Parker David: Supplementary Estimates Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeParker David: Supplementary Estimates Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill — Second Reading[Sitting date: 26 June 2013. Volume:691;Page:11344. Text is incorporated into the Bound Volume.]Supplementary EstimatesHon DAVID PARKER (Labour):I was interested to hear the last speaker Paul Goldsmith talking about a change to fattening regimes in respect of the livestock herd scheme and saying that a change to the fattening regime allows a change in the way in which livestock is accounted for for tax purposes. Of course one of the reasons why the scheme had to be changed is that until now the fattening regime was the farmers who were able to fatten their returns by reducing their tax burden by misusing changes between livestock herd schemes.I want to address one other issue—a serious issue I think—that was raised by Mr Goldsmith in his contribution. He gave us a percentage of the number of people who areon the lowest income tax rate. What he did not say is that that includes some of the wealthiest people in New Zealand who earn more economic income than low-income earners. David Cunliffe will be able to tell me the percentage of high-income earners who are not on the highest marginal tax rate.Hon David Cunliffe: About 60 percent of the top 100.Hon DAVID PARKER: Recently we had a report that—John Hayes: You made that up.Hon DAVID PARKER: No he did not actually. I read the same article. Approximately 60 percent of the most wealthy people in New Zealand have not been paying the highest marginal tax rate. National’s answer to that was to drop the highest marginal tax rate but even once we have done that some of the wealthiest people in New Zealand mask their economic income as being capital income on capital account which enables them to not include it as taxable income. So although they might have low taxable income in terms of the statutory definition of income found in our taxation legislation they have a lot of economic income on capital account which is not taxable in New Zealand. I want to point out that this bill does nothing to address that.I further want to emphasise what the OECD one of the agencies that advises the New Zealand Government said in respect of that. It said in its June report on the New Zealand economy that “Income inequality is higher” in New Zealand “than the OECD average.” So already in respect of income inequality in New Zealand has reached the point where income inequality is worse than the average in the OECD. This is the New Zealand that we think of as being an egalitarian country but it has become less egalitarian than the average in the OECD.Then it said that this is partly because “the system of taxes and transfers reduces inequality less than in most OECD countries.” That is another quote from its report. “The system of taxes and transfers reduces inequality less than in most OECD countries.” In other words our tax system is less redistributive than most tax systems in the OECD.Then it goes further and drills down as to what the main causes of that are and none of them—none of them—are addressed by this bill. It said in its report that the biggest problem in New Zealand in terms of both inequality and economic efficiency in terms of the tax system is that we do not tax capital gains. I am going to read out what it says because the position in New Zealand is far from moderate; it is extreme: “New Zealand belongs to a group of five OECD countries with particularly high pre-tax capital-income inequality. … As much of this income especially at the top levels takes the form of capital gains the lack of a capital gains tax in New Zealand exacerbates inequality (by reducing the redistributive power of taxation). It also reinforces a bias towards speculative housing investments and undermines housing affordability as argued in the 2011Survey .”So the Government in 2011 was told that one of the worst things with the New Zealand tax system is the fact that we do not tax capital income unlike most OECD countries and that as a consequence we are a less equal society and our economy is less efficient because people chase speculative land-based capital gains because of the tax bias. The 2011 survey told the Government that. Here we are 2 years later we are looking at another tax bill that could have addressed the issue and it does not.It is absolutely clear that it is one of the reasons that we have rising inequality. We have got rampant house price inflation running in Auckland at the rate of 15 percent per annum where first-home buyers increasingly cannot get a foot in the market where homeownership rates are declining where increasing numbers of houses are owned by the few and where increasing numbers of young New Zealanders especially cannot afford to buy one house and are increasingly reliant on intergenerational wealthtransfers—inheritances—in order to buy a house rather than realistically being able to save in order to buy a house. One of the reasons for that and an important reason that would be easily fixed in New Zealand is that we need to have a capital gains tax.The National Government members jump up and they say: “Oh the only capital gains tax you can have is one that includes everything including the primary home.” Well the Labour Party does not favour taxing the family home. When we hear the National Government using that as an excuse we ask: “Well what do other countries do?”. Virtually every other country that has a capital gains tax or some sort of equivalent to that exempts in one way or another the primary home or gains from the primary home.So not only have we had the idiocy that was in the original taxation bill—the car-park tax and the other mistakes that David Cunliffe has capably addressed tonight—it does not address this fundamental flaw in our tax system. Neither does it fix the fact that under a recent tax bill the Government increased petrol tax beyond that needed to fund roading.Hon David Cunliffe: Wonder why.Hon DAVID PARKER: Yes I wonder why it did that.Hon David Cunliffe: Wafer-thin surplus.Hon DAVID PARKER: I think it might be the wafer-thin surplus too Mr Cunliffe. It did that because it wants to achieve its surplus target. We agree that we should be achieving a surplus target—Hon David Cunliffe: We would have done it.Hon DAVID PARKER: —yes we would have done it—but when you have given 40 percent of your income tax cuts to the top 10 percent and then you increase petrol tax for everyone including the poor in order to achieve that well it just does not seem fair. When you increase GST—which as a proportion of low-income people’s income is a higher tax than it is for wealthier people who do not spend as high a proportion of their income on “GST-able” goods and services—that too is regressive and hurts the lower-income people in society.What else does this bill not address? Well we have heard a lot of talk from the Government that it is spending a lot of money it says—well money—on food in schools. Two and a half million per annum—Jacinda Ardern: 18c per child in poverty per week.Hon DAVID PARKER: —18c per child in poverty per week—not a large amount of money. It is stealing a Labour Party initiative but it wants to do that. It does not have many good policies of its own and good on it for doing something in respect of child poverty. When it gets as bad as it is under this Government even this Government feels that it actually has to deal with some of the symptoms of poverty even if it is not dealing with the causes.But do you know how much it is overcharging us for ACC which it does not fix in this bill? Our ACC levies are over the next 2 years $700 million too much. That is 300 years’ worth of the food in schools amount. It is funding the equivalent of 300 years of its derisory $2.5 million contribution through food in schools to poverty which it has made worse through its tax policy and it is not fixing the ACC side of it. I warrant to say that for the families that those children are coming from the extra that those same families are paying on those ACC levies is probably more than the $2.5 million that the Government is putting in. It is taking with one hand what it pretends to give with the other.This legislation—which we are voting for because it actually in a couple of very minor ways improves the tax system—does nothing to improve these major deficits in our tax system which are both holding back our economy and increasing inequality. Idespair sometimes that we pretend in this country to be an egalitarian country when we know that inequality is rising to the detriment of us all and when some of these things can be so easily fixed in a way that not only makes society fairer and addresses child poverty—because the tax take across society becomes fairer—but also makes the economy go better. I cannot understand why the Government is not willing to do these things that will make us grow better.