Foss Craig: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
Foss Craig: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
[Volume:639;Page:9433] 
CRAIG FOSS (National—Tukituki) 
: 
 I rise to speak to the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill. When KiwiSaver was originally announced it was a relatively simple project and the original KiwiSaver bill was a relatively simple bill. Various advisers and officials said they were not sure of the take-up or the participation rate that KiwiSaver would bring. So what happened in about July last year after the bill had gone through 6 months at the select committee? Various advisers said there would be very little take-up of KiwiSaver and there would actually be just savings shift from some private schemes by some new entrants into the KiwiSaver scheme who would not quite realise what they were doing and who essentially would be locked in for life. 
Suddenly the Government had to have a bit of an incentive—a bit of a bribe perhaps—so the specified superannuation contribution withholding tax exemption was brought in as well as the mortgage diversion scheme which I will talk about again in a minute. At that time participation models said that about 20 to 25 percent would participate in KiwiSaver—so that was fair enough; I guess the Government was starting to learn the meaning of the word “incentives” and what they bring to the place. But interestingly even if this proposal in the Budget announcement yesterday and the provisions in the bill around KiwiSaver are so wonderful and even if these tax credits—however they are variously described—are so fantastic for our economy and so great for all participants even at that rate presumably only 50 percent of taxpayers will participate. So according to Treasury’s models and revenue advice 50 percent will not participate. If the scheme were so good would it not be 100 percent? If Labour were so true to what it says to those people it claims it represents would not the scheme be constructed in some other way? 
The reports are already coming in—we have already seen them. There was a bit of gloss on the various news channels last night but the reports are coming in and people are asking: “Where is the cash; how can I live?” and “Where is the cash; how can I get by?”. I would like to quote a couple of institutional analyses of the Budget if I may. A quick quote is that Westpac describes the Budget as “a bit of give and take.” But here is the kicker; here are the bits where once one starts reading one sees the details of the Budget coming through: “The fiscal impulse over the next 3 years is bigger than that published in the half-year economic and fiscal update.” Listen to this: “This will keep upward pressure on inflation and interest rates.” That is those who are least able to afford it those who are least able to find cash will continue to struggle. Life has just got harder for them. Their real income their purchasing power for the next 3 to 4 years—at least under this current regime—has just been officially cut. It is an absolute disgrace that this Labour Government wants so absolutely urgently to hurt the people that its party was apparently formed to protect. 
There is another comment here from the BNZ that is interesting—I will just read it out quickly as I move back to the bill. A common theme is starting to come through in descriptions of the Budget: “Budget: more angst for Bollard” and “Fiscal stimulus bad news for the Reserve Bank of New Zealand.” What does that mean? It means that the Budget is bad news for the mortgage payers and the credit card payers of New Zealand. That is another point I will come back to. These quotes interestingly are very very descriptive and again the kind of thing we find out when we start to wander through the back pages of the Budget. Members should listen to the BNZ’s description of some of the assumptions in the Budget: “we feel that Treasury are still making heroic assumptions …”. So there are “heroic assumptions” in the Budget—I will come back to that in a minute. 
It is also interesting to note some of the reports that are coming through in this Export Year. The currency is pretty much unchanged interest rates are signalled to go up and it is Export Year. Let us think it through. As I noted last night in 2000 when Dr Cullen first had the opportunity to start to help reward New Zealanders and let them share in the upside of the upcoming economic boom the current account rate was 5 percent and he was aiming for it to come down to 2 percent of GDP. Currently it is 9 percent and the difference in currency is about 40 percent. Exporters have to work 40 percent harder just to get ahead; they are in pretty much the same position as other hard workers of New Zealand. 
When KiwiSaver was first announced there was a lot of fanfare about that thing called the mortgage diversion scheme which gave $1000 for the first 5 years to help first home buyers etc. We did not hear a word of this scheme in the Budget—not one word. One of the stinging criticisms of the original KiwiSaver scheme was the contradiction between a first home buyer scheme and a retirement savings scheme. One cannot have both. If this Government were somewhat courageous or listened to some of its more sensible advisers it would perhaps start to split out and deal to the two rather than just give the constant shallow rhetoric we had about trying to help first home buyers etc. Yet it has put in a scheme like this and had a 1-hour Budget speech that totally rejects one of the original core tenets of the KiwiSaver scheme. That does not make sense to me; perhaps the Minister Mr Carter will have more to say on it when he gets questioned next week. 
Part of the bill brings the company tax rate down to 30 percent. I say “Bravo; well done.”; we support the Government on that. But as usual they just cannot trust the real world. There are so many caveats so many details and so many uncertainties—the Government just cannot keep it simple. On that basis we will be voting against the package the “all” in here. We want to be voting for a Budget that will build a future for New Zealand but everything that Dr Cullen touches does not have just strings attached—it has chains. 
I note the wins that the very sensible Mr Dunne has achieved in this Budget. The leverage that member has given the small numbers of his caucus is quite incredible. If members recall he spoke in the past of a target of “30 30 30”—30 company 30 top marginal 30 trust etc. Well he is getting there; we are part of the way there. Coming down to 30 percent for company tax is a good first step in the right direction. I say congratulations to Mr Dunne on that one. But of course there is a double-edged sword there because the incentives to arbitrage between the top marginal tax of 39c and this new company tax at 30c just got a whole lot bigger overnight. As per normal the devil is in the detail here. As our leader John Key noted yesterday John Tamihere was right: there is a subtle change in a word here a subtle change in a word there. Down the bottom of page 67 of the Budget document in the notes to the accounts we see that all sorts of underlying issues and tenets are flowing through this Budget. 
Of course Dr Cullen and members opposite get up but all they can really do is to make personal attacks: “Ha ha ha—you’re voting against that.” You know if Government members were so proud of the Budget and if they had so much ownership of it they would be talking about the detail of the Budget. Instead we have heard particularly last night of Dr Cullen’s very curious fascination with the clothes John Key wore when on  
Close Up 
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I will touch base on the productivity issue. You know wage earners in New Zealand took a pay cut last night but the crux of what the BNZ is saying is that the only way out of the problem Dr Cullen has created over the series of the last seven Budgets is productivity. Forty percent of the economy is part of this state. Members should listen to what the BNZ says this Budget entails because this Budget is wrong: “Over the past three years labour productivity growth … has averaged 0.4% per annum and over the past 10 years has averaged 1.2% per annum. Treasury assume growth going forward will average 1.7% per annum.” 
Where on earth will that increase come from? Because unless that is achieved the numbers in this Budget the parameters around the modelling for this KiwiSaver proposal are absolutely junk—absolutely junk. This is a train crash waiting to happen for all sorts of reasons. Its underlying assumptions are the starting point. I say well done to Dr Cullen for the company tax rate but I tell him that the package here is an absolute nonsense.