Parker David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
Parker David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:672;Page:18929] 
Hon DAVID PARKER (Labour) 
: 
 I will refer to clause 3 of the Taxation (Annual Rates and Budget Measures) Bill. I ask the Minister in the chair the Minister of Revenue to take a call in order to advise the Committee on the income tax rates proposed in clause 3. According to this clause “Income tax imposed by section BB 1 of the Income Tax Act 2007 must for the 2011-12 tax year be paid at the basic rates specified in schedule 1 of that Act.” In my reading of that clause the rates of income tax are not being adjusted for the losses that most New Zealanders in the KiwiSaver scheme are suffering as a consequence of the decrease in the tax credits applying for KiwiSaver. As I understand it despite the fact that people are losing the member tax credit and therefore the effective tax burden they suffer in New Zealand is greater their income tax is not going down. That is my reading of clause 3. It would be good if the Minister would take a call to confirm that the tax credits are going down—so people do not have the old benefit they had for saving under KiwiSaver—but their income tax rates under clause 3 remain unadjusted and therefore they are worse off. I ask the Minister to take a call in respect of that point. 
The second point I would like the Minister to confirm is that the adjustments that are made to Working for Families are of similar effect; that the middle-class tax bill after the changes to Working for Families in the later part of the bill which take money off them is not adjusted in this part of the bill by an amendment to the income tax rates. At the same time I would be grateful if the Minister could explain why if I am right it is fair that there has not been some redistribution of the disproportionate tax cuts that went to higher-income earners in respect of National’s income tax cuts in the last Budget. Remember that the statistic we were given was that 42 percent of the income tax cuts last year went to the top 10 percent of income earners. If I am right in my assessment of what happens overall in this bill why has there not been some redistribution so as to make that fair because it does not seem to me to be fair. 
Similarly why are there no significant changes to the rates of income tax in respect of the farming sector? There was a headline in the paper yesterday on this subject and I agree with some of the criticisms that were made of what I think were sub-editorial changes to the heading which suggested that farmers got $500000 of income but paid only a small amount of tax. The headline did not make clear whether it was gross income or net income and that should not have been the case. 
Amy Adams 
: Yeah it did it was just wrong. 
Hon DAVID PARKER 
: It did not make it clear whether it was net income or gross income and some people like Amy Adams read it and chose to interpret it as being a reference to net income which it never was. None the less it was clear that effectively an insufficient rate of income tax was being paid by the rural sector. Why is that not addressed here? 
I ask the Minister whether it is right that the only change that is signalled in respect of those tax settings is a future review of the livestock valuation schemes that are open to farmers. One of the ways in which those effective income tax rates are low in practice for the farming sector one of the ways that members of the farming sector can effectively minimise their taxes in New Zealand is by opting in and out of different livestock valuation schemes. At the moment if the value of livestock is going up farmers can opt in to the capital scheme and the increase in value is not attributable to them for tax purposes because it falls into a capital scheme. But when the value goes the other way at the moment farmers can opt out of the capital scheme and go into the revenue-based scheme for the valuation of livestock the value of their livestock goes in and they decrease their income for tax purposes on that part of the cycle. So farmers capitalise the upside and put a drop in value into the revenue scheme. 
Even that problem is not fixed in this Budget. The Government knows that it is a problem that decreases the effective rate of tax and these tax rates are set for the forthcoming year by clause 3 of this bill. The Government could have fixed that problem in this bill this year by saying that it is plainly wrong but no all it has done—as far as I am aware and I have seen the press release from the Hon Peter Dunne today—is to say that it will look at the situation in the future. I congratulate him on doing that because it is better than doing nothing but given how little tax is being paid by this sector looking at it and maybe doing something tomorrow is actually better summed up as doing nothing in this Budget because nothing is done in this Budget to remedy it. That is one of a number of areas of unfairness in the tax system relating to farmers and I thank the Minister for identifying that one but there is a long list of other things that are not being fixed that I do not have time to go into today. 
I come back to my primary point. Will the Minister confirm that notwithstanding the other changes to taxes for individuals that increase the effective tax burden of middle-class people in KiwiSaver and middle-income people who are having their Working for Families abatements made more severe the income tax rates that clause 3 in Part 1 of this bill sets remain unchanged so the net effect of both of those things is that the tax payments in effect go up and notwithstanding that last year 42 percent of income tax cuts went to the top 10 percent that is not revisited and instead there is an increase in middle-class tax burden.