Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill — In Committee 
Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill — In Committee 
[Volume:621;Page:16496] 
Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill 
In Committee 
Part 1 Annual Rates of Income Tax 2004-05 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I am pleased to be here to speak to the Committee stage of the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill. Part 1 is likely to be the part that generates the most discussion this evening. It is the part that confirms the annual rates of tax. It is worth noting in relation to this part that the Committee has before it a Supplementary Order Paper from United Future that seeks to index income tax thresholds from $38000 to $43000 and from $60000 to $68000. I need to inform the Committee that that Supplementary Order Paper has attracted a financial veto on the basis of an unbudgeted fiscal cost of $900 million per annum. This is of course particularly important given that the projected cash surplus is limited to some $520 million per annum. 
The other parts of the bill are largely taxpayer friendly and are likely to attract somewhat less debate I suspect. They reflect the main themes of the Government’s tax policy work programme: promoting growth and innovation; simplifying tax especially for small businesses; reducing tax-related compliance costs; and protecting the revenue base. The rest of the bill which we will discuss later removes some tax obstacles and closes a couple of loopholes. 
JOHN KEY (National—Helensville) 
: 
 One has to get up early in the morning to get past the Hon David Cunliffe but even he could spot that the aim of the Opposition’s attack tonight would be this Government—a Government that just loves to tax ordinary New Zealanders. It loves to tax hard-working New Zealanders businesses and people up and down the country. 
Dr the Hon Lockwood Smith 
: Gouge the tax out! 
JOHN KEY 
: It loves to gouge their eyes out. Dr Smith is absolutely correct. The Government loves to take money off hard-working New Zealanders and waste it on absolutely anything it can point a stick at. “How big is that spending?” one might sit back and ask. It is $34 billion worth of additional taxes brought in by this Government—$34 billion in the last 5 years and the Minister of Finance had the gall to come before the Finance and Expenditure Committee and tell it that there is no room for tax cuts going forward. He had the gall to tell the people of New Zealand that they have paid $34 billion—something like 18 additional taxes bringing in money from every part of the economy—and that there is no room for tax cuts. But he did even better than that. When he was before the Finance and Expenditure Committee and we asked him about the petrol tax the extra 5c a litre—yet another tax Labour is bringing in—and the amount of roading that will be built on the back of that $200 million he said code for: “I’m not going to bring in the tax before the election because I’m very unpopular with the amount of taxes I’m collecting. But what I will do is to put on hold all the additional new road construction that would have been done by this Government because fiscally we can’t afford it.” The Government has a $7.4 billion operating surplus and a $6.6 billion operating balance excluding revaluations and accounting charges. It is funding its entire capital programme out of cash and it still has available spending to repay debt—but it cannot afford it! 
The United Future party came up with a Supplementary Order Paper. Parts of it are not necessarily what we would do in tax policy but we support it. The Government will not support it. The Government will not support its own partner—a partner that it has a confidence and supply relationship with. There must have been great negotiations around the Cabinet table when United Future came in and said: “Well we didn’t get a place at the Cabinet table but we decided we’d support you through thick and thin on confidence and supply. But by the way we’re going to veto your tax bill because it will give $700 million to $900 million worth of relief to hard-working New Zealanders. But we’ll tell you what: we’ll go out and spend the money for you better.” How will they spend it? Well their track record frankly is abysmal. There are billions of dollars more for health in this country yet fewer operations are being done. 
Steve Chadwick 
: Oh rubbish! 
JOHN KEY 
: That is right. Fewer operations are happening throughout the country. Poor New Zealanders are not on waiting lists because Labour has got rid of waiting lists. It has redefined them with some other PC flaky term. Basically unless a person cannot see cannot hear cannot walk cannot talk or cannot do anything then he or she is not allowed to be on a waiting list—because that is embarrassing when a Government is spending billions of dollars more of taxpayers’ dollars. Then we had the debacle around Steve Maharey’s ministry where people at all sorts of polytechs around the country were charging the Government for courses they were supposedly undertaking but really were not doing at all or for courses that had not provided any value at all. That is the idea of this Government; it simply wants to raise taxes—$34 billion additional taxation. 
On Monday of this week we released some data that I think the Government would be well-advised to look at. It showed that the increase in real nominal after-tax wages in New Zealand has been about 3 percent over the last 5 years. So New Zealanders’ average after-tax wages have gone up by about 3 percent over the last 5 years which is less than 1 percent a year. Mr Cunliffe smiles with embarrassment like a Cheshire cat that has caught something and Dr Cullen is hiding somewhere within the precincts of the building I am sure because he is embarrassed that at exactly the same time the Government’s revenue has gone up by 25 percent in real terms. In nominal terms it has gone up 40 percent—$34 billion—but in real terms it has gone up 25 percent. To put it another way—and to put it simply so the Minister can understand it—for every $7 of value that this economy has produced $6 has stayed with the Government. Is that fair? 
RODNEY HIDE (Leader—ACT) 
: 
 The ACT party opposes this bill—particularly this part that sets the annual rates. We stand here as the only party that says the move of Helen Clark and Michael Cullen to increase the top rate of tax from 33c to 39c was wrong. We say that the 39c rate should be dropped immediately. Unlike our National Party cousins—we know that John Key would like to have a policy that said: “Let’s drop the 39c to 33c.” but he has not managed to persuade his caucus—the ACT party stands firm. 
Simon Power 
: Oh! 
