Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): Tēnā koe e Te Māngai o Te Whare. I'm delighted to speak on this excellent bill the Taxation (Annual Rates for 2018-19 Modernising Tax Administration and Remedial Matters) Bill. As I've said to other people when I'm talking about tax I'm in my happy place.There are a number of aspects of this bill that I would like to talk about; we'll see how the time goes. The first aspect I would like to talk about is just this phrase: the Annual Rates for 2018-19" part of the title. As has been alluded to this is a simple constitutional requirement. Every year Parliament has to pass the rates of taxation. It has to happen within a certain time frame so every year you will see a bill coming through the House called the annual rates for 2018-19 or 2019-20 and so on to which other matters are attached as well in the particular bill. This bill fulfils that particular constitutional requirement. So when we pass this bill we are doing what we need to do in order to keep our tax system running effectively and because we keep our tax system running effectively we also keep our Government running effectively paying for all the goods and services that we enjoy in this civilised country. So that's a simple constitutional requirement.The second aspect of this bill that I would like to talk about—and to talk about why this particular bill is important and important to so many New Zealanders—is to do with secondary tax. Now as any person who works in tax knows or anyone who mentions the word "tax" and implies that they have a little expertise knows—when I say that I know about tax so many people so many of my constituents say to me "When are you going to get rid of secondary tax?" or "Secondary tax is the bane of my life." or "Secondary tax is so unfair. Could you please just get rid of secondary tax? It would be good to do it right now." This bill does make considerable progress towards ending the perceived secondary tax problem and I say "perceived" for a particular reason. It is because secondary tax ought not to be a problem.Let me explain why this is the case. I think it's important to explain this because so many people don't quite understand secondary tax and I'm hoping that if we can explain it then people will understand why this bill fixes the problem. I want people to imagine someone who has two jobs earning about $250 a week each and that person will get two payslips every week as you'd expect from two jobs. But on the first payslip they get after tax and ACC and so on they're going to end up with about $220 in their back pocket. They've earned $250 they've had tax and ACC deducted and they end up with about $220 in their back pocket from their first job. But then they get their second payslip.Kieran McAnulty: What happens?Dr DEBORAH RUSSELL: Well it's really interesting what happens. They've earned $250 but unlike their first job where they ended up $220 in their back pocket in their second job they only end up with $200. "That doesn't seem fair." they say. "Why do I end up with $220 from my first job and only $200 from my second job?" and they see the problem as being with secondary tax. They know that they're paying secondary tax on their second job and it looks like they're getting hit with much more tax on their second job. That's not fair and that's the secondary tax problem. People think it means that they get taxed more and that they get penalised for having that second job.Kieran McAnulty: That's a disincentive.Dr DEBORAH RUSSELL: It is a disincentive in the person's mind—and that's where it's effective—from taking a second job.What people don't really understand is that that tax that is deducted is not actually their income tax. What it is is a down payment on their income tax liability for the year. It means that as they go through the year paying their taxes they pay pay-as-you-earn or PAYE. It's like paying a little bit of their tax bill liability every single pay day. The problem is if you didn't take out the secondary tax at a higher rate then at the end of the year the person would end up with a stonking great tax bill.Here's how this works. Look if you earn about $50000 a year—Todd Muller: Can we have a PowerPoint?Dr DEBORAH RUSSELL: —then your tax liability is about $8000 a year. That's just the way the maths works on the tax rates Mr Muller. So $8000 a year from your job but if you have two jobs worth $25000 each then all your employer knows about you is you have a job; you're getting paid $25000. If the employer doesn't know that the person has a second job then they just deduct tax as though the person was earning only $25000 a year. Now the tax on $25000—plain and simple—is about $3400. So $3400 from one job and $3400 from the other job—that person ends up with $6800 deducted. If you earn all the money in one job you get $8000 tax deducted. That's about the right amount. Earn tax from two jobs worth $25000 each; if the employers don't know about the two jobs if they only know about the one job they pay you for then each employer correctly deducts about $3400 or about $6800 in total. So you end up with the wrong amount deducted during the year. The person should be paying $8000 in tax—that's what you pay on $50000—but the wrong amount has been deducted. So they end up with a tax bill of $1200.Secondary tax fixes that problem. More is taken out of the second job to reflect the fact that in total the person earns $50000. But even so it seems unfair. Secondary tax means you do not end up with a big tax bill. The problem with secondary tax is sometimes the rate is wrong and it gets over-deducted. Now that's quite nice because the person who over-pays with a higher secondary tax rate ends up with a tax refund at the end of the year. Now who doesn't like getting a tax refund? Everyone likes getting a tax refund. It's a nice lump sum of money. Trouble is people have perceived it as unfair and in order to get that tax refund you have to do a tax return and plenty of people don't like doing tax returns or they find them scary. So perhaps the person doesn't get their tax refund at all or perhaps even though the lump sum is very useful that person could have done with the money during the year could have done with it week by week could have used it to pay the groceries week by week. Perhaps it would have been easier to get it paid week by week.This bill helps to fix that problem. It helps to fix it because through this bill and through the Business Transformation at the Inland Revenue Department every pay day about the right amount of tax should be deducted for the particular individual person. Employers will be reporting on a regular basis to IRD reporting every pay day to IRD. That will mean that IRD can accumulate all the information for a particular person on an ongoing basis during the year and if IRD thinks that perhaps tax is not being deducted at the right rate they can contact the person and contact the employer and offer what's known as a tailored tax rate. If you get that tailored tax rate right there is no secondary tax there is no extra tax during the year and there is no tax to pay at the end of the year. This bill fixes that problem and that is one of the reasons why I support this bill.I hope that everyone would support this bill. It's a shame that the Opposition won't. It's a dense bill. There's a lot in it. As a committee we worked very very hard through this bill and people will see if they read the revision-tracked version of the bill there are many changes here recommended by the Finance and Expenditure Committee. They were changes that all the members of the select committee agreed to. We worked hard on this bill and I'd particularly liked to commend the leadership of Michael Wood the chair of the select committee and the people from both sides of the House who worked hard on that bill. From the Opposition side I would commend Mr Andrew Bayly who had great input into the bill and of course there were people on our side of the House who contributed greatly to this bill as well. We agreed on so much about this bill. What a shame that the Opposition won't support it for reasons I suppose because they lost. I support this bill."