Dunne Peter: Taxation (Annual Rates of Income Tax 2007-08) Bill Taxation (Business Taxation and Remedial Matters) Bill Taxation (KiwiSaver) Bill — Third Readings 
Dunne Peter: Taxation (Annual Rates of Income Tax 2007-08) Bill Taxation (Business Taxation and Remedial Matters) Bill Taxation (KiwiSaver) Bill — Third Readings 
[Volume:644;Page:13767] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (Annual Rates of Income Tax 2007-08) Bill the Taxation (Business Taxation and Remedial Matters) Bill and the Taxation (KiwiSaver) Bill be now read a third time 
. The Taxation (Annual Rates of Income Tax 2007-08) Bill is the annual bill that sets out the income tax rates to apply in this case for the 2007-08 tax year. 
The Taxation (Business Taxation and Remedial Matters) Bill introduces a wide range of important measures. It introduces the new 15 percent research and development tax credit—a measure that is intended to help raise the amount of private sector research and development in New Zealand. The bill also introduces amendments resulting from the recent reduction in the company tax rate to 30 percent. I should point out that both sets of changes are a direct result of the recent business tax review that was carried out as part of the confidence and supply agreement between United Future and Labour. 
The bill also relaxes a whole range of tax penalties such as that for taking an unacceptable tax position so that those penalties now reflect the seriousness of the offence and distinguish between people who try to do the right thing and fail and those who have no intention of doing the right thing. The idea behind these changes is to further promote voluntary compliance. 
The bill also increases tax incentives for making donations to charitable organisations—again a particular consequence of the confidence and supply agreement between United Future and Labour and arising out of the discussion document on charitable tax changes that we issued last October. The changes include removing the current rebate thresholds on donations made by individuals and removing the deduction limit on charitable donations made by companies and Maori authorities. So from 1 April next year all charitable donations will be tax deductible. That is a significant and dramatic step forward. 
On the savings front the bill allows policyholders in unit-linked life insurance products to access some of the benefits of the new portfolio investment entity rules. It also allows certain contributions to retirement schemes to be subject to withholding tax rather than income tax which means that contributions to those schemes will not be taken into account for social assistance purposes. I might observe in passing that earlier I made a call for an objective of tax policy to be an alignment of personal company and trust tax rates at 30c in the dollar. The combination of the business tax changes and the changes related to the tax treatment of certain savings vehicles contained in this bill gets us just over halfway along that path. 
The bill also allows for the introduction of data matching between the Inland Revenue Department and the New Zealand Customs Service. That change will enable the Inland Revenue Department to identify when people with outstanding child support debt enter and leave New Zealand so that it can take steps to recover that debt before they leave the country. I acknowledge that that provision of the legislation received pretty much universal support from the House. There is no tolerance for those who shirk their child support responsibilities. The change that is contained here will make enforcement of the existing regime that much more effective and it comes on top of changes that we made last year to introduce further incentives for people to meet their obligations. 
Supplementary Order Paper 167 which was released yesterday added two further important policy measures to the legislation. The first was the introduction of a new tax rebate for redundancy payments to make the taxation of redundancy payments fairer for people who find themselves in a higher tax bracket as a result of receiving a lump-sum payment. The second change was to reintroduce legislation intended to shut down tax schemes relating to leases on overseas assets that result in a loss to the New Zealand revenue. The amendments had been introduced at an earlier stage but were later withdrawn to allow the Government more time to consider transitional concerns that had been raised in submissions made to the Finance and Expenditure Committee. As a result the proposals have been modified to allow a less disruptive transition to the new rules for parties that were involved in leases that existed before 20 June this year. 
These are the main policy changes to which the bill gives effect. It also contains a number of remedial changes designed to ensure that the tax law is as effective as possible and always works as intended. Supplementary Order Paper 168 which was also released yesterday takes amendments made by each of these bills to the Income Tax Act 2004 and inserts them into the Income Tax Act 2007 which was enacted while this legislation has been before Parliament. This lengthy process involved restructuring the legislation proposed in these bills and using the new terminology developed as part of the overall process of rewriting the Income Tax Act and it contributed to the substantial size of that particular Supplementary Order Paper. 
The third bill is the Taxation (KiwiSaver) Bill which gives effect to Budget announcements relating to employer contributions to KiwiSaver and to complying superannuation schemes. The main changes of course are the introduction of compulsory contributions on the part of employers to match their employees’ contributions and the introduction of an employer tax credit to help offset the costs to employers. These changes are part of the package of KiwiSaver changes that were introduced in the Budget this year with the primary objective of increasing the incentives for people to save for their retirement. The fact that over 316000 people have joined KiwiSaver in the first 5 months of its operation shows not only that this savings scheme is meeting a need but also that people do want to save for their retirement. It is particularly encouraging—and this was a point noted during the Committee stage debate—that many of these savers are younger New Zealanders who are being introduced to a savings habit that will hopefully stay with them for their life. That has to be good for the country in the long term. 
It was also observed that the Government does run huge financial risks here. The biggest risk is the popularity of the scheme. The fact that after 5 months we have exceeded the year 1 target for uptake shows that most New Zealanders were ready for a scheme of this type applauded its introduction and are pleased to be part of it. This Government and successive Governments will have to cope with the consequences of the popularity and the vitality of KiwiSaver. 
These three bills which emerged from legislation that until divided by the Committee was one piece of legislation have required a huge effort on the part of a number of people. I acknowledge in no particular order the contribution of members of the Finance and Expenditure Committee who worked through this legislation over some months; the drafters; the policy officials in the Inland Revenue Department Treasury and my own office; and the people who made submissions. I acknowledge the members of this House who participated in the debates for their lengthy and complex consideration of this matter. Very detailed issues are contained in these bills and I think that as they arrive for their third readings the legislation is in good shape. This marks another significant achievement in the process of tax reform in New Zealand. I want to record my thanks to all of those people for the contribution they made at whatever stage to make this legislation possible. Therefore I commend these bills to the House.