RODNEY HIDE 
: Well he might have persuaded Mr Power but that is not enough. The ACT party says that the top tax rate should not be 33c in the dollar but that we should go to a top rate of tax of 20c in the dollar and that we should do so immediately. [ 
Interruption 
] I hear Steve Chadwick calling out. Here is a Government that expects everyone else to pay a 39c or a 33c rate of tax but she stands to defend a Minister who pays—how much tax? Was it 39c was it 33c was it 20c? No! It was none. Steve Chadwick believes that she can look voters and taxpayers in the eye and say: “Yes you pay 39c and you pay 33c.” but here is John Tamihere who received a golden handshake of $195000 that he said he would not take—and I am coming to precisely the point of the annual tax rates. If one receives a payment of $195000 and one is a member of Parliament can someone please tell me under this legislation and the legislation it replaces or the legislation before that what the tax rate should be? It is 39c is it not? But what did the Cabinet colleague of Steve Chadwick Rick Barker and—what is the name of the fella in the chair?—David Cunliffe pay on that amount? None! So what are we doing in this Parliament passing law when Labour Party Cabinet Ministers just ignore it? John Tamihere voted for the legislation. He goes around small businesses telling them they have to pay their taxes but what does he do? He pays none. That is a disgrace and I do not see David Cunliffe getting up now to defend his Cabinet colleague. And what does Helen Clark say? She says: “Oh naughty boy! You didn’t pay your tax as set out in the annual rates of income tax for 2000-01.” 
Lianne Dalziel 
: Now you are stretching it. 
RODNEY HIDE 
: Well I can see why Lianne Dalziel is bitter. She paid her tax and she got fired. John Tamihere did not pay his tax but he did not get fired. He was sent on a holiday to west Auckland. 
Simon Power 
: At least she had honour. 
Rodney Hide 
: She had some honour. She went—[ 
Interruption 
] Oh I know. David Benson-Pope is calling out. He is saying that there is no honour with John Tamihere and I agree with him. If we are going to pass this legislation that sets the top rate of tax at 39c I expect MPs to pay it. I expect Ministers to pay it but I say to Lianne Dalziel that it is very clear— 
Lianne Dalziel 
: Who pays your money Rodney? 
RODNEY HIDE 
: Oh here we go again!. Are they not great? 
Lianne Dalziel 
: We know all about it. 
RODNEY HIDE 
: Oh yes. They know all about it. Let us hear about it then. They could get up and give a speech and tell us the story. Here we have a Labour Government with high taxes for everyone—and wasted money. Labour’s own Cabinet Minister does not pay his tax and Helen Clark says that is OK. David Cunliffe says that is OK. 
Lianne Dalziel 
: How much did you get paid? 
RODNEY HIDE 
: The wicked witch from Christchurch can go on all she likes. The fact of the matter is that people see through it. John Tamihere said he would not take that $195000 but he did. Then he said he was not going to pay any tax on it because he had to feed the kids and pay the mortgage. 
Lianne Dalziel 
: The truth will come out. 
RODNEY HIDE 
: Oh the truth will come out! Well I am pleased that it will because it takes the Opposition on this side of the Chamber to bring the truth out. Lianne Dalziel did not know about the golden handshake. She said that she did not know about the tax not being paid but she will go back to her constituents and say that they have to pay their 33c or their 39c—but John Tamihere does not. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I have to agree with the previous speaker. Mr Tamihere did have an obligation to pay tax at those rates on the income. Every taxpayer is responsible ultimately for his or her own liability and Mr Tamihere is responsible for his. Of course he will be voting for this legislation even though he has been away. 
The big issue here about these rates is really quite simple. There is no doubt that the Government is collecting billions more in tax than it ever expected and that has allowed Dr Cullen to do two things. Firstly because of the surplus he can claim he is a fiscal conservative and secondly he can spray money all over the place. He can spend up faster larger quicker and at lower quality than any Minister of Finance in my adult lifetime—he has had so much money coming in. In fact he has so much money now that he is paying for his long-term investments out of cash. Who else is doing that? How many of us would love to be able to buy our houses out of this year’s surplus income? 
John Key 
: Out of petty cash. 
Hon BILL ENGLISH 
: Out of petty cash. That is what Dr Cullen is doing. Why does that matter? It matters for two reasons. The first is simply that— 
Rodney Hide 
: He’s got so much money Cabinet Ministers don’t have to pay tax. 
Hon BILL ENGLISH 
: That’s right but I can tell members that what they pay the Queen’s Counsel to find out that he is not paying tax will more than make up for the tax that was not paid. 
This is a double hit for the Government’s fiscal outlook. There are two reasons. The first is thatthe people who are doing overtime to pay off their mortgages are simply paying more tax than they need to pay. The Government does not actually need the money but because it has the money coming in it comes up with all sorts of wild and woolly ways of spending it. 
 I can quickly tot up $60 million $80 million $90 million that is pure political puffery on the part of Mr Maharey and Mr Mallard who are spending a bit and then there will be an announcement next week and beforethey know it they have spent $100 million. 
Rodney Hide 
: What about the CDs? 
Hon BILL ENGLISH 
: There was $15 million worth of CDs that no one looked at. There is another reason we should be opposing these rates and it is simply that they are unfair. They are unfair because we have now had strong economic growth for 7 years which is of benefit to everybody. These are the best economic conditions in a generation but the working people that the Government pretends to represent have not had their fair share of it. The Government’s revenue and surplus have risen dramatically faster than after-tax wages. 
John Key 
: Seven times faster. 
Hon BILL ENGLISH 
: They have risen seven times faster. The Government has simply taken much more than its fair share of the economic boom which should have belonged to the working people who took so many hits during the restructuring of this economy. They took the knocks and now Dr Cullen is taking the gold that is flowing. The people took the hits; he is taking the cash. That is unfair and it is what these rates are doing. 
