Hon PETER DUNNE (Minister of Revenue)
: I move,
That the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill be now read a second time. It has been a while since this bill was introduced, so let us just recap briefly on what it does. It is an omnibus bill that makes a number of wide-ranging changes to our tax system. Some of these aim for greater efficiency in innovative tax services, some deliver on changes that were announced in Budget 2011, and others ensure that the current rules continue to work effectively and with greater fairness.
It is a point that is worth stressing repeatedly that in tax administration an important way to simplify the system and to gain greater efficiency is through the greater use of electronic systems—a theme that underpins this legislation. For businesses, the bill’s main thrust is to modernise the record-keeping requirements they face by making it easier for taxpayers to store their records offshore through applications from their data storage providers, and by allowing taxpayers who submit returns electronically to also store them electronically. The bill also contains a proposal to simplify and reduce the costs of record-keeping by removing a number of legal barriers to electronic filing and record-keeping as the Inland Revenue Department moves away from its currently cumbersome paper-based systems towards the greater use of electronic services.
The bill also proposes to rid taxpayers or their agents who send electronic returns to the Inland Revenue Department of the requirement to retain paper copies of those returns. That may seem a simple and, indeed, an obvious step in today’s environment, but it is a significant one that will substantially reduce the cost of keeping records.
It is also worth noting that the bill contains a proposal to give business greater certainty over the tax treatment of costs incurred on software development projects that are unsuccessful by allowing an immediate deduction for expenditure incurred in the year that the development is abandoned. The consequence of this will be a fairer outcome, which should help more investment in innovation.
Continuing the theme of fairness, to bring greater equity to the filing returns system, the bill also amends the tax return filing rules for salary and wage earners. Our tax system works on the principle of paying about the right amount of tax through the PAYE system, and this will even out over time. The advantage for many taxpayers is the removal, therefore, of the annual requirement to file a tax return, meaning a reduction in their compliance costs, and freeing up the Inland Revenue Department from processing those returns to focus its resources on higher-value activities.
Over the years that advantage has been eroded. Some salary and wage earners have been cherry-picking only the most favourable years in which to square up their tax obligations in order to receive a refund, while of course ignoring those years where there might well be tax to pay. This has resulted in the number of refunds for small amounts flowing out of the system and none of the balancing tax to pay it back, if you like, coming back in, so the evening-out process that the legislation—which dates from the late 1990s—sought to put in place is, in effect, being nullified. So what this bill proposes is that taxpayers who choose to file a return for a particular year in which they expect an advantageous result should also be required to file returns for the previous 4 consecutive years.
The bill will also remove the requirement for taxpayers to file an income tax return or to receive an income statement from the Inland Revenue Department merely because of their Working for Families entitlements.
This bill was considered by the Finance and Expenditure Committee. I want to acknowledge the work that the committee did and the fact that, in bringing the bill to its second reading, the committee made two very important recommendations. The first of these is that the proposal to amalgamate the IR3 and personal tax summary return, which members may recall was included in the original proposals, should not proceed. Its second recommendation was that the implementation of the other return filing proposals for individuals that were remaining in the bill should be changed from the 2014-15 tax year to the 2016-17 tax year. These latter proposals can be activated earlier, if that proves necessary, by way of an Order in Council. I think that these are sound recommendations. I think that they will allow the Inland Revenue Department to implement the returns filing proposals for individuals alongside other high-priority changes that are already being implemented.
I should also inform the House today that I intend to release a Supplementary Order Paper on this bill. That Supplementary Order Paper will focus largely on issues relating to the Canterbury earthquakes. I am confident that it will provide real help to the citizens of Canterbury, as the matters that it addresses were all raised by taxpayers and their agents. It will introduce a series of remedial changes to ensure that the international tax rules are also working as intended.
Overall, this is a straightforward piece of legislation. It is consistent with the changes that we have been making over a number of years to simplify and make the process more efficient. It is taxpayer-friendly in the main. It has been well considered by the select committee, and I acknowledge the members for that work. I am now pleased to commend the bill to the House for its second reading.
Dr DAVID CLARK (Labour—Dunedin North)
: The Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill follows neatly on from the last that we have debated, and that is because it also is about tinkering. It is an omnibus bill, as the Minister of Revenue has told us, and it does some worthy things—I will not deny that. The Minister is striving to ensure that the tax system we have has loopholes plugged. He is making some useful flip-flops on KiwiSaver, and he is tightening up one or two things that it is good to address.
The submitters to the Finance and Expenditure Committee, which was well run by members opposite, made a number of salient points, and so we had some general consensus around changes that should be made. We heard from Mr Crooks, Mr Gilchrist, Mr Lay, Buddle Findlay, a coalition of insolvency practitioners, Contact Energy Ltd, the New Zealand Law Society, the New Zealand Computer Society, PricewaterhouseCoopers, the Corporate Taxpayers Group, Gerry Rea Partners, KPMG, the New Zealand Bankers Association, and so on. You get the picture. These were a worthy group of submitters who had given this bill full attention. So I think it is fair to
say that technically it is a very competent bill, and the Labour Party will support it on that basis.
However, the thing this bill does not do is address the real problems with our taxation system. This bill does nothing to address the 4 percent drop in revenue since this Government came to office 4 years ago.
Hon Dr Nick Smith: The GFC.
Dr DAVID CLARK: The global financial crisis, as the Hon Dr Nick Smith points out, did have an effect on the tax take. The member is quite right. The Inland Revenue Department attributed 1.5 percent of the drop in tax take, of a 4 percent drop, to the global financial crisis. The other 2.5 percent it attributed to policy changes.
We know that the biggest change in recent times is the tax changes of 2010 that the Government made. They have seen Government revenue plummet, and this bill does nothing to directly address that. Sure, it stops a few loopholes. It does make some small amount of difference, but no measurable difference in that respect. The finance Minister continues to describe those changes made in 2010 as broadly fiscally neutral, and with that—we know he takes some licence from his surname—he is really redefining the English language in that respect. The word “broadly” has been given new meaning, I would suggest, because “fiscally neutral” usually refers to the forecast period, which is a 4-year period. Now the Minister is referring to the “business cycle”. He has stopped saying that it is fiscally neutral; he has started saying it is broadly neutral over the business cycle.
This is evidence of a Government that is struggling. It is struggling in this area. It does not have pro-growth tax policies, and so the investment signals that people are getting encourage them to put money into the speculative sector and not into the productive sector. This is something that needs to change. This is not addressed in the bill in any sense, really, other than stopping some loopholes, which, again, could be speculative but are probably not productive. It does nothing to address that.
It also does nothing to increase savings. We need a universal KiwiSaver. This bill does raise the employee contribution rate for KiwiSaver from 2 percent to 3 percent. National has been flip-flopping all over the place on KiwiSaver. Only 2 years ago, I will remind members of this House, National cut the employee contribution from 4 percent to 2 percent. So it has gone down from 4 percent to 2 percent, and now the Government is putting it back up from 2 percent to 3 percent. It is all over the place. The Government has more positions on KiwiSaver than the Kama Sutra, I would contest.
We see that the Government is tinkering with savings, but it does not really have a vision for this sector. The minimum wage increase that my member’s bill puts forward would assist with savings policy, because it would ensure that hard-working New Zealanders could make contributions to this KiwiSaver scheme addressed in the bill.
We know we need pro-growth tax policy. We know we need savings increases. If we look across the Ditch to Australia we see it has $1 trillion in its superannuation scheme looking for a home—looking to support businesses. We have nothing like that in New Zealand. Muldoon scrapped it. A previous National Government leader scrapped this scheme, and if we had it today, we know we would be in a much better position. We would have greater capital depth in this country. But this bill does not directly address that problem. All it does is correct a few loopholes. The research and development tax credits, which could change it, are not in there, nor is monetary policy change to support our exporters.
