Cunliffe David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
Cunliffe David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:672;Page:18926] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is appropriate at this point in the debate to come up a level and consider the broad framework of tax policy that stands behind the Taxation (Annual Rates and Budget Measures) Bill. It is appropriate in the Committee stage to repeat what we have said in the first reading debate and to stake out the ground upon which the Labour Opposition will be fighting this bill. Although it is uncontested that a significant and serious debt problem with net international liabilities equalling 85 percent of our GDP confronts this country and that a deficit of $16.7 billion per annum cannot be sustained it is also true that in reducing those deficits the tax system plays a key part and that the equity and efficiency of any tax rate changes must be carefully considered as a means of deficit reduction. 
It is essential that the Committee recalls the changes that have recently been made. When I say recently I mean during Budgets 2008 2009 and 2010 which formed the basis of the rates that we are being asked to pass today. In 2008 a number of changes were made to tax rates mainly in the middle and the bottom brackets which cost the country about $8 billion in forgone tax revenue. That was passed against the background of a somewhat slowing economy and there was a view that that was an appropriate level of stimulus based on the information available at the time the Budget went to print in about March 2008—in other words 6 months before Lehman Brothers collapsed the global financial crisis and the terrible deleveraging process that has since ensued affected New Zealand. I think it is a fair bet that had we known how bad that was going to be there may have been some reconsideration of the depth of those tax remissions. However that was the information available. Nonetheless even with those reductions in tax rates Labour was able to bequeath to the incoming National Government— 
Hon Dr Nick Smith 
: Rubbish! 
Hon DAVID CUNLIFFE 
: Dr Smith is a man of letters a man of intelligence discernment and an impeccable reputation. He has declared that my sentence is “rubbish” before I have even finished it. He cannot therefore know what he is rubbishing—except himself. The Labour Government bequeathed to the incoming National Government a net debt position including the assets of Crown financial institutions—Treasury numbers—of 7.6 percent of GDP. I have it in front of me on a spreadsheet. That has deteriorated to a net debt position including financial assets of minus 15 percent and is headed for minus 30 percent before the measures taken in this Budget. There could be no clearer deterioration in position than that. 
The CHAIRPERSON (Lindsay Tisch) 
: I reminded the member right at the beginning on two occasions that we are debating clause 3. Clause 3 is about the annual rates of income tax for the 2011-12 tax year. The member must come back to clause 3. 
Hon DAVID CUNLIFFE 
: Clause 3. As I said at the start but I will repeat the passing of the rates today has to be considered in light of how we got those rates. Three preceding Budgets are essential for us to recall. The first was 2008. I have acknowledged that it may have been somewhat brave in the remissions it offered in those rates. In 2009 as the Chair will remember National incorporated rate changes into the 2009 Budget that were passed in urgency around Christmas of 2008 so urgent were they. It was the first part of a three-part rate reduction programme by the incoming National Government which dropped the top rate from 39c to 38c in the dollar. Then in their wisdom in the 2009 Budget those members cancelled the rest of the three-part programme only to re-instigate them the following year in the 2010 Budget. How is that for leadership? It was a reversing of the reversal rather like KiwiSaver for which today they were brave enough to half-reverse the reversal of last year’s Budget change. But in this case in terms of income tax rates which is what we are discussing in clause 3 those measures in Budget 2009 cost another $8.5 billion in forgone tax revenue over 4 years. 
When we get to Budget 2010 which was of course the doozy the Government was so concerned about the Crown’s fiscal position and the growing deficit that what did it do? It dropped the top tax rate from 39c to 33c in the dollar and the company rate from 30c to 28c. That was extraordinary. That cost $14.3 billion in forgone revenue growth over the 4-year forecast period resulting in an accumulated amount of revenue forgone—wait for it—of $23 billion under the National Government over 4 years plus Labour’s $8 billion which equals around $31.5 billion. Why is that relevant? Because today we face a deficit of $16 billion which is roughly half the quantum of the tax remission in gross terms in the last three Budgets. So go figure! The Government reduced rates reduced revenue and could not manage the economy out of a paper bag; growth fell in a hole and now we do not have any money to spend. 
That brings me to the second important point of the argument about tax rates. If we are contracting Crown expenditure to accommodate the size of the deficit might we not also consider changing some of those rates back up? Why is it that the top tax rate is somehow sacrosanct? Why is it that when middle-income New Zealanders are having KiwiSaver cut and Working for Families cut—and I see that those cuts go way below $70000 combined family income; $60000 is caught by these changes—why is the top tax rate sacrosanct? In other words if the country is being asked to tighten its belt why are the tight belts the first to be further tightened and the rather more generously proportioned waistlines of certain other taxpayers allowed to expand further? Are we creating in short— 
Craig Foss 
: Leave Parekura out of this! 
Hon DAVID CUNLIFFE 
: —I am not speaking about the distinguished chairman of the Finance and Expenditure Committee in person; his waistline is no business of mine. But why are some being asked to bear the brunt and not others? Why are we building two New Zealands? Those who have not who shall have less and those who have who shall have more. This seems wrong to me but hey I am only a social democrat—what would I know? I represent very proudly only the electorate of New Lynn. I do not represent some other electorate such as Grey Lynn those latte-sipping socialists from the inner city. No no: New Lynn where good working people live and I am very proud to be their MP. Does Cam Calder come from the North Shore and commute to South Auckland? The nice thing about New Lynn is that when I look up on a crystal-clear day when the birds are singing I can actually sometimes see John Key flying over us in his helicopter to get from his mansion in Parnell to his electorate in Helensville. I count that a great privilege—but back to the rate issue. 
What would a sensible moderation of tax rates look like? We have to have regard for international competiveness and I am sure Mr Dunne in the chair would remind us of that. Therefore changing the corporate tax rate would not be top of our list of things to do. But in looking at the marginal personal rates it seems to me that some rebalancing there that brought a stronger sense of social equity to the exercise of reducing the Crown’s deficit would be appropriate in most ordinary Kiwis’ sense of fairness. Of course we have to balance the growth aspects of this—the building of the strong export-oriented economy that we need. That brings me back to the part of the discussion in the first reading of the bill where we noted—I think collectively; I think Government members joined with the Opposition on this—that there was no economic development strategy anywhere in this Budget no pretence of one. That is not what they do; they are conservatives. They are good with a little nip and tuck here and there around the fist they reckon. Even so some of them take us backwards. But growing the pie? That is not for them. That is for us. When the public wants the pie grown they will vote them out and vote us in. Is that not right colleagues? And that is what we do. They are also the party of continuity. They are the Holyoakes of the modern era there to sit on their well-proportioned bottoms while the country goes to rack and ruin. It is Labour that historically has been the party of change. 
Coming back to the bill: if we want rates changed again this is unlikely to be the Government that will do it. They seem to think the epitome of courage is to semi-reverse last year’s reversal. That is not strategic; that is not the kind of change this country needs. It will not take us forward. 
This is a rare opportunity. It happens once a year for Parliament to recall what has happened to tax rates. What has happened to tax rates in three successive Budgets before this one has been massive tax remission to the public and proportionately speaking much of it to the top end. That needs to be rebalanced.