Donald Rod: Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill — In Committee 
Donald Rod: Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill — In Committee 
[Volume:621;Page:16578] 
ROD DONALD (Co-Leader—Green) 
: 
 I would like to say how disappointed I am in the Government for vetoing my amendment to Part 2. [ 
Interruption 
] Is Richard Prebble disappointed as well? Good. I was looking forward to his support. I know that the ACT party is very keen on encouraging New Zealanders to save for their retirement and would therefore I am sure have supported our amendment to Part 2. I would have hoped that other parties in the House would be so kind as to do so as well so that New Zealanders particularly those earning less than $38000 a year would have had an incentive to save for their retirement. In fact even those earning up to $60000 a year deserve an incentive to save for their retirement. 
What incentive do they deserve? They deserve exactly the same incentive that all the members in this Chamber have. We are part of a very privileged group of people in New Zealand thanks to the Labour Government. When the Labour Government brought in the 39 percent marginal tax rate on income it kept the specified superannuation contribution withholding tax rate at 33 percent which means that all of us in this Chamber get a 6 percent tax incentive to save for our retirement. I thank the Government for doing that. 
But I do not thank it for initially penalising all of the people earning less than $38000 a year by taxing them at 33 percent no matter what their marginal tax rates were. After many years of pressure—I call it Chinese water torture: drip drip drip—the Government finally succumbed and removed that discriminatory regime and it has now set the specified superannuation contribution withholding tax rate at an employee’s marginal tax rate. I congratulate the Government on doing that but it deserves a brickbat for not extending the very privileged tax status that we all have and that all other people who enjoy an income of more than $60000 a year have. The Government deserves a brickbat for not extending that incentive to everyone earning less than $60000. 
That is why I am so disappointed that the Labour Government has refused to allow my amendment to stand. It would have been a sensible amendment and would have been very consistent with the Government’s claims that it wants to encourage people to save for their retirement. But of course as with many things with this Government it says one thing and does another. The Government is refusing to help the very people who elected it. It is the workers of this country who voted for Labour—particularly blue-collar workers people who earn less than $60000 a year—but they have absolutely no incentive to save for their retirement. 
That is why it is not surprising that fewer than a quarter of a million New Zealanders are currently members of subsidised superannuation funds. That is an indictment not just on the Labour Government but on successive Governments. The number of New Zealanders in subsidised superannuation funds was over 300000 in 1990 and that number has dropped by over 60000 since then. That is not only sad but economically disastrous. It can be seen coming through in the Reserve Bank figures. Members just need to go to the bank’s September Monetary Policy Statement to see that it is projecting negative savings rates of 11 percent for the 2006 year. A household savings rate of minus 11 percent is not good news for New Zealand—it is very bad news—and the Government could be taking a first step by backing our amendment. 
But let us not stop there; let us get into some serious incentives for saving. We look forward to seeing what the Stobo report has to say. We hope it will look at where the t’s and the e’s are in the “taxed/taxed/exempt” regime. We think it is about time the Government seriously looked at making contributions exempt so that they are deducted from gross income and to compensate for that taxing the money that members of those schemes withdraw at the point of retirement. Along the way it should make the middle “t” a lower-case “t” if one likes by taxing the earnings of superannuation funds at 21 percent then deducting the tax paid by members from their final payout at the point of withdrawal. That is the sort of incentive we need to be making to encourage people to save for their retirement and it would give the Government the added advantage of tax deferral because quite clearly the Government does not need the money now given the surplus that it is running but it will need it in 20 to 50 years’ time when the current crop of workers will retire and the Government will be short of income.