Why are we not getting that? Why are we getting this kind of bill? I want to contest that it is because we have a problem with the Inland Revenue Department. We have a computer problem in the Inland Revenue Department that this Government has not yet dealt with. We have computer systems that are on their last legs. I want to quote from
the Prime Minister, who said in February this year that tax policy is being held up because the computer systems—and here is the quote—“can’t actually support radical changes from Government.” This Prime Minister here—the National Prime Minister—says that his own tax department cannot actually support radical changes from Government. This is the Prime Minister of this country saying that it cannot make significant changes that will be of benefit to our country. This is really troubling stuff. “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” Who said that? That was the Prime Minister.
Chris Hipkins: The Prime Minister?
Dr DAVID CLARK: Yes. He said: “You don’t want to be in a position”—
Hon Trevor Mallard: The current one?
Dr DAVID CLARK: —the current Prime Minister—“where Parliament is held hostage to a lack of technology.” That is precisely what we have got. That is why we have got this watered-down legislation. That is why we have got legislation that is not going to make a difference to New Zealand. That is why our economy is in the doldrums. This is what he told Parliament.
We know that when the Government attempted to do something about this—it was told when it first came to office that this system was on its last legs—Mr Dunne received that briefing and the department did start to try to address some of the issues. It made a $21 million false start—a $21 million false start. That is taxpayer money that went into a system. I think it did the right thing in pulling out, by all accounts—it went nowhere. But what has it done since? We have no plan as to how this tax system is going to be fixed. We have the ageing FIRST core computer system, now more than 20 years old. That was built in 1992, before Google and before Facebook. This is the system that we are reliant on as a country to ensure confidence in our tax system, and we have a Prime Minister who tells us we cannot rely on it.
I want to say that we are in a dire position, and that is why this Government is reduced to tinkering on tax policy. Partly, it does not want to address the big issues, but partly it is hamstrung because it does not have a clear plan as to how it is going to get the systems in place. It is about time the taxpayers of New Zealand were given a clear picture of how this problem is going to be addressed.
This bill does raise the employee contribution for KiwiSaver from 2 percent to 3 percent, after National wound it back from 4 percent to 2 percent previously. It is also true that the big ideas that the Government has are reduced to things like the paper boy tax. We know that that was the big idea in the Budget from the Government. This is along similar lines. We have an omnibus bill. It is worthy and it closes a few gaps, but it really is not going to address those big issues. The tax switch, which all our hard-working New Zealanders are hurting from, is still in place. The top 10 percent of New Zealanders got 44 percent of the value of those tax cuts; the bottom 20 percent got about 2 percent of the value. We have got a tax system that is not fair, and we have got a computer system that can hardly keep up. The Inland Revenue Department computer upgrade, we are told, is going to cost $1.5 billion—$1.5 billion, this new computer system—and yet we do not have a timetable, and we do not have sense of who is going to build it, what it is going to look like, or how it is going to give us confidence as taxpayers that our tax dollars are being properly collected.
We have a Government that needs to get its act together. We need this Government to get its act together, to get our tax system together, so that we can actually make the changes that will take New Zealand ahead as a country. Then we can stop our workers flying away to Australia because there are no prospects here and because the tax system cannot handle pro-growth tax policy. We need to make a difference. I contest that the National Government is not on top of this, and it must get up to speed and fix this issue.
: It is a pleasure to rise and speak on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill.
Can I apologise to anybody watching this on television for the speech from the last member, David Clark, because it was full of doom and gloom. The only bit that I thought worth picking up was when he was talking about the bill and suggested that it had more positions in it than the Kama Sutra. Well, I have got to say that there will be people all over New Zealand who have heard that who are thinking of the Kama Sutra and now have a picture of that member in their minds, and procreation around the country will have ceased. So I do not think that we should do that again.
He also mentioned to us that all the bill does is fix a few tax loopholes—a few tax loopholes. Does anybody remember the last election when the then leader of the Labour Party—somebody who is thought of quite fondly now, compared with the new leader—said that a Labour Government policy was to close a few tax loopholes? He said that it would save about $5 million by doing that, and would then use it for $6 billion worth of new spending. So when it comes to closing loopholes, I can say that this bill actually does a very important piece of work. It is a real piece of legislation, and is not like the pie-in-the-sky dreams that we heard previously.
I want to talk about a couple of bits of the bill that I think are quite important for New Zealanders. In particular, I want to talk about KiwiSaver. What this piece of legislation does, and what our Prime Minister has done, is focus on ensuring a very strong and important future for KiwiSaver that New Zealanders will benefit from. Before I do talk about it, though, I want to say that the Government is clearly focused on lifting New Zealand’s economic performance. I want to pay particular attention to this in so far as the work the Government is doing collectively, but also, more important, I want to say that individual members of the Government are also doing their fair share.
On my right we have Mr Paul Goldsmith. Can I say to members opposite that when they go to the airport shortly, before they rush into a lounge there to dine, then go home to their families, they should have a look in the bookshop on the way past. There will be some serious fun to be had, because I have heard that tomorrow a book called
Serious Fun will be available to New Zealanders, authored by somebody sitting very close to me. If you pick up a copy, it is good for the economy. The book focuses on lifting economic performance, and if you are nice to Mr Goldsmith—sorry, if the members opposite are nice to Mr Goldsmith—he will sign it for you. I can see already that there is quite a bit of interest in that happening. The title is
Serious Fun, and that is what we say about Mr Goldsmith on this side of the House.
I will say just briefly that when it comes to KiwiSaver, the Government has made an absolute commitment to New Zealanders that this is about saving and focusing on the future. The $1,000 kick-start is secured in law and will remain there. That is a commitment on behalf of the Government. The changes that we are making will reduce the Government’s borrowing whilst increasing the focus on saving through KiwiSaver.
I want to give credit where credit is due, because KiwiSaver is a great scheme, and it is one that we know that 1.9 million New Zealanders have opted into. I want to give credit where credit is due. That credit deservedly goes to our Prime Minister, John Key, who secured it, worked hard to deliver on it, and made some important changes here that mean that KiwiSaver is something that New Zealanders can benefit from and rely on. That is actually very much what they also think of this Government. There are 17,500 new members a month joining KiwiSaver—a fantastic number of New Zealanders. There was $9 billion in it 3 years ago. The KiwiSaver fund has grown to $12 billion, and it is expected to be worth $60 billion by 2022—
Dr Cam Calder: How much is that?
McCLAY: —$60 billion by 2022.
I can say very clearly here that not only is the Government committed to KiwiSaver and not only does the Prime Minister support it fully, which is why we have made these important changes, but we will not touch it, as opposed to the members opposite, should they ever get on the Treasury benches again. We will leave it there for New Zealanders. It is for their use in the future. It is the Opposition that will say: “We have closed loopholes, we have saved $5 million, but we have found another $6 billion of spending, and we might have to raid New Zealanders’ piggy banks to do that.” The trust of New Zealanders is firmly in this side of the House. I look forward to the next speaker’s speech. Thank you.
Hon DAVID PARKER (Labour)
: I hope not to disappoint the last speaker, Todd McClay. I see the prior speaker has brought up the issue of
Serious Fun, a book to be published by Paul Goldsmith, I think. Of course, Paul Goldsmith is the biographer of John Banks—
Dr David Clark: The hagiographer.
