Sir Roger introduced into this House in 1972—I think, from talking to him recently; I had to check with him for the exact date—a private member’s bill. He was in Opposition at that stage, in the Labour Party. The bill introduced compulsory superannuation savings in New Zealand. Not long thereafter a Labour Government was elected, and that Labour Government introduced—again, using the model that Sir Roger Douglas had developed—compulsory superannuation savings in New Zealand.

Those compulsory savings were used by the National Party under the Rt Hon Sir Robert Muldoon as the cornerstone of its campaign against the Labour Party at the following election. He did a couple of things that were terrible. Members will remember the “reds under the bed” cartoons—or, I should say, the dancing Cossacks cartoons—and the talk that the whole of New Zealand was, according to Sir Robert Muldoon and the then National Government, going to end up owned by the superannuation scheme, and that therefore it was a bad thing to do. National promised that if it was re-elected, it would axe the scheme and would give everyone the money back. Indeed, Sir Robert Muldoon encouraged people to stop making contributions to the superannuation scheme, despite the fact that the law remained on the books of the country. As a consequence, he was successfully taken to court, in what is still a notable case, Fitzgerald v Muldoon. Mr Fitzgerald took the Prime Minister of New Zealand to court for ignoring the laws of this land in telling people that they did not have to comply with the requirements of compulsory superannuation.

That is a big difference that has arisen between the fortunes of Australia and New Zealand. For the three decades since then, we have not had settled superannuation policy on any long-term or durable basis, and we as New Zealanders have not saved enough. We have spent too much and we have not saved enough.

The most recent recurrence of this terrible trend in New Zealand of National Governments unwinding the positive moves towards better provision for long-term savings for superannuation and investment capital for new or expanding enterprises in New Zealand is, of course, the current Government. The current Government has relied upon KiwiSaver to achieve the advances that are referred to in this bill in terms of the portability of superannuation from Australia into New Zealand. Those advances would not have occurred but for the KiwiSaver scheme. The KiwiSaver scheme is sufficiently similar to the Australian scheme that the Australians have been convinced that there should be portability, and that the superannuation savings under Australian schemes should be able to be converted into KiwiSaver.

Of course, KiwiSaver in itself is less effective than it was. The savings deficit in New Zealand is significant. New Zealanders need to save a lot more. KiwiSaver gave significant tax credits to employers, which eased for them the transition into contributing to the savings of their employees. Employers got a contribution by way of a tax credit to the amount that they were spending on their employee’s savings. The employee was required in response to save 4 percent of his or her earnings. The inducements to the employee included tax benefits to the employee. So through the combination of the tax credits to the employer and the tax benefits to the employee, droves of New Zealanders were beginning to save 4 percent of their income, plus 4 percent matched by their employer over time. That has been halved by the current Government. In doing so, the current Government also removed the tax credit to employers, so if the employer is now contributing, it is at a real cost to him or her, and there will be less encouragement from employers for employees to begin to save for their retirement and to reverse the long-term trend in New Zealand of insufficient savings.

Those insufficient savings show up most transparently in our current account deficit. Year by year, New Zealand gets poorer as we sell more of ourselves to overseas lenders. That is essentially what a current account deficit does. Except to the extent that the additional capital that is coming into the country goes into productive investment, the rest of it is consumed, and in New Zealand the majority of it is consumed. As a country, we get poorer and poorer to the extent of our current account deficit, which is largely consumed. That reflects the fact that we spend more than we earn and we do not save enough. As a consequence, our country gets poorer and poorer year by year. Although the Government has been saying that it will reverse that, and that it will cause the next round of economic growth in New Zealand to be in the productive export sector, the tradable sector—be it primary produce or manufactured goods and services—the reality is different. The growth we are now starting to see in New Zealand is actually from the re-inflation of the Auckland property market. We are seeing an increase in residential housing activity. We are not seeing the increase in export-related investment that we need to cure our current account deficit. In part, that is because the competitive investment capital is not available to our businesses at competitive international rates. In part, it is because we have a volatile exchange rate.

Neither of those issues are fixed by this legislation, but Labour will, none the less, support the bill being referred to a select committee, because it is good that we at last have some vestige of savings policy in New Zealand through KiwiSaver that is being recognised by the Australian Government as sufficiently good to allow reciprocity, or conversion of Australian-based superannuation into New Zealand schemes.

Other changes made in this bill are supported by the Opposition. Indeed, I think we did some of the preliminary work under the Hon Peter Dunne, who held the same role in the previous Government, relating to gifts to charities, and to the removal of gift duty consequences for larger gifts to charities. That seems to be a desirable thing to do, as well. In closing, I say that Labour supports the bill being referred to a select committee, but it laments the fact that KiwiSaver is not as good as it could be.