If Parliament passes these rates then it is building in reconfirming and continuing the basic unfairness. The civil service and the Labour Government are taking much more than their fair share of the economic boom and the real pity of it is that those working families will by this time next year be paying significantly higher interest rates on their mortgages. They will be seeing that economic growth has slowed down and they will be feeling less secure—and the Government will still be sitting on a mountain of surplus because of these tax rates. For the next couple of years the Government’s books will be in brilliant shape but the working people will have missed out on the best opportunity in a generation for higher net incomes which is after all what really matters to them. 
CRAIG McNAIR (NZ First) 
: 
 I will speak to Part 1 which confirms the annual rates of income tax for the 2004-05 income year. I want to speak about tax rates which will have to be addressed at some time or other and which some other members of Parliament have been speaking about tonight. When I speak about tax rates I am not talking just about income tax although I am including income tax specifically because we are talking about that in this part of the bill. I am also talking about taxes in general—the amount of tax that this Government has raised on petrol and a whole raft of things. 
The Government would have us believe that we have an economic boom in this country whilst it is taxing individuals up to 39c income tax. That is a 39c tax rate for people who are earning around $60000 a year because they are considered to be rich by this Government. In this country a wealthy person according to this Government is somebody who earns $60000 a year. Members of this House know that $60000 a year is not a lot to live on these days. People are struggling on $60000 a year to have a couple of kids a mortgage and at least one car. For a lot of people it is impossible. 
This Government says that there is an economic boom. The New Zealand dollar is at 70c against the US dollar and we are not even offering any tax concessions for our exporters in order to grow our export sector. There is not the economic boom that this Government would have us believe. The Minister of Finance gets up to speak day in day out along with other Ministers like the Minister in the chair David Cunliffe. I heard Parekura Horomia talking today on the Ngati Tuwharetoa (Bay of Plenty) Claims Settlement Bill. He said how great the farmers and exporters are getting on but we have a trade deficit in this country. As I said people who are earning over $60000 a year are being taxed at 39c in the dollar and we do not even have a Government with enough vision or positive outlook to say that the export sector needs at least to be given a fair run for its money and given some tax concessions. 
Hon Maurice Williamson 
: Buy back Telecom! 
CRAIG McNAIR 
: That is a very good idea. Mr Williamson has tried to steal another New Zealand First idea by saying “Buy back Telecom”. I am sorry but we own that idea and he will not pinch it off us. New Zealand is continually sliding down the OECD rankings. The average Australian earns $120 a week more than the average Kiwi. 
Dr the Hon Lockwood Smith 
: It is $175. 
CRAIG McNAIR 
: It is probably more. I stand corrected. Dr Lockwood Smith says that Australians earn $175 more per week per person than Kiwis. We say and this has every relevance to Part 1 that if the average New Zealander earns $120 or $175 less than the average Australian the Government and individuals here in New Zealand are worse off. We say that when it comes to taxation we need to think outside the square. That is what New Zealand First is saying. We are firm advocates for all Ministers and MPs paying their taxes. 
I will also say and I mentioned this briefly in the second reading that New Zealand First would have supported the notion that to preserve the present tax thresholds in purchasing-power terms the present bands should be adjusted from $9500 to $10750 from $38000 to $43000 and from $60000 to $68000 at least. We would have supported that. 
ROD DONALD (Co-Leader—Green) 
: 
 I will speak briefly on Part 1. 
John Key 
: Does Ahmed Zaoui pay tax? 
ROD DONALD 
: Poor Mr Zaoui—and I thank Mr Key for raising this as it is very kind of him to notice—is incarcerated in prison despite the fact that he has refugee status in New Zealand. I look forward to him being released and able to earn a decent income—perhaps as a university lecturer talking about clashes of cultures or one or two other things. But perhaps he will be in the difficult position that tens of thousands indeed hundreds of thousands of New Zealanders are in which is that they do not earn enough to bring up their families in decency. That is what I will talk about in this debate on Part 1 which deals with annual rates of income tax. 
I will offer some amendments to the annual rates for the acting Minister to consider. I fear however that he will either rule them out of order or veto them. But just in case he is not so callous and he gives Parliament the opportunity to vote on our amendments I would like to draw to the attention of other members of the House—especially my colleagues in National New Zealand First ACT and United Future—that the Green Party does support income tax cuts. But we want the cuts to be at the bottom not at the top. I find it extraordinary that on the same day that members of Parliament received a 3 to 4 percent wage increase the United Future party recommended that we also receive a $1155-a-year tax cut. We are the last people in this country who need a tax cut. We are the last people in this country who need more money in their pockets. 
John Key 
: Come on! 
ROD DONALD 
: I gather from what I read about Mr Key’s wealth that he is the last person in this Parliament who needs a tax cut. But I will leave him out of the debate and return to the people who really matter—the struggling families of this country and particularly the 30 percent of children who are growing up in poverty; a figure that this Government acknowledges is the case. 
 We are simply saying that the Government’s Working for Families package does not go far enough fast enough. Unlike some other parties in this Chamber we supported that package because we do want to lift families out of poverty. We do not want any children in this country growing up with unmet needs. We want them all to have a decent opportunity for an education all to have a comfortable home to live in and all to be able to experience the quality of life that most of us in this Chamber take for granted. But the Government is not bringing in its Working for Families package quickly enough. It is stretching it out over 2 years which I think is callous and is not giving enough relief at the bottom. 
Our primary amendment would make the first $5000 of income tax-free. Although that would benefit members of Parliament because we too would get an extra $750 a year the people who would benefit most are those earning under $38000. Instead of the $75 a year that Mr Copeland from United Future was offering we are proposing $750 a year. We intend to fund it not from the surplus—I will come back to that in a minute; Mr Key made some points I agree with—but from a suite of eco-taxes. The first would be a carbon tax. We would also bring in a proper tax on diesel in order to line it up with petrol. There would be other eco-taxes as well. We are endeavouring to be fiscally responsible and are putting up where the money for our proposals would come from. 
