Clark David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
Text is incorporated into the Bound Volume 
Clark David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
[Sitting date: 28 August 2012. Volume:683;Page:4824. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I am very pleased to be able to take a call on Part 1 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill where we are being asked— 
Todd McClay 
: Not as pleased as the chairman. 
Dr DAVID CLARK 
: —to confirm the annual rates of income tax and I hope it also pleases the chairman that I take a call at this stage. The rates of income tax are very critical to outcomes in our society and I want to put firmly my view that this part of the bill is one of the ones that we struggle with the most. We will support the broader bill but I would like to have a quick look at the outcomes that can be attributed to the current rates of income tax and ask the Minister of Revenue why we should confirm these particular sets of tax rates now. 
Recent reports have indicated pretty clearly that we are doing poorly as a society. We are becoming more and more unequal. A good deal of this inequality in our society comes as a direct result of the so-called tax switch in 2010. And we know that in that tax switch 44 percent of the value of the tax cuts that National gave out went to the top 10 percent of earners and just 2 percent of the value of those tax cuts went to the bottom 20 percent of earners in New Zealand. That tax switch benefited greatly those at the top—some pocketing an extra $1000 a week—while those at the bottom very quickly had any tax cut gobbled up in GST. 
There have been reports in recent days and weeks that indicate that the effects of the current tax rates are disastrous—increasingly disastrous. In fact they were labelled quite accurately by the leader of the Labour Party as a bloody disgrace. Firstly I want to look at  
The Netherlands Study 
 commissioned by Every Child Counts which came out on the 22nd of this month. It indicated very clearly that we need to invest in policies that support children and parents and ensure that they have the right tools and support if we want to eradicate poverty in this country. And all the evidence shows according to the report that poor outcomes for kids in poverty cost taxpayers a good deal and that is estimated at between $6 billion and $8 billion a year. New Zealand spends around a third less each year than the Nordic countries on this. The Netherlands spends less than half but continues to achieve excellent outcomes. That is the first report. 
The next report that we have had recently was the  
Household incomes in New Zealand 
 report which indicated that inequalities in New Zealand are worse than ever. The median income across all households fell by 3 percent between 2009 and 2011. That follows 15 years of steady growth in those median incomes. We also know that without Working for Families a Labour policy things would be a lot worse in terms of that inequality in our country and the outcomes for our citizens in poverty would be a lot better if we had both Working for Families and a fairer set of tax policies. 
The fall of 3 percent in real terms in the income of those people on the median wage is one thing but we also know that the same thing led to an effect where the proportion of kids in poverty in New Zealand has gone from 15 percent to 21 percent between 2007 and 2011. This is through policies that can be tied back to a number of things including things like health care and other proactive measures but also very firmly tied back actually to particular tax choices that we make. 
We are being asked here I remind the Committee to affirm the annual rates of income tax in Part 1. We are being asked to say that the current set of policies the Government has in the tax area are fair and are leading to positive outcomes for our citizens. I wish to argue that they are not. 
The Children’s Commissioner’s report is the third of these reports that has come out recently that points to very unequal outcomes that I wish to draw attention to. It indicates a 25 percent incidence of child poverty—270000 children in poverty. The costs of a poor start as we have said amount to around $6 billion for those children living in poverty which we pick up as taxpayers every year. So I want to argue that this particular set of tax rates benefits the wealthiest in our society in the short term but is actually bad for all of us in the long term as it leads to disinvestment in social goods and also disinvestment in those things that are good for all of us in the economy including public services and the right incentives as I said to grow our economy. 
We have also learnt in recent days that 90 of the 100 wealthiest New Zealanders are not on the top tax rate—90 of the 100 wealthiest New Zealanders are not on the top tax rate—and that in fact a full 50 percent of those with wealth over $50 million are not on the top tax rate in New Zealand. They are able to structure their affairs in such a way that they do not pay their fair share of tax. Labour stands for fair taxes in a fair economy and we would impose a capital gains tax that would make sure that people did not avoid paying the tax that they are due to pay that they would carry their fair share in terms of taxation but also that a neutral signal is sent to the investors in respect of the productive sector. When people invest their money they make a choice about whether it is better for them to invest in productive assets which are good in fact for all of New Zealand in terms of exports or to choose as they currently often do to put money into the housing sector where the returns are artificially distorted by the absence of a capital gains tax. 
There are only three countries in the OECD that do not currently have a capital gains tax. This Government is choosing not to put one in. We are told—the rumour is—that that is because the current tax capabilities in the department are not up to scratch. The computer system could not handle a capital gains tax and that is one reason why the Government cannot go near it. Mr Key has pointed to that in a Valentine’s Day promise. He talked about $1 billion that needed to be spent to remedy this problem. That does not seem to have been spent. We have no timetable no understanding of when our tax system will be able to handle the changes that we need as a country. In fact we are left confirming current policies by and large because our tax computing system will not handle the big changes that New Zealand needs to grow its economy to be an effective country in terms of addressing the issues of poverty and also to make sure that businesses have the environment they need to grow exports. Instead what we are faced with is a growing balance of trade deficits and children increasingly living in poverty. The largest gap between rich and poor that New Zealand has ever had on record is what we are faced with this week. 
It is a bloody disgrace. David Shearer is right. We need to address these things. We need a fairer tax system where all New Zealanders know that if they put their shoulder to the wheel they can get ahead they can contribute they can put food on the table for their families that is nutritious and healthy and they can afford to buy the shoes they need for school the raincoats the textbooks and all the other things that are necessary for kids to succeed and not feel like society is against them. 
I put it to you that this current annual rates of income tax confirmation should be thoroughly questioned by all sides of the Committee because in so far as National has a plan to address these issues of poverty— 
Todd McClay 
: We have a plan. We have a plan. 
Dr DAVID CLARK 
: —and inequality it is not working. We have heard of 120-point plans. We do not actually see any plans with measurable targets. As Mr McClay points out they say that they have a plan but we do not see any with measurable targets and we certainly do not see any targets being achieved. The real economy is smaller now than it was when National came here. The only thing that keeps the economy growing is population growth. Real wages are lower than they were in 2008. The median wage we have learnt is down 3 percent and people are suffering. This Government is not delivering the brighter future that was promised. It is delivering a poor shadow of that and New Zealanders are tiring of it. They wish for stronger tax policy that would address these inequities and instead we are asked to confirm the status quo. I put it to you that that is not an adequate solution. Thank you.