Hon Sir ROGER DOUGLAS (ACT) : I want to take up some of the points that the Hon David Parker has talked about. But before I do, I just wanted to say that although all of us recognise that the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill is necessary, essentially what it is doing is fiddling while Rome burns. What we as a Parliament are doing is essentially borrowing the equivalent of a hospital every week, and we intend to go on for 4 years borrowing $250 million a week, or a hospital a week. Frankly, that is unsustainable. The fact is that if we come back to retirement—and I think if we are talking about superannuation, we cannot actually talk just simply about superannuation; we have to talk about retirement—the cost there is not simply superannuation; it is also healthcare in retirement, which is getting more and more costly. If we look at this year’s Budget, if we look even at provisions in this bill, we find that 60c in every dollar of personal tax that each and every one of us here and throughout New Zealand pay goes to the retired. It costs $1 in every $3 of personal taxation to meet the superannuation costs of the retired. It cost 27c in the dollar of every dollar of personal tax to meet the healthcare costs. That is 60c in the dollar, and we have a retired population of around only 12 or 13 percent. When that gets over 20 percent, this country will be bankrupt unless we do something about it.

I do not believe that any of the political parties in this Chamber have a policy that would help get us out of that. Our Māori Party member, Rahui Katene, who spoke in this debate, talked about inequality. Although I agree with her, I do not agree with the cure. Let us take superannuation, for example. The present superannuation scheme is unfair. It is certainly unfair to Māori. Māori enter the workforce generally at a younger age than most New Zealanders do. They therefore work longer in the workforce than most New Zealanders do. In other words, they are paying more taxes over their working lives, yet they die at an earlier age on average and get nothing. Only a superannuation scheme that is fully funded meets their requirements and the requirements of many others on low incomes.

The same is true in other areas like education and health. That is why I advocated the other day in a paper that I published that the first $600 of income a week should be tax free, giving around $6,500 extra a year in people’s pay packets. But if people took that tax reduction, they had the responsibility to buy their accident and sickness cover, their health cover, and to save for their own retirement. The fact is that if the average person did that over his or her working life, he or she would be likely to retire with somewhere between $800,000 and $1,000,000 in the bank. Certainly, that would be better for low-income earners, often Māori, and Pacific Islanders.

It is time for this country to actually take stock. The thought that this Government is going to borrow the equivalent of a hospital a week for the next 4 years makes me shudder. We can fix it. The paper that I put out demonstrates how we can fix it if we are prepared to make some necessary changes. It is true that this Government inherited a mess from the previous Labour Government—there is no doubt about that. But at the end of the day, it does not matter who created the mess. This Government has the responsibility to deal with it. Labour will not recover for a long time from the fact that over and above inflation, it increased Government spending by about $18 billion a year.

PESETA SAM LOTU-IIGA (National—Maungakiekie) : I rise to support the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. In July this year, despite the sideshows presented by the Opposition, the Hon Bill English and the Hon Wayne Swann signed a memorandum of understanding to establish a trans-Tasman retirement savings portability scheme. That scheme, as many have already mentioned today, opens the way for New Zealanders to return home from Australia and bring their retirement savings with them.

New Zealanders who have lived in Australia—and I include myself in that group—will be able to bring home their savings, which are currently invested in Australian superannuation funds and Australian businesses, and invest them in New Zealand businesses and New Zealand infrastructure. This bill will enable the exchange of funds. Of course, some will take their KiwiSaver savings and transport them to an Australian fund, but, given the history of New Zealanders working in Australia and those who are now returning to live in New Zealand, given the change of Government, and given the optimism that this National Government has brought to this country, the flow of those funds will undoubtedly be greater from Australia to New Zealand.

As the previous speaker, the Hon Sir Roger Douglas, mentioned, this bill will not solve all our problems. I do not believe Rome is burning. But the bill is consistent with the raft of other legislation that we are putting in place to make it easier for businesses to raise capital and for funds to invest in the rundown infrastructure of this country. It will make it easier to create a single trans-Tasman market, not just for goods and services but also for labour and a number of other investments that cross between our two countries.