Hon DAVID PARKER: The hagiographer—that is right. Actually, there are two biographies already on John Banks. One was a vanity book, which was the one that Paul Goldsmith authored. The other was a more transparent biography of some of his prior things—
Hon Trevor Mallard: Noel Harrison’s book?
Hon DAVID PARKER: —that is right, by Noel Harrison—called
Banks: Behind the Mask. Because I stood against Mr Banks, I had the misfortune of reading both. I not sure whether this
Serious Fun is poking fun at Mr Banks in the next part of his career or whether it is about some other topic.
There is a serious point to be made about that though, and that is that rather than getting on and dealing with the important decisions that need to be taken through some pro-growth tax reform and through some really significant changes to savings over time in New Zealand, which the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill only tinkers with, this Government has left tinkering and seems to be spending more of its time managing its own faux pas than it does managing the interests of the country. Whether it is fiascos at ACC, with exaggeration as to the level of problems in ACC by Dr Nick Smith—followed by a miraculous cure about a year later. Having jacked premiums up higher than he needed to, he then dropped them down for the election, then he eventually bit the dust because of some other problems. Since then, we have had John Judge dumped. I did not agree with everything he did, but I actually did think he was a decent person and did not deserve the indignities that he has suffered in recent months. We have had other—
Hon Trevor Mallard: Even this morning.
Hon DAVID PARKER: Even this morning it continues.
Hon Trevor Mallard: Judith Collins dumped on him this morning.
Hon DAVID PARKER: Yes, she dumped on him this morning and accused him of sort of covering up documents, rather than those documents having been wiped off a computer by ACC itself. Other things going wrong are legion. The latest Budget we had was all about increasing class sizes to improve teacher quality. What a nonsense. That one fell. That one bit the dust.
This bill itself, as the prior speaker, the man from Rotorua, said, does increase the compulsory contribution under KiwiSaver to “3 plus 3”, but what it does not do is expand the scheme to more people or set out a path for the future that has savings under that scheme growing progressively over time. New Zealand needs both of those fundamental steps if it is to right the wrongs that we have had in this country for
decades now, since the last National Government to tinker with saving schemes, Mr Muldoon, undermined—
Paul Goldsmith: You weren’t listening. The member wasn’t listening to the answer to question No. 1 today. It was talking about savings.
Hon DAVID PARKER: Oh, he talked about savings—OK. Mr Goldsmith tries to defend himself by saying that Mr English, in answering at question time today, said that there has been a decrease in household debt in New Zealand in the last 4 years. You would expect that. You would expect that, because in a recession people put their cheque books away. They do not buy cars, they do not buy as many dishwashers or home improvements and things, and they do not buy as many books, Mr Goldsmith—they do not buy as many books. How much to you think New Zealand household debt has gone down by?
Dr David Clark: You’d expect 10 percent or something, wouldn’t you?
Hon DAVID PARKER: By 0.2 percent, Dr Clark—0.2 percent. Those members claim that that is some wonderful success—0.2 percent. I thought Mr English went through that part of the question very quickly. It was almost sotto voce, “0.2 percent”, then he carried on with the rest of his answer.
This Government is failing to address the big issues. We need everyone who is in work, except in cases of hardship—where they have a serious illness, for example—in KiwiSaver. That is the big difference between Australia and New Zealand. We had Mr English again saying: “Oh, it’s resources.” It is resources, he was saying. Then why is it that we have net migration out of Taranaki? When I uncovered that statistic this week, I was most intrigued to think: “Ah well, I’m sure we will have that same old excuse, now that the excuse about Greece is wearing thin.”, given that people are not leaving New Zealand because of Greece’s problems; they are leaving because of New Zealand’s problems.
Andrew Little: A two-speed economy in Taranaki.
Hon DAVID PARKER: A two-speed economy in Taranaki. Unfortunately, they are both a bit slow relative to Australia, because this Government refuses to take the decisions that are necessary in order to get the economy moving. These are long-term entrenched problems, but we will not overcome them unless the Government takes the decision that New Zealanders need it to take and that businesses need it to take, so that the economy starts moving. There are some decisions that business can take. There are some decisions that business cannot take. Our population relies upon the Government taking those right decisions, and they are not being taken.
As we have heard from Dr Clark, real wages are dropping. Then we hear the Minister of Finance say: “Oh, not after tax.” What he does not tell you is his not-after-tax figure. It is true enough if you are one of the highest income earners in New Zealand, who got 40 percent of the tax cuts that went to the top 10 percent; their after-tax real wages have gone up a little bit. But there are other people—
Simon O’Connor: Tell the full story!
Hon DAVID PARKER: I am telling you the whole story. The real wages after tax of the lower deciles in the economy have not gone up. They have not gone up; they have gone down. That is another reason why we have got this great outflow of people to Australia, or this terrible outflow of people to Australia. They have no sense of optimism that they can have a profitable and secure future in their own country. Now we have reached the terrible situation in that the Government promised it was going to reverse this drain to Australia, but we have had it go up, and 40 percent of the people who are leaving are between the age of 18 and 30, from the regions as well as the cities. Those who are leaving from the regions are not replaced by immigration into Auckland. We have an ageing population in our regions. We have a spiral downwards in some of
those centres. It is very sad, and I suspect it is not going to change much under this Government.
The Government says that unemployment is not as bad as it is in other countries, and that is true. Unemployment is not as bad as it would be if we were not losing 53,000 per annum to Australia.
David Bennett: Oh!
Hon DAVID PARKER: We have David Bennett say “Oh!” and throw off at that comment.
Hon Clayton Cosgrove: He just woke up. He was snoring.
Hon DAVID PARKER: No, actually he was not asleep. He was not asleep.
Paul Goldsmith: This speech lacks punch. Come on.
Hon DAVID PARKER: This speech lacks punch—OK. Well, I will let Judy over there take the next call.
The Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill does another thing that I am not sure—although overall we are voting for this bill—is right. Contact Energy complains that this bill is changing the laws relating to the taxing of bonus shares issued by companies under profit distribution schemes. The one public company that this was going to affect in New Zealand to a significant extent was Contact Energy. Contact Energy came along to the select committee and said “Look, don’t do this to us.”, because actually what the bill is doing is making it harder for it to raise the capital that it thinks it needs in its business. It currently operates under a rule that enables it to have people retaining some of their earnings in the company and taking a bonus share in lieu of a dividend, which was causing no loss of tax to the revenue, but was causing an increased rate of leaving retained earnings in the company to the benefit of that company, and probably increasing New Zealanders’ savings.
Again, the Government did not listen. It did not listen to Contact Energy, which said that this was going to decrease the rate of savings in New Zealand and decrease the capital available in that sector of our economy for no good reason. The concern that the Inland Revenue Department had was that these schemes could be misused in other parts of the economy, but they are not currently being. So why do we not wait until they are being misused before we fix this fictitious problem? At the moment it is a future problem, rather than a current problem. Instead, the Government moved on this, again a somewhat peripheral matter, when it should have been dealing with bigger issues.
Record numbers of people are going to Australia, exports are decreasing, and the Government is not pulling the levers it has control of to reverse that trend. We are not doing the things that we need to do to improve our productive export economy, and the economy is not rebalancing.
Dr RUSSEL NORMAN (Co-Leader—Green)
: I rise to speak on behalf of the Green Party on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. The first thing this bill does, of course, is set the annual tax rates for the 2012-13 tax year. The setting of those annual tax rates fixes in place the great so-called tax switcheroo that the Government introduced. If you remember, the tax switcheroo the Government introduced was meant to pull the wool over people’s eyes. It was meant to trick people—
David Bennett: Come on, switcheroo!
