Burns Brendon: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — Second Reading 
Burns Brendon: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — Second Reading 
[Volume:659;Page:7871] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I am very pleased as a member of the Finance and Expenditure Committee to take a call on the Taxation (Consequential Rate Alignment and Remedial Matters) Bill which is a good bill that has come through the select committee. It is sensible legislation with some amendments that I will comment on in a moment. 
I will pick up on some of the comments from members preceding me particularly the chair of the committee Craig Foss who did a good job at the select committee. But today in the House he commented on the speech given by the Leader of the Opposition on monetary policy and criticised the notion that we should be considering the future of our economy and some of the levers that are used to affect the economic situation. I would like him to go back to his electorate and say to his farmers and his exporters that monetary policy is working at the moment. He should tell them that as they struggle with a currency currently at about US73c up from US50c earlier in the year. He should tell that to farmers and exporters who are trying to go into the British market at the moment when our currency is 44 pence to the dollar and it was around 30 pence at the start of the year. He should tell that to those trying to buy a house in a re-inflating housing market which is being fed by monetary policy by banks pumping capital back into the housing market because it is a nice safe investment for them. I commend Phil Goff’s comments today. 
Amy Adams the member for Selwyn went on about hard-working New Zealanders. My goodness we hear that. Let us also recall that 71 percent of National’s tax cuts last December which were rushed through under urgency went to just 3 percent of those hard-working New Zealanders. Therefore the vast majority of New Zealanders missed out. Let us also recall that if those same hard-working New Zealanders had had the tax cuts that National had promised— 
The ASSISTANT SPEAKER (Eric Roy) 
: We are in a second reading. I ask members to acquaint themselves with Speaker’s ruling 106/2 which states that “On the second reading of a bill discussion must be confined to the bill before the House as printed.” There are quite a suite of things that just explain the nature of it. We are quite precise here. If there are going to be some amendments members can refer to them but cannot debate them. This debate is about the second reading of the bill. 
BRENDON BURNS 
: Thank you Mr Assistant Speaker. I was of course coming to the bill and was just picking up on comments already made in the House. However we will turn to the matter at hand. I think the point has been made. 
This bill obviously is one that Labour supported. In fact its genesis was under Labour. The bill did not receive a great deal of submission but there were some submissions received from important players in the taxation space which I will comment on in a moment. 
One of the important changes that the select committee was able to make was about the issue of the resident withholding tax rate default rate. The initial proposal from the Inland Revenue Department was a 38 percent tax rate. My colleague Stuart Nash did some good work in the select committee identifying and pursuing the fact that literally hundreds of thousands of New Zealanders—the battling New Zealanders the hard-working taxpaying New Zealanders—would have been totally disadvantaged by the rate being 38c in the dollar. So the committee has recommended that the default rate go back to just 21c and that is a very very appropriate change. 
The Institute of Chartered Accountants commented that the tax rate being at 38 percent would have been the wrong tax rate for 92 percent of all New Zealanders and would also have resulted in a huge flurry of people having to go back to the Inland Revenue Department. The select committee well knows from examining this bill from other measures before us and from reports from the Inland Revenue Department that the department is already hard-pressed. People can wait 30 to 40 minutes to get through on the phone to the Inland Revenue Department. So the notion that we would introduce a bill requiring tens of thousands of New Zealanders to go back to the Inland Revenue Department to seek some remedy from it was not one that I think the Inland Revenue Department—if it had given a little bit more thought to it—would really have pursued. So it is pleasing to see that the select committee has accepted the recommendations of some of the submitters including the Institute of Chartered Accountants who have noted the problems that would have been created if we had stuck with a default rate of 38c in the dollar. 
Some of the submissions made to the select committee are not being followed through by amendment and I want to pick up on some of those. We have supported the proposal to give the Commissioner of Inland Revenue the discretion to determine who should receive an income statement automatically. We have also decided that income from portfolio investment entities—PIEs—should not be capped at 30 percent outside the ambit of this bill. We have also upheld that a proposal of the commissioner to require payment of tax in dispute should be adhered to and should not be challengeable. That is an important principle. Obviously we expect the commissioner not to use the power in general circumstances and he does not do that. He uses it only when it must be used and we are upholding that right in our report back as a select committee. 
In terms of the compliance costs for the resident withholding tax regime the committee requested that as this bill comes into law the Inland Revenue Department consider the concerns about the resident withholding tax regime creating difficulties for casual payers of interest and dividends because of the compliance costs it can impose on small businesses. 
The committee also noted the call for electronic communication between taxpayers and the Inland Revenue Department. The Inland Revenue Department has a capital spend in place to improve its information and communications technology infrastructure to allow it to do electronic communication on a better footing. We certainly support that because we can see that it will reduce the barriers between taxpayers contacting the Inland Revenue Department. 
I note one of the other changes in the bill. It is around the issue of secondary tax. As an electorate MP I get plenty of people complaining to me that they pay too high a rate of secondary tax. It sometimes comes as quite a shock to people when they take on a second job or get a little extra income through doing overtime. Those people are particularly in low-income categories and at the moment they can be charged up to the prevailing high tax rate. They can lose a lot of income. So I was pleased that the tax changes that the Labour Government introduced in October last year introduced a new set of personal income tax rates which included a new 12.5 percent rate for income of $14000 and below. Currently the lowest rate for withholding tax on secondary income is 21 percent. Obviously the difference between those two figures can be a considerable amount. So I am very pleased to see that new 12.5 percent rate being introduced in this bill. 
This bill is a sensible tax measure. It had broad support across the Finance and Expenditure Committee. It introduces sensible tax changes. Labour supports the bill in the House.