Adams Amy: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — Second Reading 
Adams Amy: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — Second Reading 
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AMY ADAMS (National—Selwyn) 
: 
 I am very happy to take a call in the second reading debate on the Taxation (Consequential Rate Alignment and Remedial Matters) Bill. After listening to the speaker who just resumed his seat Stuart Nash I have to say that it is rather unsettling to hear a Labour member use the phrase “growth of the economy”. For a moment I thought I was in the twilight zone but then I realised that I should not be put off by it at all. Labour members talk a great game about the economy but we know that for 9 years they did not do a thing to help the economy. That is the party that put the productive sector— 
Stuart Nash 
: I raise a point of order Mr Speaker. The economy grew by 25 percent in the last 4 years under the Labour Government and I think that— 
The ASSISTANT SPEAKER (Eric Roy) 
: That is not a matter of order; it is a matter of debate. 
AMY ADAMS 
: As I said it was not hard to remember that much as Labour members talk about helping the economy they do not actually do it. 
Here we have a bill that reflects the National-led Government’s commitment to growing the economy. It was interesting to hear that Labour members are still complaining that this Government gave the people of New Zealand a tax cut. Most of Mr Nash’s speech was spent bitterly complaining that we have the audacity to come into power and give the people of New Zealand a tax cut. For 9 years the Labour Government sucked every cent of tax that it could out of hard-working New Zealanders. National members came in and said that Kiwi mums and dads and Kiwi workers deserve to keep the money they earn. We are not going to build up a war chest to blow on overpriced trainsets; we are going to back the economy. We came in and lowered personal tax rates and this bill is a result of that. 
As a consequence of lowering those tax rates we had to turn our mind to the consequential adjustments that were required. I find it interesting that Labour members are so bitter about the fact that we have come in and done what they refused to do which is give money back to the people of New Zealand. We let New Zealanders keep that money in their own pockets because we believe that money belongs to the people who earn it not the Government. Labour members think that Big Brother needs the money more than New Zealanders do; they think that it is better for the Government to spend New Zealanders’ money. That is not the case. This National-led Government would rather people kept the money they earned and put it back into growing the economy. From our side of the House that is a real commitment backed up by action and that is the difference between this National-led Government and the Labour Opposition. 
The title of this bill explains that there are two component parts to it. As I was saying consequential adjustments need to be made as a result of the lowering of tax rates. That is the meat of the bill and it is where the Finance and Expenditure Committee did most of its work. We also heard the Minister of Revenue say in his opening speech in this debate that this bill provided the best vehicle to achieve a number of remedial matters. 
The bit I mostly want to talk about in this contribution to the debate is the adjustment of the resident withholding tax rates. As we have already heard in the debate the Finance and Expenditure Committee spent a lot of time looking at this adjustment. It was an interesting issue and one on which the committee worked together very well with reasonably common objectives. As we have heard the bill as introduced would have moved the default rate for those who had not elected a resident withholding tax rate for their accounts to 21 percent and a year later if there was still no election it would have moved it to 38 percent. The issue that was identified was that it would see 90 percent of taxpayers who are on lower rates potentially initially paying more tax than they should with of course an entitlement to collect it back in their end-of-year return. Obviously there is a concern that it might not always be collected. 
But the other side of the equation—this is where the balancing came into it—is the real concern and growing pressure on the Inland Revenue Department to ensure that it properly manages tax debt. Our committee spends a lot of time looking at the matter of tax debt. It is a significant item on the department’s books and the department is very concerned about it. On one hand our committee is putting a lot of pressure on the Inland Revenue Department to look at how it manages tax debt and how it can stop tax debt from getting out of control but in terms of this bill where the department tried to take a proactive step in ensuring that new tax debt did not arise we were equally challenging it by saying that is all well and good but it should ask itself how it makes sure it is not charging people more tax than it should. We had these competing elements of trying to ensure that we did not continue to run up hundreds of millions of dollars in tax debt but equally trying to ensure that New Zealanders were not paying more tax than they needed to pay initially. 
The other part that came into this and I think it is worth mentioning from an individual perspective is that although no one wants to pay more tax than she or he has to this is a “pay as you go” system and any overpayment or underpayment is adjusted at the end-of-year return if one is filed. I think it is worth mentioning that although it is never good to pay more tax and have to collect it back there is also a burden on people if they are under-taxed during the year. I am talking about workers who pay PAYE who do not usually file a tax return through their accountant as a matter of course. It is a real burden for some people if they have underpaid tax during the year to get to the end of the year and find a bill from the Inland Revenue Department that they were not expecting. It is not always in people’s interests to suddenly have to front up with a pool of money they did not think they would have to find. So we did not want to see them in the position of being out of pocket as the weeks roll by but neither did we want to see them facing large bills because they had not got around to electing a rate. 
We had some interesting debates on these matters. I think the committee has come to a good position with the help of the department and I thank the Minister and the officials for their work in this regard. The rate now sits at 21 percent and we have a commitment from the department to run an extensive campaign to educate people on their entitlement and the expectation that they will identify and select their correct rate. But equally I think at the end of the day all people have to take responsibility to ensure their affairs are in order. We can do much to educate help and get people in the right direction but when taxpayers are opening bank accounts when they are setting up taxation and when they are applying for an Inland Revenue Department number they have to step up as well and they have to take some ownership of their financial situation and tax rate. So although I commend the department for being willing to work at ensuring taxpayers have the right information I say to taxpayers that there is also an obligation on them to ensure that their tax is managed appropriately and that they pay attention to the rate they are on and to the rate they should be on. 
As I said our committee spent an amount of time debating that matter looking at it and challenging it from different perspectives. I think it is fair to say that no outcome was ever going to give a perfect result from every angle of the debate but I think we have got to a good workable step. It can continue to be monitored and I think it will prove to be successful. I commend the officials for their work on it. I thank my fellow committee members under the chairmanship of Craig Foss for working so constructively towards this outcome. 
I turn briefly to some of the remedial matters in the bill; one or two of them have been mentioned in the debate. Of the couple that I wanted to pick up on the one that is particularly close to my heart—although that probably suggests that I need to get out more—is the change to ensure that beneficiary income from trusts does not have to be allocated within 6 months of the balance date. It will now have a requirement to be allocated by the time the return is due to be filed which will give much more flexibility in the management of trusts and trust accounts. It is a good change it is overdue and I am very pleased to see it. 
There are also some tidy-up matters in there—for example removing the ability to dispute the need to pay disputable tax which all becomes a bit circular. Otherwise we could have a very strange situation: someone with tax in dispute might be in a particular set of circumstances where the Inland Revenue Department was able to require him or her to pay the tax up front while the dispute was sorted that person could dispute that requirement to pay and we would get into a circular argument. So I think tidying that up is certainly to be commended. Moving to electronic communications was another matter that drew the committee’s attention and debate for a little while. As Mr Foss said in his contribution given the amount of material we are dealing with and given the times we now live in it is inevitable that we need to move to more electronic communication. There will always be issues with that as it is worked through but I take at face value the Inland Revenue Department’s commitment to do everything it can to get that right. We will certainly continue to watch that matter. 
I think all in all the bill has come back to the House in good shape and I am very pleased to support it.