Groser Tim: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
Groser Tim: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
[Volume:644;Page:13695] 
TIM GROSER (National) 
: 
 I address clause 3 in Part 1 and I will read it out in a slightly reconstructed way. What it says is that the income tax imposed by section BB 1 of the Income Tax Act 2004 will once again apply in the 2007-08 tax year. If we actually sit down and interpret what that means in more technical language used by economists we see it means that once more we are doing absolutely nothing about bracket creep—absolutely nothing. This is the meat and potatoes of the Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill. We have here a huge bill of great complexity—it is 409 pages not counting the other Supplementary Order Papers—and there are various parts of it that move the game forward in the right direction. For example if we look at business taxation we see that the cut in the corporate tax rate is something that makes some sense. But on the other hand what we see even in that area is the lack of a coherent overall strategy to drive business taxation down to where New Zealand actually needs it. In New Zealand there were 44000 partnerships as at February 2006. There are 74388—let us round that up to 75000—individual proprietorships. None of these will benefit from that cut even though the cut itself makes a contribution in that general area. 
This is the heart of the matter. We have been looking for 7 or 8 years to this Government to come forward with a coherent strategy. This was its opportunity and what do we see? We see that it just wants to deal with it by repeating the rates set out in the schedule of the Income Tax Act 2004. This is against the background of some central statistics that are absolutely crucial to the political debate between the two major parties. These will form the basis of a vigorous contest between the two parties and will explain why in the minority report of this vast bill the minority view of the National Party simply stated: “The National Party recognises that the company tax rates will be dropping to 30 percent but we believe that personal income tax rates should also be lowered.” We cannot have a clearer statement of intent on a central issue than that. 
As recently as 2 years ago we looked at the statistics and we saw that $20 billion more in tax had been accumulated by Dr Cullen since he took over as the Minister of Finance in 2000. That figure will be well in excess of $20 billion today. The OECD revenue statistics recently quoted a very interesting comparative study of Australian and New Zealand economic performance. The total percentage of revenue collected at all levels in Australia namely provincial state and federal levels was 30.9 percent in 2005—say 31 percent. In New Zealand it is six points higher than that. That is one of the margins that explain why New Zealand has fallen so rapidly in the last 7 years behind the comparative economic performance of Australia. The punitive rate of 39 cents in the dollar when it was introduced for reasons that made no sense at all—we all understood what it was about when it was introduced; it was the politics of envy—was explained away at the time as attracting only 5 percent of taxpayers. But because of the bracket-creep phenomenon and because there has been no systematic attempt to address the issue of comprehensive income tax reform we now find 14 percent of New Zealand taxpayers are paying that rate. This includes basic professions. It includes schoolteachers nurses and junior accountants. No wonder we are seeing the exit of 75000 New Zealanders across the Tasman or to other parts of the world—80 percent of whom are under the age of 40. We are losing our best youngest most innovative New Zealanders and part of the reason but not the whole reason is this almost unbelievable unwillingness to use the massive accumulative surpluses to actually deal with the problem.