Moving beyond that to one of the valuable points that Mr Key made this Government is in an extraordinary situation in that it is paying for capital projects out of its annual surplus. Although to some extent one would have to say that is brilliant fiscal management in the short term we believe it is happening only because the Government is running its surplus off the backs of the poor people of this country. For as long as there is any poor child in New Zealand who is suffering because of inadequate family income we do not believe that any fiscal surplus this Government claims is real whether it is on paper or is cash in hand. 
We invite other parties in the Chamber to support our amendment if the Minister Michael Cullen lets us away with it. We encourage the Government to put some of that massive surplus into helping those who are struggling rather than investing it for example in the offshore sharemarket through its superannuation fund. Instead the Government should be putting more money into the sustainable infrastructure that New Zealand desperately needs. 
Hon MAURICE WILLIAMSON (National—Pakuranga) 
: 
 I am delighted to take a call on the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill. I want to concentrate my speech on the issue of taxation with regard to the funding for roading. 
I suggest to members of the Committee who have not been here for too long—and I notice a number of members from the Green Party and United Future who were not around in the mid-1990s—that they take a look at  
Hansard 
 and check what happened. Winston Peters was then a bit of a lone voice. I think he and Tau Henare were the only two members in the House from New Zealand First before the coalition—this was in 1995. Winston Peters put up a member’s bill proposing that because there was plenty of taxation already all the money that went to the consolidated account from petrol tax—and at that stage it was about 24c or 25c per litre—really should go to roading. That is what Winston Peters proposed in this House. He said that all of the 24c should be moved from the consolidated account and go to roading. 
I want members to refresh their memory. They should have a look at  
Hansard 
 if they want to see what happened. The Labour Party headed by Helen Clark and deputy leader Michael Cullen voted for that. They said in the House that it was wrong to be bleeding that money off road users when there was a desperate need for money for roading. Michael Cullen—it is in  
Hansard 
 members should go and check it—voted for the entire 24c to go across. 
John Key 
: That’s surprising. 
Hon MAURICE WILLIAMSON 
: I know it is surprising. That has stopped a lot of people in their tracks. 
John Key 
: I’m shocked. 
Hon MAURICE WILLIAMSON 
: That is true. They voted for Winston Peters’ bill. Fortunately the bill was defeated by only a couple of votes but Helen Clark Michael Cullen and all the other Labour members voted that the whole 24c be moved across. Lianne Dalziel who is in the Chamber tonight voted for that measure and it will be in  
Hansard 
 that Damien O’Connor voted for it. Now what do we face? We face a Government that next April will stick another 5c per litre tax— 
John Key 
: What? 
Hon MAURICE WILLIAMSON 
: That is right it will stick another 5c per litre tax on petrol for ordinary motorists. That is at a time when petrol prices have gone through the ceiling because of geopolitical matters the Iraq war and a whole range of other issues. 
I say to the Minister in the chair Michael Cullen that if the Government needs the 5c for extra roading—he says it does and I accept that roading desperately needs to be better funded—why on earth could he not take it from the huge surplus of $7.4 billion or whatever the number is that he is already running? The surplus actually grows by the day; every time I look at Treasury’s website it has changed. If Dr Cullen thinks that taking 5c from that is wrong how come he voted in the House to take all 24c and move it to the road fund? 
John Key 
: He was in the Opposition. 
Hon MAURICE WILLIAMSON 
: My colleague John Key has given me the answer. He was in Opposition then so it was good to vote for moving the whole sham shooting-box over but now he does not want even 5c transferred from a surplus unseen unparalleled and unheard of in this country’s history. 
If members think the money is not needed for roading then let me correct another error made by the Minister of Transport Pete Hodgson in this House only a few weeks ago. He said that Peter Brown—I think that is who he was having a smack at—was not right about the amount of money spent on roads as a percentage of GDP and that it had increased under this Government. That is what he said. So I put some written questions. Again I ask members to check questions for written answer. I asked how much money was spent on roads and what percentage of the GDP that was in each of the years 1998 1999 2000 and so on. Lo and behold it is interesting that in the 1998-1999 year which was the last full year of a National Government the money was the highest it had ever been. Every year since then Labour’s spending on roads has been less as a percentage of GDP than what National spent in its last year. That is not what Pete Hodgson said. 
So I understand why Michael Cullen wants to spend some more on roads. He is embarrassed about how little spending has gone on. Why smack the motorist around with 5c more at the pump when the cost of petrol is already beyond our wildest expectations compared with where we were only a year ago? Do members remember a year ago when the price of super was under $1 and 91 octane was under 90c? 
Hon Damien O'Connor 
: It was not. 
Hon MAURICE WILLIAMSON 
: Damien O’Connor says it was not. On the West Coast they probably pay $3.50 for super but I tell him that that is not what people pay in Auckland. He should get real and get to understand what Auckland prices are compared with what people pay on the West Coast. Now the Minister of Finance says that he needs that money so he is going to stick an extra 5c on the backs of the working class. Where are the Greens with regard to the working class on this? The Minister says he needs that tax when he has a $7.4 billion surplus. Bill Birch would have gone to heaven on the idea of a $7.4 billion surplus. Bill Birch’s total surpluses cumulated did not come to what this Minister is running in one year. The Minister has come to this Chamber and cannot keep a straight face because he wants more. 
LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I move  
That the question be now put 
. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In speaking to Part 1 of the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill I remind listeners that that is what we are debating because they may have gotten a little confused. Part 1 is about this Labour Government wanting to confirm the annual income tax rates. 