Dr RUSSEL NORMAN: It obviously tricked David Bennett. It would be a pretty easy job, you would have to say. But the idea of the tax switch was that the Government would decrease the taxes on upper-income earners, which it did, and the exchange would be that it would increase GST. So what that would mean is that ordinary New Zealanders would pay by having an increase to the GST on their groceries. Every time you go to the supermarket you have to pay a little bit more GST. You pay a little more
GST so that those who are the very upper end of the income scale can have tax cuts. It meant a 5 percent tax cut, effectively, for those at the top end. So if you earned $1 million a year, then the National Government, the John Key - John Banks Government gave you a 5 percent tax cut. So if you earned $1 million a year, you were given an extra $50,000, or about $1,000 a week. Of course, that money has to come from somewhere, so the way that the John Key - John Banks Government organised this was that it said: “Oh well, every time ordinary New Zealand mums and dads, Kiwi mums and dads, go to the supermarket to buy their groceries, they can pay extra GST on those groceries.” And that is the heart of the tax switcheroo. What it meant was a big tax cut for upper-income earners, which is very significant if you are on $1 million a year. That is a tax cut of $50,000 a year, or $1,000 a week, thank you very much, John Key and John Banks. But if you were a middle-income earner, then you have to pay increased GST to cover that cost.
Aside from the sheer inequity of that tax switch, the old tax switcheroo, which was at the heart of this bill that we are considering in front of us—and aside from the sheer unfairness of a system that says we are going to give big tax cuts to those at the very top and we are going to pay for it by taxing ordinary New Zealanders more through their GST—the Government said it would be fiscally neutral or broadly fiscally neutral. That is what the Government told us. Of course, it has been no such thing. It is not fiscally neutral. At no point was it fiscally neutral. In fact, the revenue lost was probably something in the order—it is very hard to get the numbers out of the Government, because the Government is very shifty on these issues; it is the John Key - John Banks Government, after all. It is very hard to get the numbers, but it is probably about $2 billion. That is the deficit. So instead of being fiscally neutral, as we were told at the time, it has, in fact, cost maybe $2 billion so far. If that is the case, then that means an extra $2 billion has had to go on the Government credit card. We have had to borrow that money to cover the tax switch that is implicit in this bill.
So the Government introduced changes that made our tax system much less fair, on the one hand, by taking money away from middle-income earners and giving it to upper-income earners, and, on the other hand, it made the fiscal position of the Government much worse. It made the deficit worse. So that was the heart of the Government’s great tax shift policy that is put in place by this bill. For that reason the Green Party will not be voting for this bill. We think that this bill is fundamentally unjust and unfair because it sets tax rates that are fundamentally unjust and unfair.
But most of all, this bill is part of the Government’s overall economic package—the Government’s dumb, dirty, grey economic package. So instead of having smart Green economics, which is the direction in which the world is heading—smart Green economics is the 21st century economics that we should be embracing as a country—this John Key - John Banks Government is giving us dumb, grey, dirty economics. It is the economics of the 19th century when we should be embracing the economics of the 21st century. That is what this tax package is part of.
So instead of seeing a tax shift that would be progressive, such as moving tax on to capital gains, which is highly progressive, what we are seeing is actually increasing taxes on the poor and cutting taxes on the wealthy. Instead of seeing a tax shift that would reduce the taxation pressure on ordinary people and actually put a carbon charge in place, what this Government is doing is spending about $1.5 billion a year to subsidise greenhouse gas pollution via the emissions trading scheme. And instead of this Government introducing some kind of resource rental—for example, around water, which is one of our most important resources—which could then take some of the pressure off the tax system, so that we would not see the kind of tax rates that we are seeing in this bill, the Government is doing nothing about water. In fact, what it is doing
is giving away the rights to water for free. So irrigators who use water and make billions of dollars out of water, literally, do not have to pay anything for the use of that water.
Instead of having a smart Green economic future, where we would actually increase savings and would support KiwiSaver—and an automatic enrolment system would be part of that in order to increase the number of people who are getting into KiwiSaver, thereby increasing our savings—the Government backed away from automatic enrolment in KiwiSaver, because, it said, it cost too much. And, of course, the reason why the Government could not afford it was that it gave away so much money in tax cuts to upper-income earners that it could not afford to make the kind of structural change that we need to make in the economy to actually increase the amount that we are putting into savings through KiwiSaver. So auto-enrolment did not happen.
The other part of it, of course, that is missing in terms of a taxation policy is the Government’s decision to borrow to pay for the rebuild, and, of course, to put a levy on just the people of Christchurch. So it is Government policy now that the people of Christchurch will pay an earthquake levy through their rates, and the Government will borrow to pay for some of the rebuilding costs, but there will not be across the country a temporary, targeted earthquake levy—or a tax, as the Minister for Canterbury Earthquake Recovery, Gerry Brownlee, quite rightly identified, which is fair enough. A temporary, targeted earthquake levy could have been used to take some of the pressure off the Government’s fiscal position to pay for the rebuild, which would have been fair, and would have been spread across the whole country. Everybody would put in a few bucks, it would take the pressure off the people of Christchurch, and it would reduce Government debt. Instead of that being part of this tax package, which it is not, what we are seeing is that the Government has actually put a levy through its rates on the people of Christchurch—the very people who do not need extra burden at the moment. The John Key - John Banks Government has put an extra levy on the people of Christchurch to pay for the rebuild, but the rest of the country has not worn it. Instead of having that levy as part of this package, it has not had it there at all.
In terms of dealing with the structural imbalances that underpin the poor economic performance of New Zealand since the new-right economic revolution of the 1980s and 1990s, which has been an economic catastrophe for New Zealand, we have not seen anything to address the overvaluation of the currency. So whether it is part of this bill, or whether it is part of monetary policy, we have not seen any attempt by this Government to deal with the problem of the overvalued Kiwi dollar. In the middle of the currency war, this Government just says: “Oh well, whatever is whatever.” Even though the Reserve Bank says we have got an overvalued currency, which is destroying the productive sector, and even though all of the leading economists say we have got an overvalued New Zealand dollar, this Government is doing nothing on it and sitting on its hands.
Instead, the Government has gone on a spending splurge. The spending splurge is really amazing: $12 billion or thereabouts on new motorways, which have never been through Treasury’s infrastructure criteria. Treasury has a special thing. It has a special set of rules. If you are going to invest in infrastructure, you are supposed to put it through Treasury’s infrastructure rules. The roads of national significance project, a $12 billion project, has never gone through Treasury’s process. And then we have the $1.5 billion on greenhouse gas subsidies. We have the $120 million to $500 million cost of the assets privatisation programme—still unquantified. The Government will not say how much it is planning to spend on that. Of course, the permanent impact of the privatisation of the assets is that it means that the Government’s deficit is worse by $100 million a year, according to Treasury’s Budget Policy Statement 2012.
So that is the reality of this fiscally imprudent Government. It has many, many hundreds of millions and billions of dollars to give away in tax cuts for upper-income earners, to subsidise pollution, to spend on new motorways, and to subsidise its assets sale programme, and that has put the Government books into a terrible hole. So instead of getting the kind of smart Green economic transformation that we need as a country, what we are getting is very poor economic management from a Government that does not know how to manage the books. What we are getting is a tax bill in front of us here that basically cements in place the old tax switcheroo, which simply gave away large amounts of money to upper-income earners and made middle-income earners pay for it. The Green Party will not be supporting this bill.
