Barry Maggie: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeBarry Maggie: Questions for Oral Answer — Questions to Ministers[Sitting date: 10 July 2013. Volume:692;Page:11845. Text is incorporated into the Bound Volume.]3.MAGGIE BARRY (National—North Shore)to theMinister of Finance: How has the Government made the tax system fairer for New Zealand households and families?Hon BILL ENGLISH (Minister of Finance):Over successive Government Budgets the Government has made a number of changes to make the system fairer. Ithas removed the ability set up by the Labour Government to enable people to shelter their income in trusts raised the effective tax rate on property investment increased funding for the Inland Revenue Department to target property speculators and others avoiding tax prevented people from using investment losses to make themselves eligible for Working for Families and other Government support and brought in stricter rules to ensure multinational companies contribute their fair share of tax. At the same time the Government has reduced income tax rates across the board. Almost three-quarters of taxpayers now face a personal tax rate of 17.5 percent.Maggie Barry: What changes has the Government made to income tax rates and other taxes to help families get ahead?Hon BILL ENGLISH: In 2010 our tax package reduced tax on work and savings 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 in 2010. The changes also made the tax system fairer. Two-thirds of the cost of the income tax cuts in 2010 went to reducing the bottom two tax rates. So someone earning $48000 a year now has a top tax rate of 17.5 percent.Maggie Barry: How does the income tax system interact with income support provided to lower-income families?Hon BILL ENGLISH: Despite a recession and significant fiscal deficits the Government has maintained a redistributive tax and income support system that supports low and middle income earners in New Zealand. At any particular time a large number of households effectively do not pay net tax. That is because the amount they pay in income tax is exceeded by the amount they receive from welfare benefits Working for Families paid parental leave accommodation subsidies and others. This is entirely appropriate to redistribute income from the higher-income earners to those genuinely in need.Maggie Barry: How significantly do the income tax and income support systems redistribute incomes for New Zealand households?Hon BILL ENGLISH: When we look at the way the system redistributes income we can measure that by net tax for income groups—that is the difference between the tax they pay and the assistance that they receive. For families earning under $60000 a year taking into account the income support payments and their income tax they pay $2.7 billion in income tax and receive $1.8 billion of income support. That is the total for people earning under $60000. The net effect of that is that for households earning over $150000 it is 12 percent. The top 12 percent of income earners pay 76 percent of net income tax.Hon David Parker: Is the Minister aware that his superficial analysis of tax paid by income group firstly takes no account of the fact that low and middle income people pay GST on the vast majority of their spending at higher effective tax rates than high-income earners and secondly ignores the advice of the OECD that in New Zealand capital income earned by the wealthiest in society attracts virtually no taxation which is unfair; if he is not aware of either of these things does it not show that his latest educational trip to the OECD was a waste of time and money?Hon BILL ENGLISH: No that is not true. If he is concerned about the capital gains of the wealthy not being taxed that is actually part of his policy because he wants to exempt the family home from his capital gains tax. Secondly when you look at the distributional effects of GST in fact it is relatively neutral. The Labour Party has to get used to the idea that the 2010 tax package reduced inequality in income tax distribution in New Zealand.