It is an incredible paradox that this Government seeks tonight to confirm income tax rates in this country when it seems to be Helen Clark’s policy that Cabinet Ministers may or may not have to pay income tax. To me that is an extraordinary paradox. The Minister John Tamihere has not been sacked so it seems to be OK to Helen Clark that he does not pay income tax. What are we debating Part 1 for if Cabinet Ministers do not have to pay income tax? As the Minister in the chair the Hon David Cunliffe knows it is the responsibility of every citizen to pay— 
Hon Damien O'Connor 
: Of the employer. 
Dr the Hon LOCKWOOD SMITH 
: No it is not. The Hon Damien O’Connor suggests that it is the employer’s responsibility. It is the responsibility of every citizen to pay his or her taxes. It is the responsibility of every citizen to make sure he or she has paid the correct amount of tax because employers do not know what other income individuals have. It is up to individuals to make sure except that Helen Clark’s Labour Government sets new standards. Working people of New Zealand pay income tax as spelt out in Part 1 but not her Labour Cabinet Ministers. 
I want to raise a couple of other serious issues. This Labour Government is confirming these high rates of tax when it has increased the tax take by 25 percent in real terms. According to the OECD we are now paying 35 percent of GDP in tax. What is worrying about that is that in the last year for which the OECD has data—that is 2001-02—the amount of tax as a percentage of GDP went up from 33.3 percent to 35 percent. What is quite clear is that Labour is trying to get back to where it was in 1989 when it was last in office when the tax burden was 38.3 percent of GDP. Labour is trying to head back up there. 
If the Government was spending the money on worthwhile projects—such as the desperate need to build some roading infrastructure instead of just setting up more committees—there might be some support for this level of taxation. But what is troubling me hugely is that Helen Clark and her Treasurer are now starting to spend money to buy votes. They are going to tax working New Zealanders—Part 1 confirms the high burden of tax on working New Zealanders—and spend the money to buy votes in next year’s election. The most recent occurrence was $20 million of ordinary working New Zealanders’ taxes going to buy the votes of the 20000 Niueans living in New Zealand. It is a disgraceful performance by a Government to tax working New Zealanders far more than they have ever been taxed before. This Government has taken $34 billion more from working New Zealanders and is spending it on buying votes for the election next year. 
In my 20 years in this place I have never seen such blatant vote buying as we are now seeing from this Labour Government. It is a disgrace twice over that we confirm these tax rates in Part 1. It is a disgrace because firstly under Helen Clark’s Labour Government it seems that Ministers do not actually have to pay their income tax. It is quite clear that the Hon John Tamihere did not fulfil his taxation responsibilities under this law and the Prime Minister has not sacked him. Secondly it is a disgrace when taxpayers’ hard-earned dollars are used to buy votes blatantly. 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 It might assist the House’s consideration if we test the credibility of the member who has just resumed his seat Dr the Hon Lockwood Smith. He quoted OECD reports and suggested that New Zealand’s tax burden was higher than the OECD average. In 2001— 
Dr the Hon Lockwood Smith 
: Don’t tell lies! 
Hon Rick Barker 
: I raise a point of order Mr Chairperson. That member is saying something that is completely and utterly unparliamentary. I ask him to withdraw and apologise. 
The CHAIRPERSON (Hon Clem Simich) 
: I thank the member for raising that. Dr Smith please withdraw and apologise. 
Dr the Hon Lockwood Smith 
: I withdraw and apologise. 
I raise a point of order Mr Chairperson. It is a responsibility of members speaking in this Committee to tell the truth. The Hon David Cunliffe knows because he just heard my contribution that I did not say—and he can check the  
Hansard 
—what he just said because I am very careful with the facts. What I said was that according to OECD data the tax take as a percentage of GDP had gone up in the latest data for 2001-02 from 33.3 percent to 35 percent. I am happy to table the article I was quoting. 
The CHAIRPERSON (Hon Clem Simich) 
: That is a debating point. 
Dr the Hon Lockwood Smith 
: I raise a point of order Mr Chairperson. Forgive me but it is not a debating point whether members tell the truth in this House. That is not a debating point. When I have made clear and am prepared to table what I was quoting from the Minister cannot assert that I said something I did not say. 
The CHAIRPERSON (Hon Clem Simich) 
: That is a debating point but the reason I asked you to withdraw and apologise was that I—and I think I was right—took what you said to be relating to the Minister. If I was wrong we will move on. 
Hon DAVID CUNLIFFE 
: Allow me to assist the Committee by clarifying this with some OECD data. For the year 2001 New Zealand’s average tax burden was 33.8 percent against an OECD-wide average of 36.9 percent. Of the 31 countries in the OECD New Zealand by my calculation was the 10th lowest. So not only were we lower than the average; we were the 10th lowest. We were in the bottom third of tax rates. 
There was one country that had tax rates in line with ACT policy. One country had a tax rate of 18.9 percent. Can members guess which country that was? It was Mexico. As far as I know the country with the lowest income in the whole OECD was the only one that mimics ACT policy. 
In 2002 the New Zealand average tax burden was 34.9 percent—not 35 percent as the member alleges—which is still below the OECD average of 36.3 percent. Once again New Zealand was in the bottom half of OECD taxation by being the 14th lowest out of 31 countries. If that member is going to stand up and quote facts and figures and pretend to table documents he had better get his numbers right first because this Government is in the habit of taking some care with its numbers. 
PANSY WONG (National) 
: 
 When it comes to a question of credibility between Dr the Hon Lockwood Smith and the yet to be honourable David Cunliffe in full force I am sure the public knows Dr the Hon Lockwood Smith’s track record—that of a member who is always very careful and who has credibility with his facts and numbers. He is absolutely right to say that New Zealand’s tax take relative to GDP has gone up. That is a fact and it is not disputable. 
The other thing people need to understand is that New Zealand has to be competitive in the world. We have to attract foreign investment and we have to motivate our business people by giving them incentives to perform. 
