Cullen Michael: Taxation (Annual Rates of Income Tax 2007-08) Bill Taxation (Business Taxation and Remedial Matters) Bill Taxation (KiwiSaver) Bill — Third Readings 
Cullen Michael: Taxation (Annual Rates of Income Tax 2007-08) Bill Taxation (Business Taxation and Remedial Matters) Bill Taxation (KiwiSaver) Bill — Third Readings 
[Volume:644;Page:13771] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 We have just heard from a member of the tax-cutting National Party. It is the party that has run for years that the only thing that matters in life—the only maiden’s dream that is worth having—is having a tax cut in one’s Christmas stocking or somewhere or another. We heard from Lockwood Smith first of all that the tax cut for redundancy is too big and has to be opposed. It is not fair; it is too big. 
Secondly we heard that the Government is providing tax credits for families so that people with five children will get and are getting a tax reduction compared with somebody with no children—somebody who shall remain nameless in this House. I gather from recent rulings that we are allowed to refer to childlessness now; but I will not mention the member in that regard. People with five children will pay less than somebody who does not have any children. The member may not know this because his specialisation in life is dairy herds or something of that sort but I tell Dr Lockwood Smith that bringing up children is expensive. He should try it some day. It is still not too late. It is still not too late by the look of those photos we have seen of him. He could still be the father of some children and he will find that they cost money. 
In most countries—in almost every Western country that I know of—the tax system recognises the cost of raising children. That might be a rort to an accountant—though how I do not know—but to the rest of us it is regarded as some form of social justice and social equity. If the member wants to think about why we have a simple 6c in the dollar rebate on redundancy he should think about the accountants he was just referring to. What he is proposing in terms of the marginal rate approach provides a huge opportunity for a tax rort. It means that after working 1 month somebody on for example $150000 a year could collect that month’s salary and the remaining 11 months’ salary as a redundancy payment and be taxed at 15c in the dollar. The member has gone quiet now. 
Then we come to the issue of the top tax rate which for some reason obsesses the National Party. Of course the level it cuts in at depends on what the rate is. When the National Government left office the top tax rate was 33c and it cut in at 1.1 times the average wage. Actually I am wrong in that; it cut in at below the average wage in 1999—$35000 and the threshold was $38000. Now it cuts in at well above the average wage and it is slightly higher. Is it huge by international standards? The famous low tax rate country Ireland taxes at 40c in the dollar—and has no imputation credit for dividends—and it cuts in at 1.2 times the average wage. The National Party—I hate to tell members this because they might not have learnt this—in living memory has never ever cut the top tax rate when in Government. It has never ever in living memory cut the corporate tax rate when in Government. It has never ever in living memory cut the tax rate on savings when in Government. So where is that tax-cutting National Government? 
What has this Government done? We have cut the tax rate on savings and this legislation carries that forward somewhat further. We are cutting—and this legislation will carry out the completion of the process—the tax rate on business for the first time since the time of the last Labour Government in the 1980s. National did put up the top tax rate and it was National that left the 66c in the dollar tax rate in 1981 that the member referred to. I tell Mr Foss that there is no point in apologising now; he was probably not even born then. But the fact is that it was a National Government that put up the top tax rate and it never lowered it. So let us try to work out which Government actually delivers in these areas and which Government just talks about it. National puffs up its chest in Opposition and says that it will cut taxes but it gets into Government and puts them up. 
What is the other feature of this legislation? We have heard practically nothing about this. This legislation has important considerations in respect of KiwiSaver. Have we heard anything about KiwiSaver from the Opposition in this debate? Those members do not want to talk about it. We have well over 300000 people enrolled in KiwiSaver and the number is growing by thousands every week—every week. The National Party does not want to say now what its position is on KiwiSaver. 
Hon Member 
: What is it? 
Hon Dr MICHAEL CULLEN 
: Oh well at some point it used to be that it was terrible it was a rort it was unfair it was indecent and it would do nothing. Now National is saying: “Oh my gosh there is well over 300000; it will be well over half a million by the time of the election. What is our position going to be on KiwiSaver?”. 
Then we heard from Dr the Hon Lockwood Smith PhD and bar about research and development tax credits. He is opposed to them but he did not hear his deputy leader’s speech in an earlier stage of this legislation where Bill English gave them reasoned support. Why? I have to tell the member that life has moved on since the 1990s. The evidence is now very clear that limited tax credits do work— 
Dr the Hon Lockwood Smith 
: Oh yeah— 
Hon Dr MICHAEL CULLEN 
: Oh yes! And the reason for that is that the return to society from investment in research and development is not the 20 percent or so that is the return to the business; it is more like 90 to 100 percent. How come New Zealand firms—including Fonterra—have been doing research in Australia since Australia introduced research and development tax credits? And how come Australian businesses are looking to move research and development to New Zealand now that we are talking about research and development tax credits within New Zealand? 
The point is that we can be so pure that all we do is drink pure water and wonder why people are enjoying champagne in other countries. Well it is time for us to get just a little bit more intelligent about firstly how we support savings in this country. If anybody thinks we do not have a savings problem that person should just go and look at the data at the weakness of our capital markets and at the price we pay for interest in this country compared with our competitors. We should look at the cost to business that that creates and realise that we have to act on this challenge. Cutting the top tax rate compared with lifting the performance of our capital markets is a matter of utter utter insignificance. 
When members opposite finally get around to the point of announcing what their tax policy will be they will have to explain what will happen to those who are earning modest incomes. Will they receive anything? Will they follow Dr Lockwood Smith’s prescription today which is to cut assistance to families in order to give money to people like Dr Lockwood Smith? He said that people on $60000 a year with five kids—five children—should not receive any tax credits— 
Dr the Hon Lockwood Smith 
: I didn’t say that at all. 
Hon Dr MICHAEL CULLEN 
: Oh yes he did. He said that it was wrong; it was wrong that people on $60000 a year with five children received tax credits in relation to the cost of raising those children. Well we on this side of the House are very proud that with Working for Families we are helping a broad range of lower and middle income New Zealanders to meet the cost of raising a family. Nothing is more important than that in New Zealand. 
We are proud that we are introducing a research and development tax credit that will help to lift our performance. We are proud that we have a KiwiSaver scheme that is already a stunning success and that will lift the savings rate within New Zealand. We are proud that we are lowering the corporate tax rate and in next year’s Budget we will announce personal tax cuts that will not go to all of National’s friends but will go in significant amount to people on low and modest incomes because it is about all Kiwis sharing in the economic success that this Government has created. 
Unlike Mr Hide who said in the Committee stage that people who earned more than $60000 were the only people who worked hard in this country we believe that all New Zealanders contribute to the success of this country—[ 
Interruption 
] And at that they jeer. Well if they want to jeer at that they should go out door-knocking in the average Kiwi suburb and tell people that they do not contribute to New Zealand. We will follow and collect their names because they will be voting Labour on election day. 
Debate interrupted.