Cunliffe David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — First Reading 
Cunliffe David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — First Reading 
[Volume:676;Page:21434] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I recognise the member who has just resumed his seat the Minister of Revenue. He may not be the Minister for much longer but we will leave the good voters to decide what happens in Ohariu.  
Labour has a number of points of disagreement with matters covered in the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill but we support the bill going to the Finance and Expenditure Committee. This is part of the normal process of remedial legislation which ensures that our tax system keeps up with necessary changes—partly as private entities try to stay one jump ahead of the law and partly as issues are uncovered that require a non-policy fix. 
The first key provisions of this bill refer to tax rates for the 2012-13 year. It would be utterly remiss of me not to acknowledge the context within which that occurs. National has lowered the top tax rate from 39 percent to 33 percent. That has probably been the single most important—certainly the single most expensive—economic decision that this Government has made in this term of Parliament. It is a signal transfer of wealth to the wealthiest New Zealanders. One might say that at the expense of the many the few have benefited. Labour absolutely objects to that realignment of the tax system. Income maldistribution is increasing. The gap between rich and poor is widening and it benefits no one if National supporters park their Mercedes behind barbed-wire fences and security cameras while others in the rest of the country go around smashing windows as occurred in London during the riots. 
David Bennett 
: So that’s an excuse for smashing windows—poverty. 
Hon DAVID CUNLIFFE 
: That is why I tell Mr Bennett immediately upon taking office Labour in its first Budget will be raising the top tax rate back up to 39 percent above an indexed threshold of $150000. 
Through that and through Labour’s insanely popular capital gains tax package which has been well received the length and breadth of this country we will be able to give every New Zealander the first $5000 of income that they earn tax-free. That includes beneficiaries it includes superannuitants and it includes people on all income levels. It could not be fairer. It applies equally to everybody. About 98 percent of taxpayers will be better off because of that tax switch—the capital gains tax in exchange for the lowering of the $5000 threshold to zero. 
Of course families are under enormous cost of living pressures and this bill also deals with GST and changes some of the GST provisions applying to late payments. It is a controversial issue and one that we look forward to hearing submissions on at the select committee. The Minister claims to be simply trying to clarify the law around GST on late payments but tax experts say that late payment fees are neither a good nor a service and therefore are not supported by a first-principles approach to GST. The Government has if you like form on GST. It has raised the rate during this term of Parliament from 12.5 percent to 15 percent on all goods and services despite a clear promise from the current Prime Minister that it would do no such thing if elected. It said there would be no change to GST. Well here is further change. 
Let me again make it clear—Labour will reduce the rate of GST to zero on fresh fruit and vegetables. On the advice of the University of Otago medical school that will clearly increase the consumption of healthy food to the benefit of children and families—[ 
Interruption 
] Members opposite are baying like hounds because they do not like to see hungry families feeding their children healthy food. Well we in Labour do. We visited many families where it is getting harder and harder in the face of inflation in the face of a tax switch that was not and in the face of a rampant increase in the cost of living—in the last year around 7 percent on food prices and 1.9 percent on wages. 
If people feel worse off under National that is because statistically they are. They have gone backwards. National’s tax switch was really a tax swindle. Hard-working Kiwi families have ended up paying more every time they go to the shops and have seen little in the way of tax cuts. Under Labour they will get a reprieve; they will get the GST off fresh fruit and vegetables they will see the minimum wage rise immediately from $13 to $15 an hour and they will see the tax on the first $5000 of everybody’s income reduced to zero. 
The bill raises the employee contribution rate for KiwiSaver from 2 percent to 3 percent. This is somewhat ironic as it was only a year ago that the Government reduced it from 4 percent to 2 percent. So one of the signal achievements of the current Budget was to undo half of what it did the previous year. The problem is that the chopping and changing around KiwiSaver has really said to New Zealanders that they cannot trust this Government in terms of policies around their long-term savings. New Zealanders are looking for certainty. Very soon when Labour unveils its I think ground-breaking savings policy they will get certainty because we are planning for the long term. New Zealanders will be better off with Labour’s savings policy. I know there is a lot of eagerness out there both in the media and in the electorates to see the details of that policy. We look forward to bringing that to the country in the very very near future. 
Let me briefly refer to several of the more technical aspects of the bill. Working for Families springs to mind as a thing that the Prime Minister said National would not change. Of course in this year’s Budget it did—same old same old. He is the “Minister for Broken Promises”. “Look-through companies” is a euphemism if ever I heard one. Everybody knows that loss attributing qualifying companies attribute losses to the taxpayer but benefits to the directors and shareholders. Look-through companies are a way of preserving some of that entitlement without sounding like they are. The problem with look-through companies is that it is pretty hard to look all the way through to who is actually taking the loot. It is not the taxpayer; it is the person setting up complex tax structures such as look-through companies and trusts. 
Many of those issues will be dealt with by Labour’s capital gains tax. In the words of one senior tax expert it is like playing netball on a court full of potholes. The capital gains tax fills in not all of them but certainly the largest one. That is why it is being advocated by Treasury by the Reserve Bank by the OECD by the International Monetary Fund and of course by all the major newspapers in New Zealand and most major media. It is polling extremely well—I think better than two to one relative to the Government’s proposal of selling down public equity in State-owned assets like power companies. The public wants to keep them and it does not want to be sold down the river by tax law that is full of loopholes. 
I turn to expenditure on unsuccessful software development. Why on a first-principles basis would the Government allow people to write off a failed software project? Why is that distinctly different from any other business proposal? That is one of the issues like the fifth rules like the bank thin capitalisation rules which we support increasing and other matters in this bill that we look forward to discussing with the Government at the Finance and Expenditure Committee and in the House. Thank you.