Smith Lockwood: Income Tax Bill — Second Reading 
Smith Lockwood: Income Tax Bill — Second Reading 
[Volume:641;Page:11219] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 As the Minister of Revenue has just said this rewrite of the Income Tax Act that we now debate for a second time is a huge effort. It is interesting though that the Minister has said that this is the fourth and final stage of the project. I ask him whether it really is. If we look at the commentary on the bill—and I accept that the Minister was not on the Finance and Expenditure Committee but I trust that he has been briefed on it—we see that a number of recent matters to do with income tax are not covered in the bill. In fact the select committee in its report raised some questions about that. 
For example the select committee said in respect of the KiwiSaver Act of 2006 and the Taxation (Savings Investment and Miscellaneous Provisions) Act of 2006 that maybe those could be considered as part of this rewrite during the Committee of the whole House stage. I argued at the select committee that we could not do that unless there had been proper consultation with the private sector and unless the rewrite advisory panel was involved in that consultation process. I do not know whether the House is aware of what has happened. What has happened? The Minister failed to mention anything about that. What has happened to the legislation that fell into the gap? This bill rewrites the old Income Tax Act. In the meantime new income tax legislation has been enacted that is not included in this rewrite. The report from the select committee said that maybe some of that legislation could be included and that the Committee of the whole House might consider doing that. What has happened? Are we to consider any of the intervening legislation as part of this process? I think that a Government member should make that clear. 
What is more if we look at the report from the select committee we see that it says that one part of the Act is so darn complex that members are not sure how to rewrite it. I am referring to Part M of the Income Tax Act which refers to the Government’s great Working for Families flagship policy. The report from the select committee actually states: “However given the complexity of the policy underlying the Working for Families Tax Credits and the difficulty of rewriting Part M in the rewrite style we believe that any review of Part M to address these concerns should be undertaken separately.” So what is to happen in the tax legislation to Working for Families which is a flagship area for this Labour Government but is not part of this rewrite process—what is meant to happen to it? Has Labour in fact realised that the policy is unsustainable and that one day it will have to be fixed up and maybe then be incorporated in the legislation? I am staggered that this Labour Government allows the provisions of such a cruel policy as Working for Families to cripple the lives and hopes of low-income people. I will come back to that in one moment. 
It is a huge paradox that at the very time when this Parliament is debating this rewrite and simplification of the Income Tax Act the Government is enacting whole new layers of complexity. We have a bill in front of Parliament right now to introduce research and development tax credits. The select committee has just been hearing evidence in public about how complex it all is to try to define some of those things. It is adding layers of complexity to our Income Tax Act. Of course that bill is not written in the style of this Income Tax Bill; it is not written in the modern rewrite style. Goodness knows when that legislation will be brought into line with this Income Tax Act rewrite. The paradox is that the Government continues to add huge layers of complexity. 
The Opposition supports this rewrite. We started it after all. As the Minister has acknowledged in the early 1990s a National Government started this rewrite process so we support it totally. It is just a shame that some of the huge effort that has gone into it has not been matched by an effort to reduce the tax burden that this Act confers on the people of New Zealand. Since Labour has been in office the total tax take off New Zealanders has climbed from $32 billion a year to $52 billion a year. Those figures roll off the tongue easily but $52 billion a year means that this Government under this Act and other tax measures is taking $1 billion a week off Kiwis—$1 billion a week. 
Craig Foss 
: I’m working towards the day. 
Dr the Hon LOCKWOOD SMITH 
: True but we can rest assured that there will be a change of Government before then. 
This Government is now taking $1 billion a week in tax off hard-working Kiwis. It is outrageous that the amount of tax taken off the average New Zealand worker has climbed so much. Compared with the time when this Labour Government came into office each year $2400 more tax is now being taken off the average Kiwi worker. I see Shane Jones yawning. He does not care about any that—none of the Government members do—yet Labour’s rhetoric is about caring for workers. The Labour members do not give a toss about how much tax hard-working workers have to pay. If they did give a toss they would have done something about the huge increase in the amount of tax that ordinary Kiwis have to pay just through the Government not altering the tax thresholds. Kiwis now pay a billion dollars a year in extra tax just because of that. When Labour introduced the 39c in the dollar tax rate—which is confirmed in this bill—it said that only 5 percent of Kiwis would pay it. Now we know if we are to believe Treasury that 14 percent of Kiwis now pay that top tax rate. 
But even if the Labour members do not care about the massive increase in taxation it is taking off Kiwis why do they not care about this issue? Why are they happy about what happens to a person—and often it is a woman—on the domestic purposes benefit with a couple of children or say three children who is trying to work her way off the domestic purposes benefit? Why has Labour done nothing to fix that problem? If a woman in that situation works 10 hours a week she still receives most of her domestic purposes benefit. She receives almost all of it. In order to get off the domestic purposes benefit if she is getting $15 an hour—not minimum pay; $15 an hour—she would have to work 30 hours a week. She would have to work 30 hours a week at $15 an hour. The cruel thing for low-income Kiwi families is that of that $15 an hour for all the extra 20 hours a week that person would get to keep $1.63. The Government takes the rest. The Government taxes that hard-working low-income family at a rate of 90c in the dollar and that bunch has done nothing about that. 
Labour’s flagship Working for Families policy did nothing to help those low-income Kiwis. It is cruel the way that those low-income people are trapped in poverty. Part M of this bill confirms all of that and it is cruel. Women write to me about that. They tell me they have tried to get off the domestic purposes benefit but they say they cannot. I can produce the letters for Shane if he wants them. He does not believe me but it is the truth that people cannot get off the benefit because of that crippling tax regime. 
This morning the Minister of Finance made a big speech about taxation. I would like to quote from his speech to the Ernst and Young tax partners and managers. The Minister of Finance said this: “Early indications are that the cash surplus for the last financial year is likely to be higher than forecast at Budget time reinforcing the fact that the government has not been fuelling inflation.” I bet that not one person in the audience this morning believed one word of that. Not one person in the audience would have believed a word of it. I have here a whole list of expert opinion on that fact from bodies such as the IMF which has said that is not correct and the OECD which has also said that is not correct. I will quote more exactly. What did the IMF say? It endorsed the authority’s goal that fiscal policy should avoid complicating the task of monetary policy but questioned whether the current stimulatory fiscal stance would effectively help it to achieve that goal. That was said by the IMF just a couple of months ago. The OECD just a couple of months ago said: “Notwithstanding a large fiscal surplus strong growth in government spending is complicating the stabilisation task of the Reserve Bank.” That is what it said. The Reserve Bank confirms that. Everyone is pointing out to this Government that its tax and spending policies are crippling this economy.