We are still talking about why the Labour Government should reconfirm these high income tax rates. Let us look at why when Labour came to Government it collected an additional $34 billion of tax. The question has to be asked: where has that gone? 
Let us look at two areas that I am very interested in. One is education. My very hard-working colleague the Hon Bill English has consistently pointed out that throughout New Zealand the contribution by parents the community and international students to the operational funding of our primary and secondary schools has gone up to nearly 40 percent. So parents have to raise a lot of money. 
There is no longer a donation aspect to education. Previously in New Zealand we talked about free education. If we talk to people in schools they say education is no longer free. Parents are being asked to mow school lawns and paint school buildings to make up for their inability to make the so-called voluntary donation. 
 I ask where the additional taxation this Labour Government collected has gone. Our schools are now increasingly relying on parents and international students to fund their expenditure. So what will happen next year now that the Labour Government has also ruined the international education sector? What will happen next year and in the future when there is a downturn in international student numbers? Will those parents be asked once again to contribute even more? 
The other area I want to ask about concerns what will happen to the health system in New Zealand. 
Steve Chadwick 
: It’s very robust. 
PANSY WONG 
: I hope Steve Chadwick will be able to stand up in public to defend her Government. Today we read in the newspaper about evidence given to a coroner that a patient was asked to move from an intensive care department unnecessarily and as a consequence he died. He had to make room for a patient who had died an hour previously. What is happening in New Zealand? Our people are dying unnecessarily because hospital emergency departments are no longer able to cope. 
In Wellington right now—we are debating in the capital city—the only 24-hour medical care facility has stated that it can no longer afford to open during the evening shift. Once again pressure is going on to Wellington Hospital and I ask whether it can cope with this additional pressure. 
So why should any political party reaffirm the high tax rates? I watch with interest the United Future party which has put forward a Supplementary Order Paper that basically has the impact of lessening some of those high tax rates. I look with interest to United Future members voting against Part 1 and the rest of the bill because even that party which is supporting the Government is saying tax rates are too high. 
STEVE CHADWICK (Labour—Rotorua) 
: 
 I move  
That the question be now put 
. 
Hon KEN SHIRLEY (ACT) 
: 
 The ACT party certainly will not be reaffirming these higher tax rates that this tax-and-spend Labour Government is promoting in Parliament tonight. There has been no justification for them. It has already been clearly mentioned in this debate that New Zealand needs a competitive environment if we are to succeed internationally. We do not just need tax rates that are as low as those of other countries; we need them to be lower. We have significant geographic disadvantages being at the end of transport routes. As a trading nation we need to have an environment that attracts investors if we are to have vigorous growth and prosperity in this country. 
This Labour Government inherited incredible economic conditions. I do not think that at any time in the last three or four decades New Zealand has enjoyed such favourable conditions. The point is that not one of them has anything to do with the policies of this Government; they are largely the low fruits of the hard yards done by previous Governments in making tough decisions and bringing reforms to the economy. This Government is squandering that opportunity as it plucks the low fruits of those courageous reforms of the past. 
Not only is the Government laying back and plucking the fruits; it is actually messing up the fundamentals increasing taxation rates when it should be reducing them and bringing in unnecessary regulations all of which— 
Hon Richard Prebble 
: But they haven’t been paying tax. 
Hon KEN SHIRLEY 
: My colleague points out the other point. The Government loves imposing higher taxes on the productive workers of New Zealand while it tries to excuse its own Ministers for it would appear avoiding tax. 
Rodney Hide 
: How does that work? 
Hon KEN SHIRLEY 
: I do not know how it works quite frankly. 
Hon Richard Prebble 
: Call it a koha. 
Hon KEN SHIRLEY 
: Call it koha. There are all sorts of excuses but— 
Rodney Hide 
: What’s the tax rate now for a Minister? 
Hon KEN SHIRLEY 
: We would have to say it is zero. What is the tax rate for a Labour Minister? It would have to be zero yet that Cabinet has the audacity to keep pumping taxes up and up. Let us go back to Labour’s wonderful airbrushed election pamphlet of 1999. It took us months to recognise who the dolled-up woman on the front page was; it was Helen Clark. She said: “I pledge I promise to the country.” One of those pledges was that only 5 percent of the population would have a tax increase and it would be those earning over $60000. 
Hon Richard Prebble 
: And 0.1 percent would have to pay no taxes at all. 
Hon KEN SHIRLEY 
: That is right. Aside from that the Government then conveniently enjoyed the benefits of fiscal drag and inflation and now significantly more than 5 percent of New Zealanders are in that higher tax bracket. It is another broken promise. So we have avoidance dishonesty and broken promises. That is what we are getting from this Government. 
Rodney Hide 
: Do we have a ministerial rate in this bill? 
Hon KEN SHIRLEY 
: I should ask members to look at schedule 1. Perhaps we could have a Supplementary Order Paper to put in a ministerial rate and make it retrospective. 
Rodney Hide 
: A Harry Duynhoven clause. 
Hon KEN SHIRLEY 
: Yes the “Save Harry” clause. Labour members were quite happy to abuse the constitution of this country to save one of their own Harry Duynhoven who unfortunately should have been expelled from Parliament. That is the point. He breached the law. So I say to that Minister— 
Lianne Dalziel 
: Bye-bye. 
Hon KEN SHIRLEY 
: Former Minister—I forgot. 
Hon Richard Prebble 
: And she paid her tax. 
Hon KEN SHIRLEY 
: And she paid her tax. 
Rodney Hide 
: She didn’t tell the truth. 
Hon KEN SHIRLEY 
: She did not tell the truth but she did pay her tax. Well maybe she did not. My question is where in schedule 1 is this special ministerial rate. We have a schedule 1— 
Rodney Hide 
: It needs amending. 