PAUL GOLDSMITH (National)
: We had to listen again to that great Australian Russel Norman talking about economics. Circa 1955 Eastern Europe was the feeling I had there. Here we have, supposedly, the Government taking the tax off the high-income earners. We have got a tax system now where three-quarters of earners are paying no more than 17.5 percent in personal tax, and a big chunk of that group would be paying no income tax after Working for Families is taken into account. But that is not good enough for Russel Norman. I just wonder what he would be really wanting to have as the top tax rate. He would probably want a 75 percent top tax rate, like Francois
Hollande, or something like that. Perish the thought for the country if that man became Minister of Finance in a future Government.
The Labour research unit has obviously got its lines very well organised. Everybody over there talks about tinkering. That seems to be the word that they have been told to get across—“tinkering”. Well, this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, which we are talking about here at its second reading, is all about tax maintenance. The last thing this country needs right now is to be lurching all over the place with madcap new taxes, as proposed by the Labour Party at the last election. The last thing we need is a capital gains tax. It has still never been explained to me how sticking a new tax on the productive sector, like small companies, farms, and all those sorts of things, is going to somehow improve economic growth and entrepreneurialism in New Zealand.
Then Labour was going to undermine the GST system that we have here, which is the envy of the world. Our GST system is consistent right across the board. Everything is done the same way. There are no exceptions. They were going to undermine that by fiddling around with fruit and vegetables. No doubt, if they had the chance, they would return the top tax rate up to 39 percent or 40 percent and open up a gap between the top rate and the trust rate, which Michael Cullen did previously, which grossly distorted the system, led to a whole lot of avoidance schemes, and undermined the integrity of the system, and yet they have not learnt from that. I am sure if Russel Norman got his chance he would be widening and confusing all the tax rates, leading to an undermined system. I heard in the last speech that we are now going to start taxing water, and he is thinking about how best to manipulate the currency. I can just imagine him watering the milk and trying to do a good idea there.
This Government got the basic tax settings right back in earlier Budgets, where we did the tax switch, focusing on lifting tax off work and income and putting more of it on to spending, and getting that alignment right so that the economy is focused on making work. It never ceases to amaze me, in the Finance and Expenditure Committee, that we talk about smoking and most of the members understand that if you actually tax something you discourage it, and so they are all happy to put the excise taxes up on cigarettes—fully understanding and believing that if they do that it will discourage people from smoking. But they never take the next logical step and understand that if you increase the taxes on working, you will discourage people in that area as well. They
do not seem to follow that logic. I just encourage them to think about that, as we go on. It amazes me.
Look at where we have got to on tax. We have a competitive tax system internationally, which is tilting the economy away from borrowing and spending, and towards saving and investment. It is a simple tax system. Two-thirds of the cost of the income tax went into reducing the bottom two tax rates. That is something that Russel Norman never mentions. As I said, three-quarters of the earners are paying less than 17 percent in personal income tax. We have got a company tax rate at 28 percent, which is internationally competitive. A family with two children in this country can earn up to $50,000 a year and effectively pay no tax when Working for Families is taken into account—$50,000 a year. So I hardly think this is a land where lower-income earners are oppressed and are carrying an unfair burden. This is a land where we have got a very good and very equitable spread of the burden of taxation.
Drilling down to some of the specifics of this bill that we have before us at its second reading, the main purpose of it is to simplify tax filing requirements for individuals and support businesses in handling their tax obligations electronically. We have seen here that we have introduced a number of supports, giving people in the business sector more flexibility about how they use online and electronic media in the course of managing their tax affairs. Another area is closing up a loophole that has emerged in the last few years, where people have started cherry-picking their tax returns. If they realise that this year they have got a return due, they pop it in, but if they have had 3 years before where they actually had to pay a little bit of extra tax, they are not paying that. So this bill goes, in a logical sense, to say that if you are going to pick one year, actually you have got to cover the last 4 years and we will even it out. During the course of the select committee we did hear a number of arguments about that and have made some changes so that under the 4-year rule you will not now incur use-of-money interest or penalties from the previous date due. We thought that was a little uncalled-for, and that change has been recommended by the committee.
The application date for changes to the profit distribution plan is another area of this bill. It was interesting to see Mr Parker, defender of the big corporates, on that score. But we did listen, and deferred the implementation of that provision from 1 July to 1 October, which has given those companies more time to make the changes necessary. The application date and savings provision for the proposal to charge GST on late payment fees will be deferred again, from 1 April to 1 January. Again, furthermore, GST will not be charged on late payment fees if the underlying charge is exempt. So some of those things are all, on the whole, good, solid maintenance of a tax system that is working well and that is all about National being firmly focused on lifting New Zealand’s economic performance and taking this country to the brighter future that its people deserve. Thank you.
ANDREW WILLIAMS (NZ First)
: I take a call on behalf of New Zealand First on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. It is very interesting that I am giving this speech while the Olympics are on, because much of what we have heard from the National benches could be aligned to some of the Olympics in the last week. In particular, I have seen at the Olympics a number of own goals, and we have here in this Chamber today basically an admission that the Government has made a number of own goals. It is also almost like watching the rearranging of the deckchairs on the
Titanic. When they talk about tinkering they are quite correct—there is a lot of tinkering going on around the edges in relation to some of these taxation changes, rather than addressing the big picture of proper tax reform.
In respect of this, you do wonder whether, had this Government not provided those tax reductions for the wealthy a couple of years ago, and had it not knocked a billion or
two off the taxes of the wealthy, it would today be needing to rearrange the deckchairs on the
Titanic to come up with some of these sorts of nickel-and-dime, margins-of-error amounts of tax on the edges. Had the Government actually kept that billion or two from a year or two ago, which would have been in the coffers today, we would probably be $4 billion or $5 billion better off today, 2 years later. It could have done that, rather than giving all the mates of this Government—mainly the mates of this Government—some significant tax reductions.
In that respect, I had to smile when I heard the previous speaker, Paul Goldsmith, talk about “lurching all over the place”. If it is not lurching all over the place to reduce the employer contribution to KiwiSaver from 4 percent to 2 percent a couple of years ago—or last year, was it—and then bring it back up to 3 percent this year, I do not know what is. It almost feels like many of these Government people were actually sitting in a chair on the
Titanic while it was going down, because they have had to hold on very firmly and watch the KiwiSaver employer contribution start at 4 percent, go down to 2 percent, and now go up to 3 percent. People out there in “KiwiSaver land” in New Zealand—New Zealanders who genuinely want to have a good savings scheme—must be wondering what is going on with this Government that it can basically play around with such an important scheme year by year. It puts a huge cloud and a huge doubt over the Government’s long-term intentions in terms of KiwiSaver. That is another own goal; that is the second own goal for the day.
The third own goal is coming up, because it says here, in the introduction to the bill, that it will allow “the capital costs of unsuccessful software development to be tax-deductible”.
Hon Clayton Cosgrove: Is John Banks involved?
ANDREW WILLIAMS: I wondered whether Dotcom was involved in this, and I wondered whether John Banks was involved in this as well, because “allowing the capital costs of unsuccessful software development to be tax-deductible” clearly means that people in the software business who have not been that successful—and there are one or two in Coatesville; there are one or two who live out at the Dotcom mansion who in recent times under this Government have not been that successful—are probably hoping this will go through, because they will be able to deduct it. Hopefully, they will be thankful to this Government that those unsuccessful software developments will be tax deductible. They then will not have to put anything in brown envelopes and maybe give them over desks, board tables, or dinner tables in a Coatesville mansion. They will know that in the future that will be tax deductible, and they will be able to do that quite above board—quite above board—because they know that their unsuccessful software development will be all right. That is another own goal; that is three own goals. It is three nil to the Opposition at the moment—three nil to the Opposition.