Some of the details of the bill will be discussed in the Finance and Expenditure Committee and throughout our deliberations. Key points are that the transfer of funds is voluntary, and that the transfer between New Zealand and Australia will be exempt from any taxes, which I think is particularly important. The amounts that are transferred between the two countries will not be available for investment in a third country. I support this bill and look forward to its implementation, and we expect that to occur in the second half of 2010. The bill will assist us through the hard edges of the recession, and I look forward to working through it with the select committee in the coming months. Thank you.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : As my colleague David Parker said, Labour will be supporting this bill to the select committee. This is an interesting debate, because it is indeed rich with irony. This is the first bill on superannuation matters that National, in Government, has brought to the House that is positive. The other bills that have been brought forward involved the suspension for 10 years of the pre-funding payments to the Cullen fund, and pulling the rug out from under the, at the time, 1.2 million Kiwis who had signed up to KiwiSaver, by gutting the Government contribution. Then we have this bill, in the name of the Hon Peter Dunne. I note that as a member of the previous Government he supported the building of those two funds, both KiwiSaver and the Cullen fund, as it is colloquially known, and now supports the actions taken by the current Government. But now, of course, we have a bill that is positive: the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. I refer to the trans-Tasman portability provisions: KiwiSaver to there, and Australian superannuation funds to here. Yes, I agree that it is a positive outcome.

The other irony in this debate is that we heard from Sir Roger Douglas. I pay tribute to him for putting in place, under the Kirk Government, a superannuation scheme on which, if we had it today, we might be debating, in this bill, the portability aspects of the legislation, but we probably would not be having debates about some of the ills that Sir Roger and others have talked about, in terms of people’s retirement savings and a lack of a savings culture, because we would have had that fund, well ahead, I would have said—I think it was about a decade or 12 years ahead—of when the Australians decided they would embark on a compulsory superannuation scheme. I remember that Paul Keating as Treasurer took heaps. I think from memory it was 1987 or slightly earlier when he introduced that scheme. It took heaps, but I think for only about 3 or 4 years. I worked in Australia in the mining industry for a number of years, and I remember asking people about the history of superannuation because it was a new experience for me to be paying into a compulsory superannuation scheme.

Of course, for the Australians it is death, taxes, and superannuation—nobody cares. It is just what they do; it is the appropriate thing to do. The Howard Government fiddled with it in the mid-1990s, in the same way. He pulled part of the rug. He did not pull the whole carpet and the underlay out from under people, as Muldoon did in 1975, as Bolger did in the 1990s, and as Shipley did. Ironically, it was the current finance Minister, as he was then as well, I believe, who cut superannuation to our superannuitants and senior citizens three times.

Then we come to today, and we face a Government that has suspended payments to the Cullen fund. It has done it all again in the typical Tory way—not only fiddled with superannuation but gutted superannuation. Bill English said there is no economic literacy. What was the exact quote? He said: “National says that borrowing to save is economic illiteracy.” That was from Bill English. He has carried on that wonderful tradition that he started in the 1990s, that Muldoon started in the 1970s. Every time a National Government gets into power, it guts superannuation. If the pre-funding is suspended for 10 years, we will never recover from that. He has decided, for political purposes, to pass the cost of superannuation on to the next generation. His legacy, in terms of preparing and planning for this country to have a viable savings plan, is to suspend it. Ironically, the Cullen fund recently made $2 billion, so was it economic illiteracy, as he puts it? Does he still hold the view that it is economic illiteracy to save for one’s retirement? I suspect that that will be the legacy of this Government.

Chris Tremain: To borrow to save.

Hon CLAYTON COSGROVE: If that is the case, then New Zealanders with a mortgage—because I know that that member who interjects is a real estate agent—would never make any contribution to their superannuation retirement savings, because they are borrowing on the other side of the ledger. They would not do that, would they? It does not add up. That member on the other side is fired up. As I said before, that is the history of the National Government, from Muldoon to Bolger—remember it? “I won’t alter the age, no ifs, no buts, no maybes, from 60 to 65.”—to Shipley, and English as it was then, who cut the pension three times, refused to inflation-proof it, reversed all those things we did in Government, reversed the lot. We set up the Cullen fund, put it to 65 and then 66 percent, no less, of the average wage, gave our elderly folk security in retirement, and set out the social contract for those who are working now, with an expectation of what they had to do in order to meet their retirement savings.

Those Kiwis also stepped up to the plate, 1.2 million of them and counting, as they signed up to KiwiSaver to make their contribution. The Government put in, the employer put in, and, as I say, we set up the so-called Cullen fund to pre-fund superannuation. Most of that has been gutted by this Government. So this debate has a touch of irony, as we have the original architect of a compulsory superannuation scheme, Sir Roger Douglas in the 1970s, contributing to this debate, and as we have over there the man Bill English who, as finance Minister, aided and abetted by Jenny Shipley, and in the Bolger Government, was responsible for all the savage cuts to superannuation and the increase in the age. We have the irony of this being the first bill in respect of superannuation that has any positive effect that has been brought to this House by that Government—portability.