Hon KEN SHIRLEY 
: Shall we draft a Supplementary Order Paper or shall we leave it to the Government? 
Rodney Hide 
: No they’d make it retrospective for John. 
Hon KEN SHIRLEY 
: They would make it retrospective for John Tamihere. 
Hon Richard Prebble 
: It’s outrageous. 
Hon KEN SHIRLEY 
: It is an outrage But what we do know is that taxation on employment is a penalty— 
Lianne Dalziel 
: That was the biggest load of fiction I have heard in my life on TV on Saturday night. 
Hon KEN SHIRLEY 
: I am sorry but I cannot hear the member. 
Lianne Dalziel 
: Richard Prebble’s kitchen—the place for writing David Lange’s selection speech! What a load of nonsense! 
Hon KEN SHIRLEY 
: Clearly the former Labour Minister is trying to create a distraction in this debate— 
Rodney Hide 
: Should we be surprised? 
Hon KEN SHIRLEY 
: Exactly. In fact it is extraordinary that the Labour Government has actually allowed this bill to be on the Order Paper. 
Hon DAMIEN O'CONNOR (Minister for Racing) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 61 
New Zealand Labour 51; United Future 8; Progressive 2. 
Noes 59 
New Zealand National 27; New Zealand First 13; Green Party 9; ACT New Zealand 8; Maori Party 1; Independent: Awatere Huata. 
Motion agreed to. 
A party vote was called for on the question  
That Part 1 be agreed to. 
Ayes 61 
New Zealand Labour 51; United Future 8; Progressive 2. 
Noes 59 
New Zealand National 27; New Zealand First 13; Green Party 9; ACT New Zealand 8; Maori Party 1; Independent: Awatere Huata. 
Part 1 agreed to. 
Part 2 Amendments to Income Tax Act 1994 
JOHN KEY (National—Helensville) 
: 
 National will be opposing the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill. I want to address Part 2 and clauses 26 to 28 that interestingly enough concern Maori authorities. 
Hon David Carter 
: John Tamihere. 
JOHN KEY 
: It is about how they have a special tax rate of 19.5 percent. I would be very worried about that if I were John Tamihere. But I am not so worried because we heard from the Prime Minister today that John Tamihere will be ringing in to contribute to the debate. He will probably do that on his Telstra free line but he will be ringing in—0800 HELP. Let us face it 19.5 percent would be better than what they actually got which was zero so maybe it is a positive. 
A 19.5 percentage rate for Maori authorities is a very interesting position— 
Hon Damien O'Connor 
: It’s now your poll rating. 
JOHN KEY 
: No our poll rate is not 19.5 percent; Mr O’Connor does not need to worry about that—but the interesting point about that rate is that the Government pushed it through on the basis that most beneficiaries of Maori authorities would have had it as their final after-tax rate. So in principle the idea was that it would save them having to re-file and to top up taxation again. The interesting issue about that of course is not about the final beneficiaries. That may in fact be correct when it is distributed to final beneficiaries of Maori authorities but in the interim they have cash available to them for which other companies would have to pay a company taxation rate of 33 percent. One might sit there and say: “Oh well maybe that’s not really that big a deal.” 
Hon Richard Prebble 
: But they have higher koha payments. 
JOHN KEY 
: They do have higher koha payments. Interestingly enough one might have a look at the position recently with Aotearoa Fisheries Ltd. That company is now in the position where it will be paying 19.5 percent taxation—and competing with the private sector that is out there paying 33 percent—under clause 27 “Distributions by Maori authority” and clause 28 “Amount distributed to member by Maori authority”. That makes a nonsense of the fact that this Government does not want to lower the company tax rate for all sorts of reasons. Michael Cullen has gone up and down the country telling us that it does not matter that companies pay a higher rate of taxation in New Zealand than they pay in many other parts of the OECD. 
I want to draw Mr Cunliffe’s attention to this point. He was quoting some statistics from the OECD but this is the important statistic he should consider: In 1999 when the then National Government left office the company rate of taxation in New Zealand was 33 percent and the average in the OECD was 35 percent. We had a competitive advantage—2 percent compared to the advantage—and I will allow Mr Cunliffe to work that out. 
Today as I look around I see that the average corporate tax rate in the OECD is 29.6 percent. New Zealand’s rate interestingly enough sits at 33 percent and the rate for Maori authorities sits at 19.5 percent. New Zealand has gone from a position of competitive advantage under a Labour Government to a position of competitive disadvantage. So if Mr Cunliffe wants to have a look at the OECD and at how this Government is structuring New Zealanders and giving them the opportunity to participate to be successful and to compete then I strongly suggest that he takes a moment to have a look at what has been happening there and to have a look at the situation in relation to New Zealand’s relative position in the OECD. 
I want also to talk for a moment if I may about issues in relation to PAYE and intermediaries. Under clause 54 some interesting moves have been made in terms of providing a situation where tax advisers will be in a confidential position. We would welcome that although it is not a change in this particular bill. But interestingly enough at the same time as the Government is introducing that it has tried to bring out an amnesty for the black economy here in New Zealand. When we had the Inland Revenue Department before the Finance and Expenditure Committee to talk about this very issue we asked it how large it thought the black economy was in New Zealand and what amnesty might be available if the Government could get it right. The answer was that the department estimated that no tax is paid on around 10 percent of the economy. 
Hon Richard Prebble 
: Have they heard of the Waipareira Trust? 