But it gets worse. It gets worse. The next own goal is taxing bonus shares issued by companies. Well, holy mackerel! Have we not got bonus shares in State-owned assets, for the power companies, coming up shortly? Those are also going to be part of this scheme. The bill states that taxes on bonus shares issued by companies are going to be part of this review. Why would that be? Is that not convenient that, when you are selling off all the shares in your power companies that you own, that I own, that you own, that he owns, and that she owns—that we all currently own—in the future the taxes on bonus shares given out by companies are going to be part of that? This is the grand scheme. This is the fourth own goal, so we are up to four nil to the Opposition now. This is incredible; it is amazing.
It goes on and on. Basically, this tinkering around the edges, this playing around with all the margins of error in the taxation system, is an excuse for this Government over the last couple of years—coming up 4 years now—to make major changes and give major
reductions in tax for its mates, for its business friends, and for its wealthy friends on
Paritai Drive who are building $30 million mansions or buying luxury launches on Auckland harbour. The Government is helping them out and giving them reductions in taxation—giving the likes of the former chief executive officer of Telecom, who was earning $5 million a year, another $5,000 a week in savings in tax. It is also giving the Prime Minister, John Key, another $1,000 a week in his back pocket so that he will be better off and can invest in another house in Hawaii maybe, or more shares in the Colorado ski fields, or more investments in Bankers Trust in the United States—wherever else his $50 million is around the world. Basically, a lot of this bill is just tinkering around the edges, but not addressing the big picture of proper tax reform.
New Zealand First has said on the previous bill, the Non-bank Deposit Takers Bill, that we will support any policy that does try to tighten up taxation and banking issues. We are going to support this bill, because there are some merits in it. There are some merits in it. The fact that it is bringing
KiwiSaver contributions back up to 3 percent is a good move—it should never have gone down to 2 percent in the first place—as is the fact that it is starting to weed out taxpayers who have not necessarily filed returns when they should have. Again, probably, most of those who have not done it will be the wealthy mates of those on the other side of the House. Most average Kiwis do not get much in the way of a tax refund. Most of them do not, so it does not really apply to—
Hon Clayton Cosgrove: Especially paper boys.
ANDREW WILLIAMS: —paper boys, in particular. How many tax refunds will paper boys get in the next year? Not many. Not many. But the Government did find $14 million from the paper boys and the paper girls of this country a few months ago in the Budget. They will be some of the ones affected in terms of the tinkering around the edges of the taxes.
But we will support this bill continuing through. Taxation is an important matter in this country. It is important for all 4.5 million New Zealanders, who depend on all the services that this country provides, and the services that the State does provide, to have an efficient and effective taxation system. Some of the provisions in this bill do allow for improvements in that area, and therefore New Zealand First will support this bill.
JOHN HAYES (National—Wairarapa)
: I sense that that last speech in the House was delivered by somebody who aspires to be the deputy leader of New Zealand First. When I hear people constantly using phrases like “shifting the deckchairs on the
Titanic”, “tinkering around the edges”, and “own goals”, these are just euphemisms because the speaker does not understand the bill against which they are talking. It is unfortunate that the member was not involved on the Finance and Expenditure Committee, at least to my knowledge, so, unlike his actual leader, he is not as well versed in the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. He hides his lack of understanding in these glib clichés.
I feel that it is a little bit important to explain something to that member about the issues around taxation. If you have a perfect market, think of it like a supercomputer network. It has sensors in every part of the economy. They reach into brains—even small brains—and they read our desires. Constantly, the market is re-optimising production and allocating resources perfectly. But efficiency is not enough to ensure a fair society. If Bill Gates has got all the money, then the rest of us starve. We need to do something to improve the efficiency of our economy, so, Mr Williams, we have things called taxes. They are inefficient, but we need the money to spend on things like health, police, schools, and roads. But taxes are inefficient, because the market price no longer equals cost, and cost no longer equals value, so the Government faces a dilemma. We want to avoid inefficiency, because we pass up the chance to make someone better off at no cost to anybody else. Most of us want to use taxes to move income from rich to poor.
The Government needs and attempts to make the economy both efficient and fair, and underlying this bill is a drive to do that. Under a Labour Government supported by New Zealand First and the Green Party, I think New Zealand would have, first of all, a capital gains tax—Labour promised that in the last election—on all businesses and farms, which would penalise our productive industry and would add to inefficiency. We would see more than a doubling of employer KiwiSaver costs, Mr Williams. We would see a big gap between the company rate and the top personal rate, which encourages tax avoidance.
We have been through this bill on a first reading, and the changes between the first reading and the second reading can be summarised like this: the changes in this bill are in addition to the biggest tax reforms in the last 25 years, which are helping families to get ahead. They are boosting growth to create jobs and to lift incomes, they are encouraging savings and investment, and they are making the tax rules fairer for all New Zealanders. We have moved from a situation that we inherited from the last Labour Government, where people were spending $1.11 for every dollar they earned, to the position that we are in now, where we are spending only 98c for every dollar we earn.
We have built a more competitive tax system that is tilting the economy away from borrowing and spending—which is what the Labour Government would do if it came back; it would borrow and spend—towards savings and investment.
Hon Clayton Cosgrove: You’re borrowing $300 million a week.
JOHN HAYES: I know, Mr Cosgrove, that you blithely got rid of $7 billion as Associate Minister of Finance—$7 billion—but we are trying to move this economy towards savings and investment.
This bill will produce a simpler and fairer tax system that rewards hard work and protects the vulnerable. Across-the-board tax cuts instituted by this Government already are rewarding hard work and delivering more money to New Zealanders, to every New Zealander—
Andrew Williams: For the wealthy.
JOHN HAYES: —whether you are working or you are retired, Mr Williams. Two-thirds of the cost of the income tax cuts went into reducing the bottom two tax rates. About three-quarters of earners, as Paul Goldsmith said, are paying no more than 17.5 percent personal income tax. We cut the company tax rate—
Andrew Williams: What about the paper boys? What about the paper girls?
JOHN HAYES: —by 28 percent, ensuring that New Zealand businesses remain competitive. A family with two children, Mr Williams, can earn up to $50,000 a year and effectively pay no tax—no tax—when Working for Families is taken into account. After-tax wages are increasing faster than prices under this Government, and we have taken steps to tighten up property tax rules by eliminating depreciation, removing the loss attributing qualifying company rules, and improving Working for Families integrity measures.
Since the first reading, this bill has been revised a little bit since last September. The two main income tax forms for individuals—the IR3 and the personal tax summary—will no longer be amalgamated. Instead, existing practice will continue, because the initiative would have put a lot of pressure on officials from the Inland Revenue Department and their ability to undertake further systems changes. The bill has been changed to contain a proposal to require individuals who choose to file for a particular year to also file for the previous 4 years. The application date for this proposal is to be deferred from the 2014-15 income year to 2016-17. However, the implementation date can be set earlier by Order in Council.
The bill also clarifies that the 4-year rule applies from the most recently ended tax year—[Interruption]—rather than from the year for which an individual chooses to file. I know this is difficult for you, Mr Cosgrove, but then that is the lot of a list MP who has no constituents to look after. Tax debts from the previous years under the 4-year rule will not incur the use of money, interest, or penalties from the previous due date; a new due date will apply instead. Credits and debits arising from the 4-year rule will be used to offset each other, Mr Cosgrove.
Hon Clayton Cosgrove: It’s not necessary to read the bill from cover to cover, John.
JOHN HAYES: These are the changes. I am not reading the bill; I am describing the changes that were introduced from the last drafted bill to this one.
The application date and savings provision for the proposal to charge GST on late payment fees is going to be deferred from April 2012 to January 2013.
Andrew Williams: When are you going to be a Minister?
