Dean Jacqui; Woodhouse MichaelTUESDAY 15 AUGUST 2023(continued on Thursday 17 August 2023)TAXATION PRINCIPLES REPORTING BILLSecond ReadingDebate resumed.ASSISTANT SPEAKER (Hon Jacqui Dean): Good morning members. The House was last considering the Taxation Principles Reporting Bill. We continue with that.Hon MICHAEL WOODHOUSE (National): Well good morning Madam Speaker. It's nice to be back in urgency but not nice to be discussing this bill. In fact this is probably the most misnamed bill on the urgency motion. I had to laugh last night when Dr Russell in moving the second reading praised the vision and insight of the chief architect of the bill the Hon David Parker." only the chief architect of the bill has thrown his toys out and walked away from the revenue portfolio when the Prime Minister specifically ruled out the wealth tax that this bill sets the framework for. Now he didn't walk from Cabinet he didn't lose all the baubles; he just threw his toys out and said "Barbara Edmonds you can have the revenue portfolio." and then that esteemed tax expert Dr Deborah Russell gets the associate revenue portfolio. But we should be under no illusion that this bill is setting the information framework to enable a wealth tax to be introduced and when the PM ruled it out Mr Parker was off.But here's why I think a wealth tax is still on the cards. If the election delivers a cobbled-together coalition of the left with Labour the Greens and Te Paati Māori I think an absolute condition of the two parties who are overtly committed to a wealth tax—and the one party that likes the idea of a wealth tax but understands for political reasons that it can't say so now—will by coalition be to bring a wealth tax to an economy near us.The other reason I think that is quite simple: they haven't thrown this bill out. If they truly believed that a wealth tax was not on the cards in the foreseeable future why do we need this information framework? Because what this bill does is it repeats the report that David Parker had commissioned over the last couple of years to report on economic income that is not taxed under current income tax law.Now in his first report he went after the 279 so-called wealthy individuals who have untaxed economic income and then threw that in the denominator put the amount of tax paid in the numerator and decided that they were paying half the tax of "Joe Average". The issue with this bill is that the reporting requirements that the Commissioner of Inland Revenue has do not make such a distinction. The Commissioner of Inland Revenue is required to prepare a report every year on all of the principle measures and the impact on the tax system and those principles include economic income as part of vertical equity. Now they're all fancy words but they essentially boil down to the same thing. That is how much growth in wealth is being experienced in New Zealand that is not being taxed.Hon Dr David Clark: What has he got against transparency?Hon MICHAEL WOODHOUSE: Nothing. It's consistency Dr Clark that I want. Let's lead on to consistency. We have discussion in here—and I'm prepared to argue against the regressivity of GST or at least to say that among the economic commentators there are arguments for and against the degree to which GST is progressive regressive or flat. What it shouldn't be—particularly in a principled tax framework Dr Clark—is cherry-picked and have fruit and vegetables however they are defined suddenly taken out for political reasons. It was not principles that led to the Government's announcement last week Dr Clark; it was politics.I had to love Dr Russell quoting the 1776 tome from that esteemed father of capitalism Adam Smith—the first Labour MP I think in my 15 years in this House to ever proudly quote Adam Smith. [Interruption] Yes she was. She'd obviously gone to the Parliamentary Library and grabbed it although to be fair she might be the only one along with David Parker who actually has a copy of Adam Smith's The Wealth of Nations. I have it on Kindle. It's a very good albeit long read. David Parker's probably got it there beside his Piketty volumes but being the anti-capitalist that he is deep down—ASSISTANT SPEAKER (Hon Jacqui Dean): Order! And back to the bill.Hon MICHAEL WOODHOUSE: It's about the speech that Dr Russell gave in her second reading contribution. She quoted Adam Smith and said the tax system should be transparent as Dr Clark said—but this tax system under Labour isn't—and that compliance costs should be minimised—well I dare say that that's not going to happen when GST on fruit and vegetables is removed—and that the administrative cost of collecting tax should be as little as possible. Again a gross breach of the very taxation principles that this Government purports to espouse.And who is wealthy? We haven't got a definition of it. Now David Parker went after I think 279 of the wealthiest individuals. [Interruption] Chlöe Swarbrick will tell me—was it a 9 percent effective tax rate on their economic income? Something like that—terrible. Only all of the difference is in unrealised changes in wealth so those individuals would have to come up with millions and millions of dollars to pay for the things that Labour are spending money on.When challenged on talkback radio David Parker said "Well they're worth on average a quarter of a billion dollars each. They're bound to find some cash down the back of the couch." I'm paraphrasing but that was pretty much what he said. That doesn't sound very principled to me.Nor indeed if we are talking about principles and economic income overall it's all economic income including on family homes. Now I'm not proposing a capital gains tax or a wealth tax on family homes but the inconsistency is here: if in Deborah Russell's electorate of New Lynn an average homeowner bought a house five years ago for $1 million because of the Government's profligate spending driving inflation up now that home is worth $1.5 million. In those five years they've earned more in the increase in value of their house than they have working as a tradie—that's untaxed. Now nobody's talking about that over there and nor are we here.But if the same plumber lives in Balclutha—listen up—owns a $500000 house and buys a $350000 rental property which over the same five years increases to half a million dollars the wealth increase the economic income on that second house is $150000 and that plumber would have to pay probably $40000 to $50000 in income tax—a lower capital gain but a higher tax bill. How principled is that? But that's what this Government will give us. The really sad thing about this is they're not going after the big fish that they said they would. In 2017 and 2016 when I was the Minister of Revenue the big issue was base erosion and profit shifting—multinational companies moving transfer costs and interest to reduce income earned in higher-taxpaying countries to record taxable income in lower-tax jurisdictions. And the OECD has been battling this for years.After initially sending a bill to this House to again create an information framework nothing has been done by this Government on the thing that they said was the number one revenue issue during the Key/English years. So this is a really disappointing piece of legislation but it reveals much much more about the Government's intention for wealth. They are coming for unrealised economic income. They are coming for your cribs and your baches and the shares in the plumbing firm—they are going to tax them if they're still in office on 14 October and the public need to know about it.The Minister says "Oh this isn't about collecting a single dollar of tax." Yes it is. She then went on and listed all the reasons why this Government needs more tax. Where are they going to get it from? Hon Member: Back to the bill.ASSISTANT SPEAKER (Hon Jacqui Dean): Order! Hon MICHAEL WOODHOUSE: They're going to get it from the untaxed economic income that is coming out of this bill.ASSISTANT SPEAKER (Hon Jacqui Dean): I'm sorry to interrupt the member but the members to my right who have continually questioned the relevancy of the speech and the context of the speech in terms of the Standing Orders and the Speakers' rulings have a remedy. They can take a point of order and just see where that takes them."