Foss Craig: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — Second Reading 
Foss Craig: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — Second Reading 
[Volume:659;Page:7864] 
CRAIG FOSS (National—Tukituki) 
: 
 It is an absolute pleasure to rise and speak on this day the anniversary of the swearing-in of the new National Government which happened 1 year ago today—the National-led Government; I acknowledge our coalition partners. We never agree on absolutely everything but goodness gracious we agree on an awful lot more amongst ourselves than the previous administration did. 
I am quite astounded by the new-found concern for the hard-working taxpayer that the previous speaker the Hon David Cunliffe was trying to allude to. He talked about overtaxation and he was all concerned. He made some points that are raised in the Taxation (Consequential Rate Alignment and Remedial Matters) Bill—that is quite right. But from the Government whose first job in taxation was to go from 33c to 39c in the dollar for the highest marginal rate and who overtaxed New Zealand to the tune of $20 billion per annum while at the same time raising spending by about $30 billion per annum I do not quite understand where this road to Damascus change has come from other than perhaps a glance at the consistently bad polls be they rogue polls or not. But it is a pleasure to speak on that. 
There is just one other point I will make and then I will move on to the bill proper. The previous member was also talking about concern for children whose parents are locked out of the housing market. In the previous administration the housing affordability index and ratios for New Zealanders got as high as they ever have to I think 7½ times average annual earnings when we normally run at about 4 times average earnings after tax. So I do not know where that logic from members over there is coming from; it is probably from the same bucket as their throwing out the monetary policy framework agreement. Apparently there was a ground-breaking speech on that today. I bring members’ attention to the fact that members opposite all agreed to the framework. Dr Cullen initiated an inquiry into the monetary policy framework which was reported back on 8 September 2008. Page 1 listed all the major points and the majority of the committee—in fact all of the committee on which the previous administration had a majority—fully and totally endorsed the current monetary policy framework. 
I wish to thank members of the Finance and Expenditure Committee as we progress this bill. It was not a contentious bill unlike other legislation that we have been dealing with recently and I appreciate the contributions of all members. I acknowledge the thanks from the previous speaker the Hon David Cunliffe. Politics aside I think we had a pretty good outcome on this bill. I also acknowledge one of the best things—there were not many—that we inherited from the previous administration: the Minister of Revenue. Peter Dunne is doing a great job in furthering modernising and aligning our legislation. I also wish to acknowledge the officials who did a great job—particularly our advisers. 
If members look at the commentary on this bill particularly towards the end they will see that the Minister and the Hon David Cunliffe also alluded to the large issue that the committee spent a lot of time on—the fairness or otherwise of the default rate for resident withholding tax. In fact the solution which came out of consultation with the private sector with affected parties such as the Bankers’ Association which are mentioned in here—remember that it will apply to all financial institutions later on—is a pretty good outcome and the Minister acknowledged that. As I noted it was the key plank. The initial bill as introduced took the default rate up to 38c—the highest marginal tax rate. I note that when we crunch the numbers yes there is a fairness argument which I will put aside for a moment with my earlier comments about the previous member’s concern about taxpayers but the concern was that those who should be on a very low or virtually a positive tax rate were being overtaxed because of the default rate—the wrong application of the 38c rate to their interest income. But if we crunch the numbers it is probably a fair assumption that not many of that demographic have large financial assets that would attract large interest income and therefore a tax obligation be it 38c 21c 19.5c or whatever. It is probably a fair assumption that they do not have large financial assets that therefore make them too aggressively overtaxed. But I acknowledge the fairness argument and we spoke about that in the commentary. Once we crunch the numbers it is not a big deal. In fact members will see in the commentary that the actual fiscal impact if there is overtaxation is about $4 million per annum. 
That brings me to a very very important point. This bill is not about—and I used the term myself—overtaxation; this bill is about correct taxation about putting PAYE or resident withholding tax payers on the correct rate given all the knowledge that their financial institution which is their bank and the Inland Revenue Department have. Everyone has the option—and it is getting easier by the day—with online banking to point and click to make sure that the correct rate is known. Of course the only information that the Inland Revenue Department may have may be about the interest on some investment asset at the bank; it may or may not have knowledge of other sources of income that a particular taxpayer may have. The bank is of course blind to that and one never knows quite what is going on. It is a very fair outcome and I think other speakers will probably acknowledge the same point. Pretty much what was in the bill as introduced gets pushed out a year because all new accounts that are opened will default to 38c in the dollar unless the correct rate is applied. So there is only that window. It sounds horrible that hundreds and thousands of people may be going to be on the wrong tax rate but when we crunch it down the number will be an awful lot less than that. 
I have just a couple of other quick points on the bill that the Minister alluded to. There is the modernisation of communications. Some other member might like to remind us when speaking of how many communications the Inland Revenue Department does a day by snail mail. It is absolutely astounding. I guess the only upside is that we are all shareholders in New Zealand Post. The figure is hundreds of thousands of communications a day; it is just astounding. So the more communication it can do by email the better it will be for the taxpayer. The Minister alluded to a couple of Supplementary Order Papers that are coming and in particular the one about inbound tour operators. That is here because this is the first tax bill before the House within that window and it would be very good to have that issue sorted out before the Rugby World Cup to let everyone have some certainty and to apply a solution to a longstanding issue. Finally there is the portability Supplementary Order Paper which sits off the Social Assistance (Payment of New Zealand Superannuation and Veteran’s Pension Overseas) Amendment Bill which we debated the other day giving New Zealand superannuation to people in the Pacific and those travelling. It corrects any anomalies there. Those people as far as their New Zealand tax residency is concerned will be on the correct tax rate and hopefully not the incorrect rate. 
This is all about the efficiency of the tax system and of the tax structure and of the obligation to make it easier in this electronic age for taxpayers to fulfil their obligations to the Crown as much as possible and with good intent. Again I appreciate and acknowledge the officials and members of the Finance and Expenditure Committee who worked on this bill. I look forward to further speeches in the House. National will obviously be supporting this Government bill. Thank you.