JOHN HAYES: I know that you did not understand that, Mr Williams, but GST will not be charged on late payment fees if the underlying supply is exempt. Other changes to the GST provisions have also been made, such as clarifying the definition of land, where new apportionment fees for zero-rating supplies can be used. Finally, the foreign investor tax credit scheme will be expanded to investors in foreign investment portfolio investment entities with application from the 2013-14 income year.
This is an excellent bill. The Government has listened to submissions through the select committee process. The bill has been improved, and I have no difficulty whatever in commending its passing to the House. Thank you.
Hon CLAYTON COSGROVE (Labour)
: Well, I think we have had a medical breakthrough here in the House tonight. I think for all those insomniacs out there, they will not need to go to their local general practitioner for sleeping pills; they will just put on an endless tape of John Hayes—a loop tape of John Hayes’ dulcet tones talking about the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. I have got to say that it was an extraordinary contribution by Mr Hayes. Mr Hayes said that if the Labour Government got in, it would be borrowing and spending. But in his own Les Patterson - like, unique way, he forgot—or maybe he has not had enough sleep—to mention, of course, that his crew are borrowing 300 million bucks a week to fund a tax cut.
He also talked about tax as shifting resources from the rich to the poor. Those were the sorts of words he used, but he forgot to mention that on top of the $300 million per week that his Government is borrowing, the so-called tax switch—which is the tax swindle—by this Government gave the top 10 percent 44 percent of the tax cuts. And the bottom 20 percent got what? They got 2 percent. Poor old Sir Les Patterson had not got the abacus out; he had not worked out, using all his fingers and toes, exactly what the tax switch had done for New Zealanders. Those earning the most got the most, and those earning the least basically got zip. So I say to John Hayes: use all your fingers and toes. We will even supply some batteries for the calculator, or another abacus if that is broken. I say to John Hayes: try again. Go out and get the standard 4, old-fashioned maths textbook; work out how to add, divide, subtract, etc.; work out percentages; and have another crack. And then he can come back into the House, have another speech, and send the rest of us to sleep again. Well done, I say.
He is an example of the ineptitude exhibited by this Government. You know when it is in trouble, because it sent the big, heavy hitters—seriously heavyweight hitters, some of them—into the House to defend a tax bill.
Hon Trevor Mallard: He’s not as heavy as he used to be.
Hon CLAYTON COSGROVE: Well, using the Maggie Barry principle, I cannot comment on that. Gerry Brownlee probably can, of course, and maybe our friend Parekura, our good mate, but I certainly cannot. I am a shadow next to John Hayes.
But I say this: this bill is interesting because other colleagues have pointed out that it is tinkering. Dr Clark, on our side, pointed out that the Inland Revenue Department computer system has been around since 1992. I will give members an example of how this computer system is inefficient, and why this Government should have done something about it. We all pay tax on interest on deposits, right, and that is an automatic process. It is deducted. The tax on interest is deducted from your account, and it goes to the Inland Revenue Department. But then you get your tax statement, if you want to request one—and I have taken this up with the Inland Revenue Department a number of times, actually—and there is not a line item that says: “Tax on interest”. What you then have to do, in theory, unless you want to just gamble and say that you have paid your tax—and most people do not do anything about it, because the tax has automatically gone in—technically, is you can ring the Inland Revenue Department and advise the department, or send in your tax certificate from your bank, and then the Inland Revenue Department will send another statement out, generate it, and put the line item in.
It is irrelevant, actually, because you have paid your tax. It is an automatic thing if you have given the bank your Inland Revenue Department number. Even if you have not, you are on the top rate. So why is this the case? It is because the Inland Revenue Department computer system cannot reconcile the fact that it has got the money from the bank. The bank has sent it the money—and Mr Hayes’ tax on interest has been sent through—but it cannot reconcile it through its technology so that it appears on your statement. How stupid is that? That is something, actually, because taxpayers want to be reassured that they have—99 percent of them—complied with the law and actually paid all their tax, and most do, of course. But there is an inefficiency, and something that could have been worked on.
I just make this point: when we talk about debt and when we talk about taxes, another history lesson from Mr Hayes that he sort of forgot in his laconic way is that, of course, when we left office, Mr Hayes, we left with net Crown debt being zero. You will find a zero if you go back to the old standard 4 maths textbooks and find out what a zero looks like, Mr Hayes. Have another crack. Zero—
Hon Trevor Mallard: Like he used to look.
Hon CLAYTON COSGROVE: Yes, that is right. Have a look at the scales; there will be a zero on there. Just do not jump on, Johnny. The second thing is that we had 9 years of surpluses—9 years of surpluses. That is the legacy we bequeathed this bunch of tired, inept Ministers and members of Parliament who now run the country. That is what we bequeathed them: net Crown debt at zero, and 9 years of surpluses. The record of this—
Simon O’Connor: So you took too much money from people.
Hon CLAYTON COSGROVE: I will come to you in a minute. The record of this Government, of course, is 300 million bucks a week in borrowings, 44 percent of the tax cuts going to the top 10 percent, and the bottom 20 percent, those on Struggle Street, whom Mr Hayes, of course, has never bumped into in his electorate—he would not know the bottom 20 percent if he fell over it—get 2 percent. What is the great tax reform the Government hit us with in the Budget? It even dealt to the old paper boys. It even put the boot into the old paper boys. I do not know whether John Hayes was ever a paper boy—you know, cycling around, maybe on a penny farthing, or, with a bit of exertion, running around delivering papers. He may not have even embarked on that; he might have been a pizza delivery man. Who knows? They probably get paid more.
Hon Trevor Mallard: The James K Baxter approach to delivering pizzas: they never made it to the destination.
Hon CLAYTON COSGROVE: Indeed. Forgive him, Mr Speaker. That is John Hayes’ legacy, and that is his Government’s legacy.
And then we look at KiwiSaver. This was, of course, a proposition that National in Opposition opposed bitterly—utterly opposed. It opposed it, it has tinkered with it, and it has made changes to it. In terms of making changes to a superannuation scheme—multiple changes in a short period of time, as these geniuses have done—ask anyone in international finance and they will tell you that actually that undermines people’s confidence in that superannuation scheme. I worked in Australia in around 1995, and I remember that the then Prime Minister, John Howard, made substantial changes to what is a pretty gilt-edged superannuation scheme that the general public of Australia, because it is compulsory superannuation there, enjoys. There was a hue and cry about it. Of course, it is compulsory, so you cannot not be a part of it. But where you do not have a compulsory scheme, of course, people say: “Hang on, they are changing the rules. We’re not going to be part of this.” They are not confident that some future crew—this mob, of course—will not come in and next year have another tinker and another change and undermine confidence again. The truth is that this mob—and they are a mob, an outfit; they are not a real political party, they are a mob—this crew over here, do not really believe in KiwiSaver. They never have. They have got it because we put it in, and because there is universal acclaim that people want it.
Andrew Little: People love it.
Hon CLAYTON COSGROVE: People love it. It is just like, of course, them wanting to put the teacher-pupil ratio up. They did not do it, because the people got to them and said that they were not going to accept it, yet they still say, of course, that they were right to do it, which means that they will probably do it again. They have no principle and no backbone, and these are the sorts of tinkering around the edges things that—
Hon Trevor Mallard: You can’t say that.
Hon CLAYTON COSGROVE: Which? These are the sorts of tinkering around the edges policies that we have from this Government as it implodes—as it implodes—and as it becomes—
Hon Trevor Mallard: I raise a point of order, Mr Speaker. I apologise to the member. It is something that I expected the Government to do, and I would have thought you would intervene. It has long been a breach of the Speakers’ rulings in this House to suggest that members opposite lack backbone. For that to go unchallenged, I think, is inappropriate, and if the Government will not stick up for itself, then I will.
