Parker David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — Third ReadingText is incorporated into the Bound VolumeParker David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — Third Reading[Sitting date: 18 June 2014. Volume:699;Page:18687. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Deputy Leader—Labour):I am. I now thank you Mr Assistant Speaker for allowing me to take a call on the third reading of the Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill which the Labour Party is supporting. I wondered what I was going to add to the earlier contributions that I had made in this debate until the Minister of Revenue spoke. The Minister—and I wrote his comment down—said: “The purpose of this legislation is to make sure that everyone pays their fair share of tax.” Well would that not be great if that was the effect of this bill? Would that not be great if that was the effect of this bill because this is the Minister who in the chair last night when asked the question that he would not answer at the select committee about how many people pay tax on their capital gains for investment property—Paul Goldsmith: What’s this got to do with the bill?Hon DAVID PARKER: Well actually Mr Goldsmith—you are from Epsom. I am surprised that you do not know that most of your members do not want to pay capital gains because they disproportionality earn their income as capital gains. The Minister said that this bill about annual rates of income tax therefore affects tax on what is taxable income. The question that is quite properly raised is what sort of economic income is caught by the regime and what is not.Dr David Clark: I hope Mr Goldsmith’s not speaking.Hon DAVID PARKER: Mr Goldsmith was at the Finance and Expenditure Committee a couple of weeks ago when the assertion was made initially by the Minister of Revenue Todd McClay that we already have a capital gains tax in New Zealand on investment property. It is true that if you buy with the purpose of resale or you are a trader then your house becomes your stock in trade just as it would be if you were buying and selling shoes. It is treated in the same way as stock in trade and you account for income tax on your profits over and above your cost of sales and therefore you do pay income tax in respect of that—not capital gains tax. It forms part of your income tax because it is a trading activity.If it is an investment activity as opposed to a trading activity then of course you do not pay tax on your gains for investment property. I know that. Everyone in New Zealand knows that. The National members pretend that that is not the case because it is another of those instances where they close their eyes to reality because it does not suit the interests that put them in Parliament and keep them here. The plain truth is that the vast majority of people who buy an investment property often make deductions for their taxable losses suffered during the period of ownership because their interests and rates costs exceed their rental income. They offset those losses against their other income but then when it comes to the sale of the property they do not pay any tax on the economic gains they make.Mr McClay having made the assertion that we had a capital gains tax was asked I thought the reasonable question by the Opposition: what proportion of sales of investment property attracts tax in New Zealand? He said he could not tell us; he would check. I asked him and the Government members said it was a stunt. I actually thought it was at least a general question he might be able to answer. I said: was it closer to 100 percent than it was to 0 percent? And he said that he did not know the answer to that either. We all know it is closer to 0 percent than it is to 100 percent. So he went away. We put that question down officially to him and he was going to come back. The answer that came back to the select committee this week was they do not know. So there is no substance behind his assertion earlier that people are routinely paying tax on the profits that they make on the sale of investment properties.Roll forward to today—this week at the Finance and Expenditure Committee we actually deliberated on the report about that sad episode and the day after we had a Committee stage in this House on this very bill when we asked the Minister whether he had been able to find out since the select committee and he did not take a call. So we thought: well we are voting money to the Minister of Finance in respect of Treasury and he was up for an estimates hearing today. It was in a public session so I am not breaching privilege or anything. We asked him whether he had had any advice from Treasury as to the percentage of investment properties that are sold for an economic gain that pay tax. He said no he did not have that either. So here we have the Government overseeing an economy where we have got increasing inequality we have got the lowest—Hon Steven Joyce: Oh rubbish! Makes it all up.Hon DAVID PARKER: So here we go—here we go again. Well actually repetition is necessary for some of the people opposite. We have got the lowest rates of homeownership in 50 years. We have got the highest rates of child poverty certainly in my lifetime and we have got growing gaps between wealthy suburbs and less wealthy suburbs