Smith Lockwood: Third Readings 
Smith Lockwood: Third Readings 
[Volume:607;Page:4312] 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 National is opposed to most of the provisions of these four bills and will make clear why that is in these third readings. The first bill I want to address is the Taxation (Annual Rates of Income Tax 2002-03) Bill. I want members of the Government the Labour Party United Future and the Progressive Coalition to understand what they are doing to working people in this country by passing this legislation. With the passage of this bill they lock into place tax rates that result in working families suffering the highest increase in taxation since Labour has been in office this last 3 years of any country in the developed world except the Czech Republic. 
If members of United Future are to support this third reading I want to make sure that they are aware of that—that is they will lock into place tax rates that have seen the biggest increase not on wealthy people on the average production worker to use OECD jargon. Under the Labour-led Government the increase in tax impost on those people in the last 3 years has been the highest in the OECD and this bill in front of this Parliament today locks those tax rates in place. What is more if we look at the combination of effects the current tax rates that this bill locks in place plus the tax credit system we see that some of the lowest-income people in this country face effective marginal tax rates under this taxation regime of 100 percent. That is not just Lockwood Smith making that up; that information was supplied to me by the Inland Revenue Department through official questions through this Parliament. People who earn between $10000 and $15000 a year with dependent children when we combine the effects of these tax rates being confirmed by this bill plus the family assistance tax credit system pay effective marginal tax rates of 100 percent. 
That means that as they seek to earn another dollar above $10000 they pay the lot—that is every cent of the extra dollar they earn goes to the Government. That is what we are locking in place with this bill. It is not good enough. It is just shameful for a Labour-led Government to treat our lowest-income earners in that way. The Hon Paul Swain who just led the third reading for the Government would not even know about that. That shows how little the Government cares about what it does to working people. This bill locks into place those tax rates that have seen the highest increase in taxes on the average working person in this country—that is the highest increases in the developed world except the Czech Republic—while Paul Swain’s Government has been in office. That is the Taxation (Annual Rates of Income Tax 2002-03) Bill. The Taxation (Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill also introduces very controversial legislation into this country. It introduces a special low tax rate of 19.5 percent for Maori authorities. It has been argued by the Government during the Committee stage of this legislation that that is not a racist measure. It argues that the special tax rate is based on the income level of the beneficiaries of Maori authorities. That would be a valid argument if it applied to other organisations such as Pacific Island trusts. If the Government’s argument were valid it would extend the special tax treatment to the beneficiaries of those trusts as well because of their low level of income. But the Government is not doing that. This legislation is racist because the only people who can benefit from the special low tax rate are Maori people. Although I have nothing against Maori people—some of our finest citizens are Maori people—it is wrong to divide this country down racial lines. No one likes paying high taxes. 
Mahara Okeroa 
: I do; I would. 
Dr the Hon LOCKWOOD SMITH 
: Did the member say he likes paying high taxes? I can promise him that most of his Maori colleagues do not enjoy paying high taxes. When this legislation goes through we will see accountancy firms kept very busy as Maori businesses seek to reorganise themselves to benefit from the special low tax rate. 
I accept that the status quo is unacceptable. At present if a Maori authority distributes profits it pays a tax rate of 33 percent like any other business. It achieves the same imputation credits for its recipients which is the same as any other business. If the authority retains its profits it pays a tax rate of 25 percent on those profits. The problem is that if those profits are not distributed within 4 years then a double taxation can occur because the 25 percent is not refunded. That is unacceptable. National fully accepts that the status quo is not satisfactory. However we do not accept that that unsatisfactory situation where some Maori authorities can pay double taxation should be remedied by the introduction of racist legislation which splits this country down racial lines. 
During the Committee stage I challenged members of the Government and those members supporting the Government to find me a non-Maori New Zealander who could benefit from the special low tax rate. Gordon Copeland claimed he had found a minister of Irish descent—he did not say he had no Maori blood in him but he did claim that he was a beneficiary of a Maori authority. I am not sure how that can be if he is not of Maori descent though I pointed out to the House that he may not be the only Maori who claims Irish or Scottish descent when that is convenient to him. The Rt Hon Winston Peters is well known for claiming Scottish descent at times when it suits and claiming Maori descent when it suits as well. 
National says that it is wrong. We will oppose this legislation because it is racist and New Zealanders object to that. It divides this country. PricewaterhouseCoopers told the select committee it will be very busy as Maori businesses seek to re-establish their affairs to benefit from the favourable tax treatment. Chen Palmer and Partners told the select committee it was contrary to the New Zealand Bill of Rights Act. It told us that in the fishing industry alone there will be a $70 million windfall for Maori businesses involved in the fishing industry. The select committee did become concerned about the potential competitive advantage that some businesses could achieve which is why the select committee recommended that wholly-owned subsidiaries should not be able to access the special tax rate but it will not be difficult for them to rearrange their affairs so that they can. Moreover we know that some of the major farming businesses in this country will pay a tax rate of 19.5 percent once this passes while other dairy farmers will pay a 39 percent tax rate. Whatever way one looks at it it is wrong for one race of people in the same business to pay twice the tax rate that is paid by another race of people in this country who are in the same business. 
In my remaining moments I point out that some of the amendments to the Tax Administration Act deserve comment as well. With the passage of this legislation we will give the Commissioner of the Inland Revenue Department the opportunity to demand 100 percent of tax in dispute. We will establish a new system of tax pooling and stuff relating to PAYE intermediaries which makes some sense but the tax pooling could be resolved if the Government would only address the use-of-money interest issues. There is a real problem around PAYE intermediaries—what happens if an intermediary goes bust? The liability for the tax payable is still with the taxpayer even though the taxpayer may have paid the intermediary. The Ministers who have been in the chair did not answer those questions during the Committee stage. 
Finally we have no problem with the introduction of promoter penalties. But again the Government has not answered all the issues around that. What will happen when a tax adviser advises on a tax scheme and the taxpayer has settled with the Inland Revenue Department which then says the scheme is not valid? The scheme promoter could get caught with having no say in the settlement of the dispute with the Inland Revenue Department and face huge penalties. The Government did not perform well during the Committee stage of this legislation.