Hon CLAYTON COSGROVE: I withdraw and apologise. I want to thank Trevor Mallard for that redemption speech. When you have got
Trev behind you, you know—
Hon Nathan Guy: Has he got a backbone?
Hon CLAYTON COSGROVE: Oh,
Trev has got a backbone—cast iron.
Dr Cam Calder: Titanium.
Hon CLAYTON COSGROVE: Titanium. And there are a few around this place who might be able to strengthen their backbones by adopting our colleague’s philosophy on life—
Hon Trevor Mallard: I wanted to make sure it was on the record, Clay.
Hon CLAYTON COSGROVE: Thank you. I appreciate that. I have never said a bad word against Trevor Mallard, at all. But anyway—
Hon Trevor Mallard: Hey, that’s a breach of privilege.
Hon CLAYTON COSGROVE: I may have misled the House, yes. The final thing I want to say is I want to address some of Mr Goldsmith’s comments very briefly and
simply say this: for that man to talk about debt, when he was a councillor under John Banks’ mayoralty, which trebled—trebled—the debt of the Auckland City Council, is extraordinary. This is the man, of course, Mr Goldsmith, who wrote two books, one on Don Brash, who is gone, and one on Mr Banks, who is hanging by a thread—hanging by a thread. The next one that is due to come out, given that he is so overworked that he has time to write a book, will, I suspect, be
The Rise and Fall and Fall and Fall of John Banks, or, perhaps, and we wait with bated breath, it could well be the political obituary of Mr Banks.
DAVID BENNETT (National—Hamilton East)
: I want to take just a really short call. I think the Labour Party has obviously run out of things to say on this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. It is a good bill, it is in the best interest of our tax policy, and we look forward to it passing through the House.
Mr DEPUTY SPEAKER: Is this a split—[Interruption] Order! I will put the question if someone does not—[Interruption] I am addressing the member, the Hon Trevor Mallard. Is this a split call?
Hon Trevor Mallard: Not that I’m aware of.
Hon Member: Yes, it is.
Mr DEPUTY SPEAKER: It is—5 minutes. The Hon Trevor Mallard—5 minutes.
Hon TREVOR MALLARD (Labour—Hutt South)
Only 5 minutes for my speech—that is shocking; that is absolutely shocking, Mr Deputy Speaker. I want to speak to the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, and I think it is fair to say that I would like to focus mainly on the returns filing aspect of this bill. Returns filing is a matter that is currently before the House. The first thing I would like to ask the Minister in charge of the bill—do we have a Minister in charge of the bill in the House at the moment? Could the Minister in charge of the bill put their hand up? Mr Deputy Speaker, is there a Minister in charge of the bill in the House? I raise a point of order, Mr Speaker. I am sorry to interrupt myself. I am just checking; it is a normal practice when officials are in the House for them to be here to advise a particular Minister who is in charge of the bill. I am just trying to check and see, because I want to address questions, but to whom do I address those questions?
Mr DEPUTY SPEAKER: You would do that in the Committee stage.
Hon TREVOR MALLARD: I raise a point of order, Mr Speaker. The only purpose of having officials in the House is for them to advise a Minister, and part of the second reading is getting the questions down for a Minister to deal with at a later stage. I think there are three Ministers here, and all I am trying to do is work out which one of them is the Minister to whom I should be addressing this, because there is always a Minister in charge of a bill at any time.
Mr DEPUTY SPEAKER: The Minister is speaking to the House and any Minister may or may not be listening in his office, or wherever. And it is not the Speaker’s responsibility to ascertain whether officials are in the House or not.
Hon TREVOR MALLARD: I raise a point of order, Mr Speaker.
Mr DEPUTY SPEAKER: No, no, look, I—
Hon TREVOR MALLARD: I apologise. It is not a question of your ascertaining; I can see the officials—
Mr DEPUTY SPEAKER: Order! I think the member is trifling with the Chair. I just ask him to get on with his speech.
Hon TREVOR MALLARD: We will just work on that particular question at the moment, and we will come back to it. The first point that I want to ask—whichever Minister is currently nursing this bill through its second reading—is whether there is any requirement, as part of the returns filing section of this bill, for a person who is
filing a return to read it. Because what we have had established by the police in New Zealand on another piece of legislation is that failure to read before signing appears to be an excuse under the law—appears to be an excuse under the law—for filing a false return. I want to know whether this legislation has the same fault in it as the local government electoral returns legislation has—whether a person who signs a document without ascertaining whether or not it is factual is committing an offence or not. It is a relatively simple question that I would like answered.
The next point that I would like to refer to is the limitation on deductions by partners in limited partnerships, which is new section HG in clause 39. What I would like to know is whether that section applies in the case of the limited partnership between John Banks and
Skycity, which was established by way of consideration of the receipt of a plain envelope with a cheque in it, which may or may not have been opened. I think it is a matter that is unclear—well, clearly it was opened, because the cheque was banked—with regard to the person who is involved in the limited partnership, if someone else is in receipt of the consideration with regard to that limited partnership and that is the person who opens the envelope. It is unclear whether or not that person can use the deductions that flow from that for the purposes of new section HG of the bill.
The next area I would like to talk about is the taxable distributions from foreign trusts. I think the important point that I would like to ask here is whether this has any relevance to any trusts held in Germany or held in Hong Kong. I ask whether any receipt from any taxable distribution from trusts that are held in either of those jurisdictions are caught in section HC 18 of the principal Act under section CV 13(b), and whether any effect on the Dotcom donations from any of his trusts is affected by the change from “section CV 13(b)” to “section CV 13(c)” in clause 37(1). I would appreciate some comment from the Minister on that particular point.
Dr KENNEDY GRAHAM (Green)
: In the interests of House efficiency let me just sum up the Green Party position on this, which was quite ably presented by our co-leader Russel Norman, both in the first reading and in the second reading today. We see that there are small but significant parts to this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, that are positive.
In a more broad sense we see this bill as essentially the tip of an iceberg of the Government’s general macro policy, which reflects a position that is socially regressive in its GST policy and its income policy, fiscally negative in increasing the deficit, economically irresponsible in increasing the national debt, ecologically destructive in not imposing a resource rental on water and not imposing a true carbon charge, and regionally skewed against Canterbury for failing to impose or introduce a levy that would make it fairer for Cantabrians in the broad recovery process, which is in the national interest. For those reasons the Green Party will continue to oppose the bill.
MICHAEL WOODHOUSE (National)
: It is my pleasure to stand in support of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. I have been listening very carefully to the contributions by members on all sides of the House. I certainly respect the different points of view, including those of the Greens, which I simply cannot agree with. One of the things that we have found over the last couple of years is the very eloquent way in which they tell half a story very well. The so-called tax cuts for the rich completely ignore the fact that we now have one of the fairest tax systems in the world once again, I think, whereas we saw increasingly distortionary tax policies being put in over 9 years of a Labour Government, which the Tax Working Group was very clear about. This Government, under the Minister of Revenue and the Minister of Finance, has set out on a path of remedying those distortions, and I think this bill continues that very well.
I am particularly interested in the software changes, and I look forward to talking about them in the Committee stage of the bill. But in the meantime it is my great pleasure to support it.
A party vote was called for on the question,
That the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill be now read a second time.
||New Zealand National 59; New Zealand Labour 34; New Zealand First 8;
Māori Party 3; ACT New Zealand 1; United Future 1.
||Green Party 10; Mana 1.
|Bill read a second time.