Tremain Chris: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
Tremain Chris: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
[Volume:639;Page:9443] 
CHRIS TREMAIN (National—Napier) 
: 
 The Minister of Finance has challenged those of us on this side of the House to go back to our provincial areas and explain why National will not be voting for this bill. I have a challenge for the Labour members and it is to go back to their provincial electorates and explain to their constituents how this bill will really impact on small to medium enterprises in their electorates and how it will particularly impact on exporters in Export Year—the year of the exporter. I want to tell Government members in case they have not opened their eyes where exporters are in Export Year. Many of our exporters are not making one dollar at all. If they are not making money they do not get any sort of tax break whatsoever. But when they get hit with a payroll tax guess what happens? 
David Bennett 
: You’ve got to pay. 
CHRIS TREMAIN 
: They have to pay it so unfortunately they end up losing more. I want to begin my speech by talking about one exporter from my electorate Design Spun and an email that this exporter recently sent to me. I want members to understand the impact that this bill will have on exporters such as this and on their ability to improve exports out of this country. It is my opinion that I will be able to explain with ease to these guys why I voted against this bill for them. 
Here is the email from Mr Jackson of Design Spun: “As a manufacturer and an exporter”—he then has in brackets a big “was” with exclamation marks—“New Zealand’s current economic environment is an extremely difficult place to be trading in. We have spent the last 2 years building on our export market and it has been very disappointing to watch those efforts eroded daily by the level of the New Zealand dollar. We are being caned from both ends with the higher dollar making our major competitor imported yarns even cheaper affecting our domestic market also. Government legislation has also played a significant part with direct cash-cost increases in the form of minimum wage increases the additional week’s holiday particularly in the form of significant ongoing compliance adding cost and detracting from the business at hand.” 
But guess what another tax is coming for that business and I will explain that shortly. Mr Jackson goes on to explain: “We talk to a number of different businesses daily and they are not experiencing the rosy times that commentators would have them believe. They are in similar positions to us except that they are currently holding off making decisions regarding their future hoping the environment will change.” Mr Jackson said that they were not quitters but that this was too tough and they had had enough. He says: “Watch this space. There’s a helluva lot more of us out there that feel the same way. Every way you turn these days there’s a barrier of some description.” [ 
Interruption 
] 
These are the sorts of people that Mr Hughes will have to explain this payroll tax to when he goes back to his electorate. I would have welcomed this bill if it were purely to reduce company taxes without a sting in the tail. But there is a sting in the tail. This bill does not include a tax rate. It comes with a payroll tax that employers like Mr Jackson will have no ability to overcome. The sting in the tail is compulsorily matching employer contributions to employee savings and it is this kick that is the reason that National will be voting against the bill. Up front the bill looks good and the spin will be fantastic but I ask members to think about Mr Jackson in this regard. 
Here is a question I posed for the Labour Party yesterday and it is one that I think people need to really understand. For most businesses the biggest cost in expenditure is the cost of labour. I talked about that yesterday. A good example is Mr Jackson’s business: after materials labour will be his biggest cost. It is all very well when a business is making big profits because a 3 percent reduction in the headline corporate tax rate will actually improve its position. However when exporters make no money there is no advantage in a tax rate drop but there is a huge cost in increasing the compulsory employee payments that the exporter will have to come up with. 
Yesterday I used the example of a business that was making a profit and I used the example of a travel agency. I am no longer involved in those businesses but I know enough about them to give members an example. In the travel business labour costs are about 40 percent of the total top line. If a travel company is making a profit of 10 percent it is doing well. But I am talking about exporters that are making no money right now. Let us take a business that has a $250000 turnover with labour costs of $100000 and a $25000 bottom line. That business would be paying tax right now of $8250 at 33 percent but the tax will be dropped to $7500—much lower a $750 drop in taxation. That business even if 50 percent of its employees take on the KiwiSaver programme after it has taken on the tax credit that is available from the Government will be having to front—[ 
Interruption 
] You cannot deny this Mr Jones. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: The member cannot use the word “you”; it refers to the Speaker. 
CHRIS TREMAIN 
: My apologies. Mr Jones cannot deny that a company in that situation will be faced with additional costs for its business—I ask him to tell that company that that will not be the case. In the case of small businesses as soon as they get above an average pay of $25000 for every dollar after that that is contributed the employers will have to come up with the money themselves. 
The Government tells us that it is not a problem because it is 1 percent 2 percent 3 percent and 4 percent. The Government tells us it is not a problem and that the phase-in of the compulsory matching employer contributions will be taken into account in wage and salary bargaining as is the case with the current campaign by the Engineering Printing and Manufacturing Union. That is what we were told yesterday. The problem is that there are a couple of key things. The first point in that statement is that the Government expects—[ 
Interruption 
]; no it does not guarantee that that will be the case—that the phase-in of the compulsory and members should note the word “compulsory” matching employer contributions will be taken into account in wage and salary bargaining as is the case in the current campaign by the Engineering Printing and Manufacturing Union. 
Here is where we really see the sting in the tail. The Labour Government expects there will not be changes but there are no guarantees. The employer contributions will now be compulsory. There is a huge difference here. The big difference is when one is on the other side of the negotiating table. Where we got to here is that when something is not compulsory it is a bargaining chip and that is what I said yesterday. When it is compulsory it is a given. In this case now the employee contribution above the average pay of $25000 is compulsory. So when employers are sitting around a bargaining table with their employees do they think that employees will sit— 
Darren Hughes 
: National will adopt this policy before the next election. I guarantee it. 
CHRIS TREMAIN 
: I ask Mr Hughes whether he honestly believes that employees and unions will sit on the other side of the negotiation table now that it is compulsory for employers to make contributions and say: “That is OK now. We won’t take a pay rise.”—just out of good faith—“That additional 1 percent will be fine.” 
Darren Hughes 
: It’s not about no pay rise; it’s about the rate of the pay rise. Look at what the Australians do with a higher unionised workforce in Australia. 
CHRIS TREMAIN 
: With the unionised situation they will not take account of the position that employers have to find themselves in—they will not. There is a big difference—a huge difference. The point I make today is that we are introducing additional costs to employers and particularly in the year of the exporter to companies like Design Spun. Such companies which are not making any money will not benefit from a drop in the corporate tax rate. They will have to struggle on. But what we are getting is an increase in the costs and an increase in the payroll tax so that businesses will face increased costs thereby making it more difficult for them to export. I will find it easy to vote against that. Thank you Mr Assistant Speaker.