Donald Rod: Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill — Second Reading 
Donald Rod: Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill — Second Reading 
[Volume:613;Page:10048] 
ROD DONALD (Co-Leader—Green) 
: 
 The Green Party will be supporting this bill through to the Committee stage and indeed to the third reading. We have been pleased to support this bill from the outset. As I said in my second reading speech the bill includes a significant victory for the Green Party—a hard-won long-fought victory. Dr Cullen is not known for his generosity but in the end he had to concede that the change to the top marginal taxation rate that he introduced in the year 2000 had led to an incentive being made available to top-income earners in this country—those people earning above $60000 a year—to save for their retirement. That incentive was that the taxation rate for superannuation savings remained at 33 percent. That automatically gave those who are most well off a real incentive to encourage their employers to offer superannuation rather than salary as a way of boosting their total remuneration package because at the same time it increased by 6 percent the amount of money that those people were able to keep from their employer’s subsidy. 
At the same time that he made that taxation change Dr Cullen refused to bring in a variable rate for the superannuation withholding tax. In other words he kept it at 33 percent. So not only did that mean there was an incentive for those people who earn above $60000 a year but it meant that a penalty remained in place on the savings of those people who earn less than $38000. [ 
Interruption 
] I can understand the member’s concerns. It is rather distracting to be almost placed in the position of being Her Majesty’s loyal Opposition. However I think at least New Zealand First is present to wear that mantle. Anyway I will go back to the topic at hand. I am sorry listeners. We are speculating about whether a coup is taking place at the moment but I am not meant to comment on the absence of members from the House so I shall not do so. As there are no members from the party here to question me in their absence— 
Hon Paul Swain 
: Not allowed to comment on them but every National Opposition seat is vacant. 
ROD DONALD 
: That is a point well made. The chief Opposition whip has leapt to fill the breach as it were. I am glad that he is here because I am about to praise the National Party for its support during the Finance and Expenditure Committee’s consideration of this bill. However before I get there I shall finish outlining the landscape as it were. 
We were very pleased when this bill did come to the House. While it did not go as far as we wanted and extend the 6 percent incentive that wealthy employees get across the board it did at least remove the disincentive that middle and low income employees have faced for years. The superannuation contribution of their employers has been taxed at 33 percent whether or not the employee is paying a marginal tax rate on his or her income of 21 percent or even 15 percent. We were pleased that the Government at least agreed to bring in a variable rate of specified superannuation contribution withholding tax although it is not as progressive as we would have liked it to be. 
During the consideration of the bill we were pleased to persuade the Minister of Finance to make the taxation rates truly progressive by introducing a 9 percent rate for the savings of people who were earning less than $9500 a year. One may say that there are very few of those people or that somebody who earns that amount of money would not be in a position to save for his or her retirement. However some people who are second-income earners in a home are members of a superannuation scheme and they were being penalised by the old taxation rate. Dr Cullen has very generously conceded that he will lose about a million dollars in taxation revenue a year in order to bring in some equity in that regard. 
In looking at this bill I need to say that we believe that it is a case of the cup being half full. We really think that a little bit of Christmas cheer from Dr Cullen would fill the cup right to the top if he extended that 6 percent taxation incentive right across the board and delivered it to the very people who voted for the Labour Party at the last election. I think the most extraordinary thing about the bill that is being reported back today is that it does not offer the same incentive to middle and low income New Zealanders that it offers to high-income New Zealanders. Maybe that is an example of where the Labour Party is currently trying to position itself. It thinks it has middle and low income New Zealanders in the bag so it is now concentrating on looking after those who are well off. 
Perhaps an equally significant positioning statement is that the National Party was the only party to support us in proposing an amendment at the select committee to bring in the 6 percent concession right across the board. Perhaps National saw the advantage of appealing to middle-income New Zealand by giving those people a serious incentive to save for their retirement. Whatever National’s motive was John Key does deserve my appreciation for supporting that amendment and I would like to acknowledge National for voting with me on it. I observe obviously that other parties that I thought might have supported such a move such as the United Future family-friendly party did not back that particular proposal. However I remain optimistic about that amendment and I will be moving a Supplementary Order Paper during the Committee stage in this House to introduce a proper taxation incentive for New Zealanders to save for their retirement and particularly for employers to provide subsidised superannuation for their employees. 
Employer-subsidised superannuation is I believe the next and best step forward in New Zealand. We have to reduce the decline in the number of working people who are members of superannuation savings schemes. The Government Actuary reported for the year to June last year that only 243000 people were members of employer-subsidised schemes. That is 65000 workers fewer than 12 years ago. I hope that the new Government move to introduce subsidised superannuation for public service employees will help to reverse that decline but it is not a very generous start. The subsidy is only 1.5 percent in the first year and 3 percent in the second although I gather that the Government is talking about staging it up to 6 percent over time. I guess that is all dependent on the Government being re-elected at the next election and perhaps even beyond that. 
 One of the problems we face with this Government is that it rammed through the New Zealand Superannuation Fund which is putting aside about $1 billion of our taxes a year most of which will end up in the very volatile and fragile overseas sharemarket but at the same time Dr Cullen cannot find a few more millions of dollars to increase the subsidy that is to be provided to public servants. Instead he is planning to offer only $19 million in the first year and $32 million in the second year. That is a very small fraction of the $1 billion that he is sending off shore. Dr Cullen could easily afford a 6 percent subsidy straight off and equally if he had accepted our amendment to bring in the 6 percent concession right across the board it would have cost him only about $77 million a year for current employees—hardly a big cost. But I guess Dr Cullen has to preserve his reputation for being rather Scrooge-like. We hope that we can persuade other parties in the House to be more generous to working New Zealanders and to recognise the value of encouraging them to save for their retirement. 
We also hope to tempt other parties in this House to support an amendment that we will be putting up with regard to the annual taxation rates. We have long had the policy that the first $5000 of income should be tax-free in New Zealand. That would have most benefit for people on low incomes by putting more money automatically into their pockets rather than making them have to go through the process of claiming for a rebate. And it would help to alleviate much of the child poverty that exists in this country by assisting low-income families to get a better level of income which would enable them to cope in today’s society. But it is not just low-income people who would benefit from that amendment. Of course making the first $5000 of a person’s income tax-free would carry across all income brackets including that of the likes of my colleague Mr Shirley who I know will support me when he speaks following my speech. So the amendment is fair to that extent. But it is also of course more progressive than the provision we have now and it would mean that proportionally those on a low income would end up being far better off than they are at present. 
That contrasts with what the United Future members proposed at the select committee—or I should say they did not propose it at the select committee because it was not in the form of an amendment but they wanted to state it in the form of a minority report. It was a bit like having a bob each way by saying what they would like but not being prepared to actually put it up to the House. The United Future members wanted to deal with the taxation-creep issue. We seriously looked at putting up an amendment to see whether United Future would support its own policy but we decided on balance that it was far better to put the focus on those right at the bottom and bring a provision that the first $5000 of income be tax-free rather than to deal with taxation creep. But perhaps again Mr Shirley may like to help United Future out by putting up an amendment to see whether United Future is prepared to vote for its own policy. 
For now we look forward to the Committee stage of this bill and look forward to support for our amendments from right across the House. We hope in particular that National will maintain the support it gave us at the select committee.