Yang Jian: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeYang Jian: Questions for Oral Answer — Questions to Ministers[Sitting date: 26 June 2014. Volume:699;Page:18941. Text is incorporated into the Bound Volume.]1.Dr JIAN YANG (National)to the Minister of Finance: What changes has the Government made in recent years to make the tax system fairer and to help families and businesses get ahead?Hon Dr JONATHAN COLEMAN (Associate Minister of Finance)on behalf of theMinister of Finance: In Budget 2010 the Government introduced across-the-board income tax cuts and better targeting of support programmes such as Working for Families. The package reduced tax on work and savings for every taxpayer and increased taxes on consumption and property speculation. After-tax incomes at all levels of taxable income were immediately increased by more than the increase in GST. Someone on the average wage of around $50000 at the time was immediately about $15 a week better off as a result of the tax changes and a family with two children on the average household income of $76000 in 2010 was about $25 a week better off. The changes also made the tax system fairer. Two-thirds of the cost of the income tax cuts in 2010 went into reducing the bottom two tax rates. So someone earning $48000 a year now has a top tax rate of 17.5 percent.Dr Jian Yang: What steps has the Government taken in recent years to ensure property speculators and other investors trading for a profit pay their fair share of tax and how much is this estimated to have increased Crown revenue?Hon Dr JONATHAN COLEMAN: The Government has significantly tightened the tax system to ensure property speculators are paying their fair share of tax. Budget 2010 for example denied depreciation deductions for buildings such as rental housing. It tightened rules for loss attributing qualifying companies. It prevented property investors from using rental losses to inflate their Working for Families eligibility and payments. It also significantly increased the Income Revenue Department’s funding to target property speculators who were avoiding tax. And it removed opportunities for income earners in the top personal tax bracket to claim losses on their property investments. Together these measures are expected to generate at least $2.48 billion in additional revenue over 4 years. That is significantly more than what another capital gains tax full of complexity and exemptions would raise over that period.Hon David Parker: Has he read Westpac chief economist Dominick Stephen’s analysis that a proposed 15 percent tax on capital gains on investment property excluding the family home would have a significant effect on the net present value of residential property investments and so would affect new investment decisions; if so why did his Associate Minister Steven Joyce say on Radio New Zealand National this morning that it would have no effect on the housing market?Hon Dr JONATHAN COLEMAN: No I have not read that particular report. But what I do know is that with a growing economy the last thing New Zealand needs is another tax. The electorate knows that as well.Dr Jian Yang: How significantly do the current income tax and income support systems redistribute incomes for New Zealand households?Hon Dr JONATHAN COLEMAN: The income tax and income support systems provide a significant amount of income redistribution. For example Treasury estimates that households earning over $150000 a year the top 15 percent of households by income will pay 49 percent of income tax this year. But when benefit payments Working for Families paid parental leave and accommodation support is taken into account these 15 percent of households will actually pay 74 percent of net income tax. And that is before New Zealand superannuation is taken into account. By contrast after accounting for these income support payments households earning under $60000 a year which is just under half of all households will pay no net income tax at all. That is because the $2.5 billion worth of income tax they are expected to pay this year will be more than offset by the $7.3 billion they will receive in income support.Dr Jian Yang: What reports has he received on the proposal for an additional capital gains tax in New Zealand?Hon Dr JONATHAN COLEMAN: It is worth noting that investors buying and selling assets for the purpose of making a profit are already taxed on their gains. I have seen reports about a proposal for an additional capital gains tax that would apply to every business and every farm in New Zealand but only a quarter of the housing market. It would be full of exemptions for things like the family home personal assets collectables small business assets sold for retirement and payments from retirement savings schemes. However nowhere does the documentation supporting this policy set out exemptions for KiwiSaver funds which currently do not pay tax on capital gains on gains made from trading with New Zealand - listed shares and most Australian shares. In fact one of the architects of this proposal has said: “The circumstances—Mr SPEAKER: Order! That answer is now getting substantially too long. Supplementary question Dr David Parker—ah Hon David Parker.Hon David Parker: Thank you Mr Speaker—prescient again! In the Minister’s answer to the second to last supplementary question when he was talking about income tax rates paid is it correct that he did not include either GST or capital gains in respect of the income earned by the wealthy?Hon Dr JONATHAN COLEMAN: Well what I can say is that the so-called wealthy as outlined in that answer are paying more than their fair share of tax. I refer you to Bill English’s press release of 28 May which lays out the case very clearly.Hon David Parker: I raise a point of order Mr Speaker. We have had very long—Mr SPEAKER: Order! Get to the point of order.Hon David Parker: Well with respect the length of the answers that we have had from the Minister would give him room you would have thought to address the issues that I raised. I asked him whether his answer included GST or capital gains—Mr SPEAKER: Thank you. So the point of order effectively is that the question has not been addressed. The difficulty was again not only the length of the answer but the length of the question. The question was whether the figures that the Minister used earlier included GST and capital gains. If that could be addressed then we could move forward.Hon Gerry Brownlee: Mr Speaker.Hon David Parker: Point of order Mr Speaker.Mr SPEAKER: No I have got a point of order here I think first.Hon Gerry Brownlee: No a supplementary question.Mr SPEAKER: No well I am waiting for the answer. I am waiting for Dr Jonathan Coleman to answer the question that was asked.Hon Dr JONATHAN COLEMAN: The point is we are talking about income tax. Obviously GST is paid on goods and services which are discretionary. But the bottom line is that those people in the so-called wealthy section of the population pay much more than their share of GST as an overall proportion.Hon Gerry Brownlee: Has he seen any reports on how taxation policy may adversely affect KiwiSaver savings?Hon Dr JONATHAN COLEMAN: I have seen a concerning report—a letter that David Cunliffe wrote to the Shareholders Association back in 2011 in which he said that in circumstances in which there would currently be no tax payable on capital gains the 15 percent capital gains tax would tend to apply. He was talking there about KiwiSaver funds. The 2.3 million New Zealanders in KiwiSaver will be very concerned about that written admission to the Shareholders Association by one David Cunliffe.