Dunne Peter: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
Dunne Peter: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
[Volume:672;Page:18967] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 That superficially plausible analysis from the member who has just resumed his seat Pete Hodgson does not actually stack up when we start to look at it. I will go through the arguments that he raised. 
Firstly he said that we should reverse the tax cuts for the rich so that we can pay for what is effectively being reclaimed through KiwiSaver to reduce the deficit. It sounds good on the surface but it does not work in practice for this reason: the bulk of the tax cut package was delivered to those who were on the bottom two tax rates. So in terms of the dollars spent if his argument has credibility—that that money should not have been spent—in fact the people who would bear the brunt of his policy being implemented would be the very people he is seeking to protect because in relation to income they benefited most from that tax package in terms of the level of expenditure. He also overlooked the fact that the tax package was revenue-neutral. It was funded by the increase in GST. There was an element between the period from October 2010 to April this year that was covered by some very short-term borrowing but fundamentally it was a revenue-neutral package. 
He then turned to KiwiSaver and talked about—well I do not think he used the word “destruction” but that was the clear implication of what he said. Let me go through what the situation is prior to the passage of this Taxation (Annual Rates and Budget Measures) Bill and what it will be after this bill is enacted. As of today right now someone joining KiwiSaver joins on the basis of a “2 plus 2” contribution rate—2 percent from the employee and 2 percent from the employer. They qualify for a $1000 kick-start for their savings. They qualify for a member tax credit of $1040 on an annual basis. There will be no tax on the employer’s contribution to that superannuation contribution. That is the status quo. The destruction that the member talks about sees the person who starts today still starting on “2 plus 2”. When that was brought in as the default position 2 years ago the Opposition claimed that it was a cut because it should have stayed at “4 plus 4”. Well we get the chance in 2013 when we go back to “3 plus 3” and I do not think those members are really opposed to that. So the person who starts today still starts on “2 plus 2” and still gets the $1000 kick-start. That has not changed. The only thing that has changed in terms of the impact on the saver is the change to $521 per annum in the member tax credit. Taken over the life of a KiwiSaver contribution that has minimal impact on their savings. They still get the same benefit at the point that they get their payout at the age of 65. They also will be satisfied I think with the fact that the employer will now be paying tax on the contributions they make. 
So the point I am making in response to the member who has just resumed his seat Pete Hodgson—and he normally is someone who gives considered analysis and I respect him for that—is that his case is factually incorrect for the reasons I have stated. What the Government is faced with—and I think it is the one point that everyone seems to agree on—is that a deficit of this size in the unusual circumstances we are in is too high. We need to bring it down. We need to look at introducing what the Leader of the Opposition said were “bold measures” to bring the deficit down. That is what this Budget seeks to do. We have not heard any “bold measures” from the Opposition other than to raise taxes on the rich. But the point I make is that given where the balance of the expenditure in the tax cut package last year went if raising taxes on the rich was to be a “bold measure” we would actually be raising taxes on everyone and that is not what the Opposition seems to be arguing for. The KiwiSaver changes have a very small impact on the individual saver but taken collectively they save us about $2.6 billion which is a significant contribution to reduction of the deficit. 
If we look at the changes to Working for Families we see that in fact the picture becomes even more obscure as far as the Opposition’s position is concerned. The changes in the threshold take 4 years to implement at the rate of $450 of income per year. The changes in the abatement rate in some cases will take as long as 8 years to implement and in most cases about 4 years. So these are very modest adjustments. There will still be provision for an increase in the rate of payment according to the existing formula and that will take place next on 1 April next year. 
But overall both these sets of changes secure these social policy initiatives for the future. I go back to the point that Jacinda Ardern made a little earlier—and I cannot remember whether it was during the debate on the previous part of the bill or on this part—about her generation. This bill is really about her generation because one of the great tragedies is that New Zealand for so long has had very short-term selfish thinking. What these measures are designed to do is protect and enhance KiwiSaver long into the future and make sure that the basis of Working for Families remains and is beneficial to the families that need it. The tax package that if you like lies behind all of that is ensuring a fairer and better system. I come back to the point I made during the debate on Part 1. A situation where 75 percent of New Zealand taxpayers—about 2 million people—pay a top tax rate of just 17.5c in the dollar has got to be good. It is certainly the lowest tax rate paid by those households in the lifetime of anyone in this House and that is something we should be celebrating not criticising.