Copeland Gordon: Budget Debate 
Copeland Gordon: Budget Debate 
[Volume:639;Page:9616] 
GORDON COPELAND (Independent) 
: 
 Shortly after 2 o’clock on 19 May 2005 in making his Budget speech Dr Cullen revealed to the people of New Zealand the deep dark secret that lurked in the pages of that Budget. He told the House that it had been decided to adjust each 3 years by using the midpoint of the Reserve Bank’s policy target agreement inflation band the taxation brackets. He said that equated to a 6.12 percent movement in each 3-year period. He said it would mean that at the time of the first triennial adjustment which was to be 1 April 2008—now only a few months ahead of us—the $38000 a year income threshold would move to $40324 a year and the $60000 a year income threshold would move to $63672 a year. In his Budget on 17 May 2007 Dr Cullen abandoned that promise. 
The announcement made in 2005 was in itself historic. It signalled that at long last a Minister of Finance had the courage to bring to an end bracket creep in the New Zealand— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: No no. I am sorry but the member cannot challenge another member’s courage. That is a personal reflection. 
GORDON COPELAND 
: I raise a point of order Mr Speaker. I was praising Dr Cullen’s courage. I was praising his courage in bringing to an end bracket creep. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Accepted. 
GORDON COPELAND 
: It was in fact a courageous step to take. Bracket creep has long been beloved by successive Ministers of Finance because it means they do not have to do anything to the taxation system and every year as inflation chips away more and more tax just rolls into the coffers. So that was a courageous thing to do. However since coming into Parliament I have consistently advocated for the regular adjustment of the taxation brackets for inflation. Unless that happens the plain truth is that the taxation burden increases in real terms year in and year out. Dr Cullen however has done nothing to adjust the brackets since they were established on 1 April 2000. That is now almost 8 years ago. He has not only gone back on the commitment he made in the 2005 Budget but also decided not to make any subsequent or consequential announcements in respect of the future in relation to this matter. 
It is now clear therefore that the people of New Zealand—at least through to 1 April 2008—will have experienced 8 consecutive years without any adjustment to the brackets. Inflation during that time has cumulatively been 22.6 percent. So the $38000 a year income bracket which is where the 33c in the dollar taxation rate now kicks in should by now have been increased to $46588 a year and the $60000 a year income bracket should have been increased to $73560 a year. The average wage in the year 2000 was $36000. So if people have done no more from then till now but to keep pace with inflation they would now be on a salary of $44000 a year and in order to maintain an equivalent standard of living to that they had in 2000 they would have to be on exactly that figure. But because we have made no adjustment whatsoever to the taxation brackets it means that their take-home pay has been steadily eroded. Such people will have shifted long since from the 19.5c in the dollar bracket into the 33c in the dollar bracket and it is now calculated that they are paying an extra $2400 a year in tax when trying to maintain exactly the same standard of living as they had. In other words they have not increased their earnings in real terms—they have just stayed static—but they are now paying another $2400 a year in tax. 
That vastly increased taxation burden on New Zealanders now amounts to about $1.5 billion per annum—that is $1.5 billion each and every year—and that amount will continue to increase until fiscal creep is brought to an end and the New Zealand income tax system is permanently put back on to a fair an equitable and an adjusted-for-inflation basis. On the one hand we index benefits and we index the excise duty paid on petrol alcohol and tobacco. On the other hand it is time to index the taxation brackets. It is time that we began to be honest with the taxpayer and it is time that we recognised that the taxation burden on taxpayers in New Zealand has increased year in and year out without a break since the year 2000. 
Let me go on to a happier note and to praise some of the other aspects of the 2007 Budget. It does include tax cuts all advocated for by the United Future party—my party of very recent memory. It signals a cut in the company tax rate from 33c in the dollar to 30c in the dollar which is a great step in the right direction and has my wholehearted support. It will lower the cost of capital. It will incentivise the reinvestment of profits into businesses. It will help start-up companies to survive the first couple of years of their existence although I personally would go even further than the Budget has and would provide a complete tax holiday for such companies over the first 2 years. This movement in the corporate tax rate is one that corporates have waited for and sought for years and it is great that at long last after 19 years without a change we have addressed that reality. At last we are moving more towards competitiveness with Australia and therefore giving our New Zealand companies a fair chance to stand up in the world and to shine. 
However nothing in the Budget gives me greater personal satisfaction than the complete removal of any limit on gifts to charities for both individuals and companies. I have personally worked on that issue for 20 years with almost every successive Minister of Finance over that time. I guess it just goes to show that sometimes someone has to be elected to Parliament in order to effect change and it has been worth it to see that huge change for charities. Charities make an invaluable and irreplaceable contribution to the social fabric of this country. They do great things that Governments simply cannot do. They are the most effective and efficient organisations ever devised by mankind. I rejoice with them at this great step forward and I encourage all New Zealanders to open their hearts and their wallets in support of charities. As they do that they will now get a rebate of 33c in each dollar from the Government with no cap—no limit. That indeed is a marvellous marvellous change. 
The KiwiSaver changes announced in the Budget also have my general support. I remember early in 2003 discussing the need to provide tax incentives for savings with Professor Graeme Fogelberg the then Vice-Chancellor at Otago University. We lamented the lack of such tax incentives and I remember his trenchant criticism of those here in New Zealand who claim that such incentives do not work. Well it is funny that every other developed country in the world has tax incentives for savings. We have been out of step and—guess what—we have had very low levels of savings. Perhaps we will at last get over our “purer than Caesar’s wife” attitude towards the taxation of savings and remember the simple maxim that if the Government encourages something we will get more of it. It really is as simple as that. Personally I have no doubt that the KiwiSaver changes announced in the Budget will boost household savings significantly in the years ahead. That will lead to greater security in retirement boost the pool of capital available for investment rein in inflationary pressures and put in place the foundations for an ownership society. 
As is known I have recently resigned from the United Future party and am now an independent MP. But I intend to launch a new political party Future New Zealand. I can tell the House that moving towards an ownership society for all New Zealanders will be one of that new party’s central policies.