Smith Lockwood: Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — Second Reading 
Smith Lockwood: Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — Second Reading 
[Volume:606;Page:3893] 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 This bill obviously contains several elements. I agree with the Minister of Revenue that those relating to compliance costs are positive for taxpayers. The issues relating to penalties being more appropriately adjusted to the crime being committed by a taxpayer and the effort to improve use-of-money interest arrangements to allow tax pooling are positive measures. But the bill contains two sets of measures that the National Opposition cannot accept. 
The first is that this bill confirms current tax rates and the current tax brackets. I wish Dr Cullen was able to hear this point. The recent OECD analysis showing that New Zealand has the second-highest increase in income tax of any country in the OECD other than the Czech Republic for an average wage-worker—or production worker as the OECD calls it—relates partly to our tax rate system and the tax bracket system. Over the years in which the OECD has done this analysis the average wage of a production worker in New Zealand has been right at the cusp of the 19.5c-33c change. If we look at the data that the OECD has been working on we see that the actual New Zealand dollar average wage of that production worker which it is all based on is exactly $38000 or $39000. So we have a whole shift in the number of people starting to pay 33c in the dollar instead of 19.5c in the dollar. The Government is collecting far more income tax as a consequence. The OECD has pointed out that this Government is taking more income tax off ordinary working New Zealanders. The increase is bigger than for any other country in the OECD other than the Czech Republic—bigger by far than for any other country in the developed world other than the Czech Republic. 
Here with this bill we confirm the existing rates and existing tax brackets that are doing that to ordinary working people in New Zealand—and National opposes that. The Government should not be doing that; it should be thinking about what its tax policy is doing to ordinary wage-earning people but clearly it just does not care. We hear the rhetoric about this Government caring about ordinary working families but clearly with this bill it does not care a jot. The fact that it is clawing a bigger increase in the income tax take off the ordinary working family in New Zealand than in any other country in the developed world does not seem to worry it. With this legislation the Government confirms the very rates and the very tax brackets that are doing that to our average family in New Zealand. If it cares to look at the OECD analysis it will see that our average worker in New Zealand is sitting right on the cusp of the shift from 19.5c to 33c—just over that cusp—and that is one of the reasons this Government is clawing so much more tax off the average worker in New Zealand. 
That is the first thing National objects to and one of the reasons that we oppose this bill—despite the useful compliance measures in it. But the second problem with this bill is one that worries us even more. Dr Cullen tried to write it off as if it were not serious and significant but it is serious and it is significant. For the first time that I am aware of in this country’s history a favourable tax rate is being applied on the basis of race. Whatever way one looks at this bill one cannot reach any other conclusion.  
Clayton Cosgrove 
: Rubbish! 
Dr the Hon LOCKWOOD SMITH 
: Clayton Cosgrove sits over there and says “Rubbish!”. I want him to identify one other racial group in New Zealand—just one other than Maori—whose businesses will receive this favourable tax rate of 19.5 percent. Is there a Pacific Island business that will receive this favourable 19.5 percent tax rate? Is there one low-income group of European descent that will receive this 19.5 percent tax rate for its business? There is not one. The only businesses in New Zealand that will receive this favourable 19.5 percent tax rate are Maori businesses. It is not good for the future of this country to make our tax law on the basis of race. That is wrong whatever way one looks at it. 
Having said that I acknowledge there is a problem with the taxation of Maori authorities. I am not being blind to the problem which a lot of people will not understand so let me explain it very clearly. At present if a Maori authority distributes its profits it is treated like any other business. It pays 33c in the dollar tax which is imputed so that any persons receiving a share of those profits do not need to pay any more tax than their normal statutory rate. There is a problem though. A Maori authority that does not distribute its profits is taxed 25c in the dollar—25 percent. If it does not distribute that profit within 4 years but does distribute it thereafter that 25 percent tax is not refundable. If the profit is not distributed within 4 years that 25 percent tax is not refundable. Therefore if it distributes after 4 years there is an issue of double taxation. I accept that. Although I say and although National says that it is wrong to give special taxation treatment on the basis of race it is also wrong to have double taxation of some people in this country and doubly wrong should that double taxation apply only to Maori organisations. So I accept that there is a need to remedy that flaw in our tax law. That is absolutely accepted. 
But we do not fix up one inadequate piece of law by replacing it with legislation based purely on race that confers a tax advantage on a race. For Dr Cullen to say that it does not confer advantage is not consistent with what the Finance and Expenditure Committee found. The select committee recommended that wholly owned subsidiaries should not be included. The reason the select committee suggested that—and Clayton Cosgrove was the chair of the committee—was that it could see that if a business was being taxed at a lower rate on profits that it had retained it had a competitive advantage in being able to invest more money in the future. It paid a lower tax on profits had more money to invest and therefore was at a competitive advantage. David Parker a new Labour member—he is an accountant—accepted very clearly the reality of that competitive advantage. The Government members of the select committee accepted that wholly owned subsidiaries should be excluded from this favourable tax rate. 
This is the sharp point. There are among Maori organisations businesses that are not wholly owned subsidiaries but come within the definition of Maori organisations in this bill. Major farming businesses some of the biggest farming businesses in our country will be able to compete ahead of other farming businesses to reinvest more in their business because they will be taxed at a lower rate. That is wrong. We do not fix up one problem by implementing an even greater wrong. Conferring greater benefit on the basis of race is not right for this country. 
I urge Labour to rethink what it is doing here. This will be very divisive. It is not good for New Zealand’s future. It will result in disharmony. It does confirm privilege under our tax laws purely on the basis of race. We reject that and I think most sensible right-thinking New Zealanders will reject that. The Government should go back to the drawing board and remedy the problem around the taxation of Maori authorities with new legislation that does not confer privilege on the basis of race. It is morally wrong to do that.