in Auckland as proven by the latest census data which is the best data that we have and which showed a very large increase in the gap in the relative well-being of peoples in Auckland. And then we have had the chief economist of the New Zealand Institute of Economic Research Shamubeel Eaqub in the last day saying that these gaps are widening between ethnic groups between geographic regions and effectively—Simon O’Connor: Be careful using his analysis. It might come back to bite you.Hon DAVID PARKER:—between the wealthy and less wealthy. Well I suspect it is not going to come back to bite me during any term under this Government because this is classic conservative party politics around the world: cut taxes for the wealthy. It is what it has done disproportionately in its earlier—Hon Steven Joyce: Rubbish again.Hon DAVID PARKER: Rubbish again says Mr Joyce.Hon Steven Joyce: How many lies can you fit into one thing?Hon DAVID PARKER: I raise a point of order Mr Speaker. Mr Joyce just called me a liar. I would ask that he be forced to withdraw and apologise.The ASSISTANT SPEAKER (H V Ross Robertson): If the member has used that word it is not acceptable in the House. It can lead to disorder. If the member has used it I would ask him to stand withdraw and apologise.Hon Steven Joyce: I raise a point of order Mr Speaker. I want to point out that I did not call the member a liar. I did say there were some lies. I appreciate that is still unparliamentary and I will withdraw and apologise.The ASSISTANT SPEAKER (H V Ross Robertson): That is drawing a long bow. I would ask the member to stand and withdraw.Hon Steven Joyce: Do you want me to do it again? I withdraw and apologiseThe ASSISTANT SPEAKER (H V Ross Robertson): I ask the member to stand and withdraw. The member will do it properly. The member will say: “I stand and withdraw.”Hon Steven Joyce: I stand and withdraw.The ASSISTANT SPEAKER (H V Ross Robertson): Thank you.Hon DAVID PARKER: It is true that the income tax cuts of the National Government disproportionately favoured the well-off.Hon Steven Joyce: That’s incorrect.Hon DAVID PARKER: What is that?Hon Steven Joyce: That’s incorrect.Hon DAVID PARKER: That is correct—thank you.Hon Steven Joyce: That’s incorrect I said.Hon DAVID PARKER: “That’s incorrect.” he says. Forty percent of the tax cuts went to the top 10 percent of income earners. The offsets that the Government claims in respect of removing depreciation allowances on property were not paid by the same people and the incidence of the increase in GST in proportion to income disproportionately falls on the lower-income people relative to the higher-income people who pay a lower proportion of their income in GST than lower income people do because people who save their money do not pay GST on their savings. Higher-income people save more relative to their income compared with lower-income people. The arithmetic of this is so clear and yet the National Party denies it. We have a country where we have got decreasing rates of homeownership and increasing rates of child poverty.The Government misrepresents our inequality statistics every day. It says that the Perry report shows that annual income inequality has not changed much in recent years which is correct. The only time it has gone down substantially in the last couple of decades was actually pursuant to Working for Families which the National Party including John Key called communism by stealth at the time. Other than that period income inequality on an annual basis has not changed much in recent years although it has changed a lot in the last two decades from being in the best 30 percent of the world to the worst 40 percent of the world. The unfortunate reality for New Zealand is once you get to being in the worst 40 percent of the world and when you realise that those figures do not include capital gains—which are more concentrated in New Zealand than in other countries that tax capital gains because we encourage them by way of our tax system—you realise that inequality in New Zealand is of course getting worse every year because the consequences stack up year after year after year. They do stack up year after year after year and you see it in homeownership rates that decline year after year after year and in child poverty rates that increase year after year after year.Despite that we have the Minister of Revenue saying that this bill meets its purpose of making sure that everyone pays their fair share which is just patently not true. In fact the greatest tax burden in New Zealand falls on the middle classes. The middle classes do not have that concentration of tax avoidance through non-taxable economic income in the form of capital gains. They do bear most of the burden of paying tax in New Zealand and of course they pay a higher proportion of their income in GST than wealthier New Zealanders. So in effect middle-class New Zealanders pay higher rates of tax than the most wealthy people in New Zealand and that is patently unfair. Indeed you just need to see the massive increases in the wealth of the rich listers and the small amount of tax that is paid by them as a proportion of their income and then you look at some of the other high asset-owning classes of taxpayers like farmers and you see they do not pay their fair share either.