JOHN KEY 
: We know where the 10 percent is sitting funnily enough. We could point the department in that direction. The department does not need an amnesty for that one; it will be able to be pointed in the right direction. However roughly $15 billion-worth of revenue is actually not getting tax treatment. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 As we debate Part 2 of the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill I cannot help but scrutinise a significant number of clauses from clause 4A through to clause 68. Members of the Committee will remember that it was not that long ago that Labour had a member of Parliament in trouble. Do members remember the situation with Harry Duynhoven? The Government passedspecial retrospective legislation to get Harry Duynhoven out of trouble and to enable him to stay in this Parliament. Now I have been looking at this part and I note that Labour now has another member the Hon John Tamihere who is in trouble. 
John Key 
: Deep trouble! 
Dr the Hon LOCKWOOD SMITH 
: Deep trouble. What are Labour members sneaking into this bill retrospectively to get John Tamihere out of trouble? Lots of clauses in this part need to be examined. I draw members’ attention for a start to clause 66 “Meaning of ‘income tax’ ”. Maybe this Labour Government is changing the meaning of income tax to get John Tamihere off the hook so let us have a look at clause 66. What does it say? Clause 66 states: “In section OB 6(1)(b) ‘CB 2’ is inserted before ‘CB 10.’ ” 
Opposition Member 
: What does that mean? 
Dr the Hon LOCKWOOD SMITH 
: I am not sure what that means but it troubles me that that could be something designed to get John Tamihere off the hook for not paying his taxes. Maybe they have changed the meaning of “income tax”. One gets more suspicious when one looks at other clauses. There is a clause about the rebate for gifts of money. Maybe they are changing that law to make it so that when the Hon John Tamihere received this koha as he calls it this— 
Hon Richard Prebble 
: Golden! 
Dr the Hon LOCKWOOD SMITH 
: Yes golden koha or something. Maybe they are changing the rebates rules around gifts of money. That is what clause 32 is about. We should look at that carefully to make sure they are not changing the rules to get the Hon John Tamihere off the hook. 
It does not finish there—we should look at clauses 34 and 35. Clause 34 is about refunding excess tax. What are they changing there in order to try to argue that the Hon John Tamihere has paid excess tax on some of his earnings perhaps to get him off the hook there? When one reads clause 35 “Limits on refunds of tax in relation to Maori authorities” in conjunction with clause 27 “Distributions by Maori authority” and clause 28 “Amount distributed to member by Maori authority” one has to ask what the Government is sneaking in there. We should have a good look at clause 28 because I am suspicious that—just as they did with Harry Duynhoven—they are sneaking something in there to get the Hon John Tamihere off the hook for not paying his taxes. He received an amount distributed to him by a Maori authority. Is clause 28 a sneaky little clause to get John Tamihere off the hook? 
What gets me even more concerned is clause 8 “Exception for withdrawal when member ceases employment”. Now we know that the Hon John Tamihere got his golden koha when he ceased employment so one can see that there are a number of clauses in Part 2 that need the scrutiny of this Committee. So many of them could enable this sneaky Labour Government to get John Tamihere out of trouble. We know what it did to get Harry Duynhoven off the hook when he was in trouble. 
There are so many clauses in this bill that in fact according to what is said in the titles of those clauses they could be designed to get John Tamihere off the hook for not paying his taxes. We know that Helen Clark has not dismissed him from Cabinet. She seems keen to find a way to keep him in Cabinet. I get suspicious when we debate legislation that talks about distribution by Maori authorities to members exceptions and withdrawals when members cease employment and the meaning of income tax. In fact all those clauses could be designed to change the meaning of the Income Tax Act because they are all amendments to the Income Tax Act 1994. The Committee should spend considerable time examining each of those clauses to make sure that what they mean is clear. I quoted clause 66 and it is far from clear what it means. 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I want to take the opportunity to outline some of the key provisions of Part 2 for the assistance of the Committee. The first key provision is to remove a tax obstacle to unlisted New Zealand companies gaining access to private foreign equity including venture capital. It does so by introducing venture capital rules that are the same as in Australia thereby equating the tax treatment between the two countries. In Part 2 also is a measure to help small businesses. It introduces a tax discount for self-employed people who make voluntary payments in their first year of business. We all know that if they do not make such payments as they are allowed not to in their second year they tend to be hit with a tax crunch so the Government is offering a discount to help smooth the tax payments of small businesses across their first 2 years. 
Part 2 also allows—and this is another taxpayer friendly provision—the costs associated with patent and resource management consent applications that are withdrawn or not granted to be tax deductible. Another taxpayer friendly provision in this part is to make the tax treatment of replacement planting of fruit trees more flexible to encourage the use of the most commercially desirable varieties. Part 2 also closes an egregious loophole involving the sale and leaseback of intangibles such as trademarks and newspaper mastheads. Finally it deals with some tax issues arising out of the recent severe flooding to allow farmers to file late tax returns once the damage has been recorded and is in order. 
Finally I want to contrast the points made by Mr Key in relation to the OECD tax rates. I draw his attention to the fact that as of 2001 which to my knowledge is the last fully complete comparative tax analysis by the OECD New Zealand’s corporate tax rate at 33 cents differed only very slightly from the OECD average of 32.9 cents thereby showing that as of that date New Zealand’s corporate tax rate was smack on the OECD average. 
What we see is the Government once again moving forward a range of measures that are designed to make tax easier to pay and to simplify the system and that is the kind of work that the country expects of a good Government. It is yet more evidence that that is what the country has. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I was quite impressed with the deep knowledge that my colleague Lockwood Smith showed in this part of the bill and the relevance of it to current events. I was looking at clause 32 “Rebate for gifts of money” where we have among other things a list—and I presume this is eligibility for rebates for gifts of money—included in which is Medicine Mondiale the New Zealand Jesuits in India Trust and the Operation Vanuatu Charitable Trust but not the Waipareira Trust. That is not covered under the provisions for rebates for gifts of money. 
Progress reported.