Tremain Chris: Income Tax Bill — Second Reading 
Tremain Chris: Income Tax Bill — Second Reading 
[Volume:641;Page:11222] 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak to the second reading of the Income Tax Bill with a premonition that the Committee stage could be somewhat arduous given the size of it. The re-drafting of the Income Tax Act 1976 was undertaken in four stages commencing back in the early 1990s. Essentially it has been a reorganisation. The bill at this stage finalises that four-part process and what we see here I say for the benefit of the public is a new Part F through to the end of the Act. 
The objective of this piece of work was to simplify access to the tax legislation and make it clear and more easily understandable. The nation owes the officials who undertook this task a debt of gratitude—thank you very much. And to the chairman of the Finance and Expenditure Committee I say well done for taking this piece of legislation through all its stages. 
I pay a particular tribute to Sir Ivor Richardson and his team for their oversight of this particular piece of legislation. Submitters to the select committee agreed that it is in fact an improvement and National supports the bill on that basis. Although this bill is unlikely to find pride of place on the mantelpieces of most New Zealand families around the country I know that there are many legal and accounting practices who are salivating over this new bill and the size of it. Can I say that the likes of Katrina Shanks to my left an accountant and the likes of friends in the Hawke’s Bay Andrew Barley and Tony Mossman are looking forward to taking this bill back to their bedrooms and considering it over the course of many nights of pleasant reading. 
Unfortunately what this rewrite does not cover are the changes that need to be made to the New Zealand tax system to make this country an efficient best-practice economy. It does not address the over-taxation of hard-working Kiwis and it does not reduce the tax burden on hard-working Kiwis. The rewrite does record in hard copy however the performance of this Labour Government with regard to excessive taxation over nearly 8 arduous years. It also records the Government’s performance on income tax and that is what I wish to cover today. 
Back in its early stages this Labour Government set high and admirable goals goals that many across the country bought into one of which was getting New Zealand’s general wealth back into the top half of the OECD. 
Craig Foss 
: That’s a distant memory. 
CHRIS TREMAIN 
: It is a distant memory as Mr Foss says. Eight years later we are no closer to this goal. In fact we are two places further down the list. In layman’s terms our people are poorer than people who live in the countries we like to compare ourselves with. Our closest neighbour Australia has continued to pull away from us with average incomes now some 35 percent higher on an average income basis. Let me say this again. This Government has failed in its goal to lift our country up into the top half of the OECD. We are now two places lower. 
The last 8 years have been a wasted opportunity. We have had some of the best economic trading times of a generation and this Government has wasted that opportunity. Our people are poorer than those of comparable nations and we have continued to drop down that ladder. One of the key reasons for this is the philosophical opposition of this Government to ongoing and credible reductions in taxation for hard-working Kiwis. 
 Let us have a quick look at Labour’s record on income tax as covered in this bill. Let us have a look at how an increasing tax burden has impacted on hard-working Kiwis. It started when Labour introduced the 39 percent tax rate. Dr Cullen said on 23 December 1999 that 95 percent of people would not be asked to pay more tax. He said that only the top 5 percent of income earners would pay more. That is what he said. But according to answers to recent questions to Dr Cullen in the House the latest figures show that 10.6 percent of taxpayers are now in the top tax bracket—10.6 percent. Treasury’s  
Key Facts for Taxpayers 
 suggests that 14 percent of taxpayers are now in that tax bracket. That is nowhere near the 5 percent Dr Cullen suggested. 
On top of that and far more important actually is the fact that virtually everyone is paying more tax because of bracket creep. So people on the 19.5 percent rate will have drifted into the 33 percent rate and people on the 33 percent rate will have drifted into the 39 percent rate. Hard-working Kiwis have been driven over that 8-year period into much higher tax brackets. What does that bracket creep mean to hard-working Kiwis? In real terms it means that our tax rates are increasing subtly every year as we are paid higher incomes. As a result a person on the average wage now pays an extra $2400 more in tax per year than they did in 2000—$2 400 more in income tax per annum. No wonder we are poorer on an average basis per nation in terms of take-home pay. 
Our top tax rate kicks in at 1.4 times the average wage so although Australia for example has a higher top personal tax rate that tax rate kicks in at $180000 not at $60000. It is a huge difference. So in a nutshell Labour has collected significantly more tax over the last 6 to 8 years—$20 billion more—on the basis that it knows how best to spend taxpayers’ money. Despite some of the best economic times in a generation Labour has delivered a failed result. New Zealand has fallen down the OECD ladder. 
Despite this fall down the ladder I am confident about the future of this nation. Dairy prices in this nation are now the highest they have been for many generations. We see now that the demand for protein in India and China is going through the roof and opportunities are there for lamb and beef prices particularly with biofuels and the consumption of grains. That will have a huge impact on sheep and beef farmers around this country as the demand for pasture-bred lamb and beef goes through the roof. So I am very confident about the future of our nation particularly for my constituents in Hawke’s Bay. 
The question though with regard to income taxes is whether we can trust this Labour Government to make the necessary changes to income tax policy in order to position our nation as a best-practice benchmark economy where our businesses can launch themselves with the best possible chance of success in export markets. 
Craig Foss 
: Such as Fisher and Paykel. 
CHRIS TREMAIN 
: Yes exactly. The answer is a resounding no and this is why. The fact is that Michael Cullen is in no rush to change his strategy. My colleague Dr the Hon Lockwood Smith pointed that out after a speech Dr Cullen made today. Michael Cullen signalled his intention to have an election-year spend-up. And as my deputy leader said today Michael Cullen and Labour are preparing for an unprecedented spend-up in election year. It is called “lolly-nomics”. Dr Cullen said today in his speech that: “Early indications are that the cash surplus for the last financial year is likely to be higher than forecast at Budget time.” Because Labour and Michael Cullen have so badly mismanaged the growth in our economy Kiwi workers are continuing to be over-taxed so that Helen Clark can build up what she describes as an election kitty. An election kitty—that is what it is all about. It is not about supporting hard-working Kiwis and helping them; it is about building up Labour’s kitty. 
Shane Jones 
: We’ve had too much growth! 
CHRIS TREMAIN 
: I would be interested to hear some comments on that I tell Mr Jones in regard to where Labour plans to spend that kitty going forward. 
Shane Jones 
: Kete. 
CHRIS TREMAIN 
: Not kete; kitty. 
Dr Cullen simply refuses to take any responsibility for his economic failings over the past 8 years. According to the Minister of Finance high interest rates and the high inflation environment are everybody else’s fault except the Labour Government’s. According to him the largest surplus has nothing to do with the Government plundering more money than it needs from people’s pockets. Dr Cullen knows that his decision to spend a record amount of taxpayer money in his last Budget will keep interest rates higher for longer. 
The reality is that Labour does not trust New Zealanders to make decisions about their own money. Under a Labour Government Kiwis can expect higher tax for longer. Under a Labour Government they can expect further falls in their place in the OECD and they can expect more “lolly-nomics”. It is time for new thinking and new philosophy on the taxation of hard-working Kiwis. It is time for a National Government—it is time for John Key.