Dunne Peter: Taxation (KiwiSaver and Company Tax Rate Amendments) Bill — First Reading 
Dunne Peter: Taxation (KiwiSaver and Company Tax Rate Amendments) Bill — First Reading 
[Volume:639;Page:9379] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill be now read a first time. 
 This is the first of the two taxation bills to be tabled in the wake of Budget 2007. This bill focuses on tax changes that will assist to transform the economy and transform New Zealand savings culture. It complements the second bill which will introduce other measures announced in the Budget. 
As part of the business tax reform package announced in the Budget this bill provides for the reduction in the company tax rate from 33 percent to 30 percent from the beginning of the company’s 2008-09 income year. This major change—a product of the business tax review—will help to increase New Zealand’s international competitiveness including with Australia. Aligning our company tax rate with that of Australia makes New Zealand more attractive internationally as a country in which to do business. It is estimated that the $2.1 billion cost to the revenue over 4 years will actually be an investment in New Zealand’s future because it will increase investment into New Zealand and boost New Zealand’s capital stock and that in turn will increase and boost labour productivity and wage rates. 
The bill also makes changes to the uplift factors for calculating provisional tax to recognise these tax rate decreases. An associated tax rate change—another to emerge from the business tax review—is the reduction in the tax rate for certain savings vehicles from 33 percent to 30 percent from the beginning of their 2008-09 income year. As a result of that change people who save through entities such as unit trusts and widely held superannuation and group investment funds will benefit from the new 30 percent rate that will apply to those funds. Likewise many people who invest in managed funds that elect into the new portfolio investment entity tax rules will benefit from the reduction in the top tax rate from 33 percent to 30 percent. Less tax paid on income from these savings vehicles will mean faster accumulation of savings by individuals. 
This bill also gives effect to some of the major enhancements to the KiwiSaver scheme that were announced in the Budget. The changes build on to the KiwiSaver model in a way that greatly increases incentives for people to join and to continue to make contributions to KiwiSaver for the rest of their working lives. Under this bill from 1 July people who save through KiwiSaver or a complying superannuation fund will be eligible for a new tax credit that matches their contributions of up to $20 per week. That means that if they save $20 a week through their fund they will receive an extra $1040 a year in their account via the tax credit and that will help them build up their financial assets faster. Employer contributions will not count for the purposes of this tax credit. 
The second bill will provide for a credit for employer contributions to come into effect next year. Members of these funds who are entitled to the credit will not have to do anything to receive it; their scheme provider will claim the tax credit each year from Inland Revenue and simply credit the amount to members’ accounts. Making it easier and more rewarding to save has benefits for all; it helps people to have greater financial security and a better retirement and it helps to create a stronger economy. 
Finally as announced in March the bill also introduces a number of amendments to the portfolio investment entity tax rules that will ensure the smooth introduction of KiwiSaver later this year. To help funds make the necessary changes to their systems in time the technical changes in this bill focus on problems relating to the portfolio investment entity calculation. The changes are intended to ensure that KiwiSaver funds that are portfolio investment entities will be able to operate with certainty from the start up of the new rules. Given that the new scheme applies from 1 July it is necessary to move swiftly hence this bill being taken through all stages at this time. I commend it to the House.