Parker DavidHon DAVID PARKER (Attorney-General): It gives me pleasure to rise in the second reading debate. Can I thank the Hon Deborah Russell for carrying forward this legislation and the select committee for the work that was done by select committee members—who did work collegially on this bill; even though some members disagreed with it they drilled down into the principles to articulate them as well as can be—the IRD officials and Sir Rob McLeod for his very wise advice to the Finance and Expenditure Committee. This is actually a very important bill and you can see its importance from the strength of feeling it engenders from the Opposition who don't want transparency as to the outcomes of our current tax system. Do you know that when the high-wealth individual work was done earlier this year after that work was done the Treasury re-estimated the distribution of wealth in New Zealand. Prior to that work being done they had estimated that the top 1 percent of wealth-holders in New Zealand held 21 percent of all assets in New Zealand including family homes—21 percent. It's quite an extreme amount of wealth to be held by the 1 percent. After the study was done they re-estimated it to 26 percent of all assets held by the 1 percent. If you think about that well that's pretty extreme but then if you think about investments outside of the family home they re-estimated that of all of the investments in New Zealand outside of the family home 35 percent of them are held by 1 percent of the population—35 percent of all investments all net wealth outside of the family home is held by 1 percent. That's what data-driven analysis of the tax system shows to New Zealanders. We heard reference from the ACT Party that this didn't go through the generic tax policy process and therefore is flawed. The generic tax policy process wasn't used to increase GST or change income tax rates. That's about technical stuff like what you are going to do for foreign investment rules and double taxation and really technical things like that. Who's on the generic tax policy groups? Major corporates and their tax accountants essentially and the occasional lawyer but it's mainly—I go to those meetings with those groups that are in that and that's who they are. Those people have themselves told me that they can't involve themselves in the bigger tax debate. I had one of the partners of one of the major accounting firms a real leader in taxation tell me that when he publicly expressed an opinion in favour of a capital gains tax they lost clients to the firm because the people who would have been charged a capital gains tax said I'm not going to use you as my accountant"—this is one of the big six firms—"if you talk publicly about that." It's impossible for those people to by and large talk publicly about what they really think about the big issues in the tax system. That's the job of this place and this place needs information upon which to have those debates and that's all this bill does. It sets out principles which are settled principles against which that information can be provided through us to the public. What's one of the other trite phrases we hear in New Zealand? I hear it from the National Party: "broad based - low rate"—"broad based - low rate". New Zealand doesn't have a broad base - low rate tax system. We have a broad-based GST system and its rate is lower than if it was a narrow base but GST is a very high proportion of taxation in New Zealand relative to other OECD countries. We do not have a broad base - low rate tax system as shown by the high-wealth work earlier in the year which showed that the people who had an average wealth of $256 million pay tax at less than the rate of 10 percent which is less than middle-income earners in New Zealand by a factor of a half to a third. So what are the principles set out here? "Horizontal equity is the extent to which people with similar levels of … income pay similar amounts of tax."—the next part of that is important—"In considering horizontal equity the time value of money matters and the tax system should generally recognise the economic effect of income." What happens now? Why do the National Party hate that? Why don't they want that in our system? When you borrow money from the bank and you take out a $300000 mortgage wouldn't you love for the bank to say "Oh by the way we're not going to charge you any interest or get the money back for 30 years. You can have the money free for 30 years."? Well that's what happens in New Zealand for some people. Their tax on any income can be delayed for decades so their effective tax rate is much much lower compared with a wage or salary earner who pays tax every week or every fortnight when they're paid. Some other people if they ever pay tax can delay it for decades. One of the reasons that the National Party hates this—and they didn't like the fact that Rob McLeod agreed that the tax system should look at economic income not necessarily realised income—is that they know that the people that they back have forms of income that are never taxed or if it is taxed taxation is delayed for decades. That's who backs the National Party. That's who backs the ACT Party and the ACT Party have become so divorced from their original position as the Association of Consumers and Taxpayers that Sir Roger Douglas recently came out and said that they are now the party for the wealthy and that they're not actually backing fairly all New Zealanders. So horizontal equity is important. "In considering horizontal equity there are important areas where exemptions … are justified" like the family home. We've put that in there because otherwise the right wing tries to tell everyone that we're going to tax the family home. We'd never propose that. That's now clear in these tax principles. I won't go through efficiency. Vertical equity is really important. You know if Jeff Bezos lived in New Zealand—the richest man in the world—he would pay virtually no tax. How is that fair? That's an example of how vertical equity is important and it could be done better in New Zealand. Compliance and administrative costs—really important. No one wants to waste a lot of money on unnecessarily obtuse tax rules forcing people to fill out extra forms but you do need to not allow that as an excuse for gross unfairness. That's why this says "Compliance and administrative costs is the extent to which compliance and administrative costs for taxpayers and the Government are reasonable but minimising costs is not justification for substantial unfairness in the tax system." and why do the National Party hate that principle? It's because they always use that excuse—always use that excuse. This is good legislation. This is really important for the future efficiency of the New Zealand economy. Chlöe Swarbrick's contribution—the misallocation of capital caused by inappropriate tax rules driving speculative asset classes highly leveraged offered to minimise taxation at the cost of productive investment is one of the reasons why Australia is more productive than New Zealand because their tax system is better than ours. I commend this bill to the House."