I suspect that other speakers are right—there will be people on both sides of the Tasman who will exercise their rights to transfer their funds and will now look at this in a very positive way. I say to Peter Dunne that I wonder whether he feels irony in this debate, as a person who, under a Labour Government, contributed very, very positively and advocated very, very strongly for the Cullen fund and for KiwiSaver—and I pay tribute to him for that—yet who now sits in a Government that has basically unravelled what I think he believes in most.

I do believe he has honourable intentions in respect of these policy issues. He believed in them, he backed them, and he advocated for them. The sad thing is that that Minister sits in a Government that has torn them all asunder. I wonder whether he senses the note of history or irony in this debate. What this Government is doing—although this bill is positive—is basically sending a bill to the next generation to pay for their superannuation. The policy platform does not encourage savings. In fact, it undermines them, as the Government has ripped out and halved the Government and employer contributions and has taken away some of the incentives. Yet Kiwis will still sign up, because Kiwis have worked out that they have to make some provision.

But this is the way National has acted throughout its history, since the 1970s. I know that Mr Gilmore, being the fountain of knowledge on all things—and he may have done history in his undergraduate degree—will know that I am correct. If he looks up his encyclopaedias or flicks on to the Internet he will know. He could Google “Muldoon and superannuation”, or “Bolger and superannuation”, or “Shipley and superannuation”, or “Bill English and superannuation”, and he would see that every time his party got into power it did nothing but undermine, pull apart, and crash and burn any savings culture in this country.

So it is with a touch of irony and history that we do deal with, I think, a positive bill, which we will support. This is the first piece of superannuation legislation—ironically, it was brought in by Peter Dunne—that does anything positive for Kiwis both in this country and on the other side of the Tasman. They will come back. Government members talk about a legacy. They had left to them a legacy of a Cullen fund making money, of a KiwiSaver scheme set up with huge support from New Zealanders. A platform and a savings culture was being established, and within months the new Government decided to pull the pin on it. So Bill English has lived up to his National Party roots and his legacy. He will go down in history, along with Bolger, Shipley, and Muldoon, and the others, whose greatest impact on New Zealanders’ lives was to pull the rug out from under them in respect of their retirement savings.

AARON GILMORE (National) : That was a wonderful bit of rhetoric from the member for Waimakariri, the Hon Clayton Cosgrove. Maybe it was a deputy leadership challenge. I think the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill is all about some wonderful steps. I think it is great that the member for Waimakariri thinks that the former National Prime Ministers are super. I think it is great that he thinks they are super, but I will talk about another super man. Bill English, who is in the House, has done a wonderful job of putting in place some wonderful portability around KiwiSaver. When I was born, New Zealand had a higher per capita income than Australia. Since that time, we have gone backwards.

This bill will allow somewhere in the region of $15 billion to $16 billion, as I understand it, sitting in Australia right now to come home. Some of the tens of thousands of Kiwis who, since the last election a year ago, have decided to come home will be able to bring their capital to New Zealand and invest in the things that are here in New Zealand. I think that is a wonderful thing. We welcome them home. Whether they are seniors or young people, wherever they come from, we welcome them home. They are coming home in droves because what they want is a John Key - led National Government, and they are very happy to come here. They want to bring their investments home.

Our Government is focused on issues of growth, but the member who just resumed his seat, Clayton Cosgrove, talked about the vagaries of history. I do not care, really, about the history; I care about the future. The other thing I want to talk about is the fact that the portability of KiwiSaver will allow some people to bring money here. The member has worked in Australia. One of our members who spoke earlier worked in Australia. They have money tied up in superannuation schemes there, and they can bring it home in KiwiSaver, and that money can then be used to invest in and grow New Zealand businesses.

I want to touch on one other aspect of this bill that no one has spoken about, and that is the technical issue around non-resident oil-rig operations. This country is mineral-rich. We have spoken a lot about Australia and Australia’s wealth. Well, our third-biggest export last year was oil, despite what people believe. This bill will push out for a bit longer some of the exemptions that the oil rig operators have. At the moment there are two oil rigs drilling off the coast of Taranaki, and I expect there will be more in the next 6 months. There is something like $1 billion being invested in oil rig drilling operations over the next 6 months, and some of them will be successful. That will allow us to grow our economy faster and catch up with Australia. That is all I want to touch on. I look forward to further debate at the select committee.

• Bill read a first time.

• Bill referred to the Finance and Expenditure Committee.