Franks Stephen: Taxation (Annual Rates GST Trans-tasman Imputation and Miscellaneous provisions) bill — First Reading 
Franks Stephen: Taxation (Annual Rates GST Trans-tasman Imputation and Miscellaneous provisions) bill — First Reading 
[Volume:609;Page:6662] 
STEPHEN FRANKS (ACT NZ) 
: 
 This bill has a number of provisions that ACT would be happy to support going through to the select committee. It has a number of provisions that some might say are overdue and others would say are part of the normal process of fine-tuning and updating a tax system. But of course we cannot support this bill and will vote against it because it also confirms this year’s tax rates which continue the envy basis of Labour Government fund-raising. 
 This bill confirms the 39c rate for people whom the Government considers wealthy. That started out being the top 5 percent of earners; now it is the top 8 or 9 percent of earners. There is no indexation in this bill. If the Government had wished to preserve any integrity in the promise it gave to New Zealanders in 1999 that the “envy tax” or the “wealth tax” would be for the top 5 percent only the rates in this bill would not have been set as they have at the same level for each of the years since then. They would have been dropped progressively to reflect the fact that inflation has been giving people an illusory higher income and that meanwhile the Government has been taking more and more tax. So ACT will not support this bill. We will vote against it. 
However I wish to comment on several other aspects that I hope the select committee will look at very closely. First is the trumpeted change to the flat rate deduction of 33 percent of specified superannuation contributions. The Government is rightly concerned that New Zealanders are not saving. The Government is probably privately panicking about it but publicly is still looking sanguine. Our savings rates will not change dramatically until New Zealanders get a Government that is willing to be honest with New Zealanders and say that Father Christmas will not be there when they retire. Father Christmas will not pop out of the woodwork to say that a country that has been spending more than it has earned for 40 or 45 years has ended up with enough income to support its elderly. There is no “them” who can support the enormous number of people in this community now expecting to live off what the Government will raise from “them” and distribute to those who do not have their own savings. The change to make superannuation savings slightly more attractive will probably have no effect whatsoever. 
Further it is mean-spirited. The Government is trying to reduce the taxation rate on superannuation savings to the employees’ top marginal rate but of course that is exactly what it does; it is the top marginal rate so although a person with an income of say $25000 has an effective tax rate that is well below 21 percent because that person’s tax is spread over two rates—I cannot do the calculation off the top of my head but it might be that the actual tax rate is something like 15 percent or 12 percent—that person’s superannuation will still be taxed at the rate of 21 percent. There is still a tax disadvantage. This Government which claims to look after those at the lower end of the scale is giving people on the top tax rate a continuing advantage. Those whose tax rate is 39 percent get the benefit of being taxed at only 33 percent on their superannuation contributions. Perhaps that is a small grudging guilt and embarrassment payment to those who are liable to the “envy tax”. 
Another little element that I trust the select committee will look into—it is a curiosity really—is the reference in the compliance cost statement section of the explanatory note to the new trans-Tasman imputation regime. Of course if it were a true regime to avoid double tax it would allow companies to take all the tax that has been paid in one country as a credit for the shareholders who ultimately get a distribution from that company. It does not. It goes halfway only. 
But more significantly although it is recognised that there are material costs—real costs—in administering this complex new scheme there is no estimate in this compliance cost statement section of whether New Zealand will be a net winner or a net loser. I suggest that New Zealand will be a net loser out of this because the owners of a company need to request that the company apply and go through the paperwork to benefit from this scheme. Although we can well imagine the Australian owners of a company incorporated in New Zealand saying: “Hey register under the Australian federal scheme so that we can get the benefit of this imputation regime.”. It is highly unlikely that New Zealand shareholders will have nearly the same clout in requiring an Australian company to provide the same benefit for them. 
I think it is curious that the Government has made no attempt to tell the House what it expects the uptake of this scheme to be. If the uptake of the scheme is differential we could see the New Zealand Government losing a considerable amount of tax with no corresponding benefit to New Zealand shareholders from the Australian exchequer. That is a matter that this House should have expected the compliance cost statement or impact statement section to give some commentary on. It simply states blithely that the compliance costs “are expected to reduce over time as Australian companies become more familiar with the New Zealand imputation rules.” That will happen only if Australian companies can be persuaded by their New Zealand shareholders to invest the time needed to become more familiar with the Australian Scheme and I cannot see very many Australian companies paying enough attention to their probably small New Zealand shareholding to think that worth their while whereas I can see a good number of Australian shareholders being in a position to require New Zealand companies to do just that. 
I also hope the select committee will take a very close look at the new provisions to get student loan repayment deductions running even if the student just forgets to mention that he or she has a student loan. That issue should very much be a trans-Tasman one in this situation. I imagine that because of the bad relationship that the New Zealand Government has established with Australia through its reneging on defence ties and through its unilateral abrogation of the understanding on immigration—its swinging open the back door to Australia and its tossing off at the Aussies for their contribution to Iraq—we would not get much sympathy or help from the Australian inland revenue department in relation to the collection of student loan repayments from New Zealand students and graduates in Australia but those provisions should mean something. 
 Lastly I hope the select committee will report on just exactly what the new charitable donee status for nine additional organisations means. That is a benefit for organisations that can give a direct tax refund to their donors. I wonder why the list starts off with Books for Africa. It almost sounds like a joke does it not? I am sure it is not a joke. We have the Bright Hope International Trust the Cheboche Area Trust—Cheboche sounds as though it is somewhere in Tibet—and the Greater Mekong Subregion Tertiary Education Consortium Trust. That sounds a highly communist name and I wonder whether it involves some kind of reciprocal relationship between the Labour Party and its communist mates in Hanoi. There is Plan New Zealand and there is the Sampoerna Foundation Ltd. Then amongst all the odd trusts that are going to get this Government handout there is the Sir Edmund Hillary Trust. What a sad remnant! The Hillary Commission was changed to Sport and Recreation New Zealand and now we at least get slight recognition of Sir Edmund hidden deep in the fine print of our tax legislation. 
ACT will vote against this bill proceeding further but if it does go ahead we hope we get some answers from the select committee to those questions.