Smith Lockwood: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — First Reading 
Smith Lockwood: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — First Reading 
[Volume:631;Page:3438] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In speaking to the first reading of the Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill I have to say that it is typical Michael Cullen – Labour legislation. Sure it eases the tax burden a bit in some areas but then it clobbers in others. This Minister of Finance clearly cannot bear to give up much revenue. We all know of course that Dr Cullen thinks he knows far better than the New Zealand people how to spend their money. That is what gets right up the nose of middle-income New Zealanders about this Minister of Finance—he thinks he knows so much better. 
Clearly the bill does ease the tax burden for some. The tax position of those who invest through collective investment vehicles is improved by this bill. But those it clobbers are often those who have been prudent savers have saved a bit of a nest egg and have invested with a diversified investment portfolio including direct investment in shares not just in New Zealand but in other countries with sound economies. That is the kind of investment that most advisers including those on the Government’s own superannuation fund would say is prudent and wise investment yet this legislation will clobber those people. 
Sure there are winners with this bill. Those investors in what are now called portfolio investment entities—or “PIEs” as this legislation calls them—will not be taxed on capital gains where they have invested in companies in New Zealand and Australia. Capital gains on those companies will not be taxed in this bill. Clearly those investors will be winners as will individual investors in portfolio investment entities who will be taxed at the lower personal rate if they are lower-income earners. Those measures are both pluses and National does not oppose them. 
In fact I guess we recognise that Dr Cullen has to introduce them for his KiwiSaver proposal to work at all. Even if it were not for KiwiSaver sitting on the horizon the measures not to tax New Zealanders’ capital gains on investments in collective investment entities in Australia and New Zealand and to tax individual investors on their individual tax rates make sense. But the problem is that the Government did not have to boot around other investors to make those changes. It could have made those rational changes without actually booting around prudent savers with direct foreign investment in shares in other sound economies around the world. The Government could have introduced these “PIE rules” as they are called yet kept the “grey list” countries. But no Dr Cullen wanted the revenue so he is just going to sock the rich a bit more and try to grab a bit more money off them. So everyone with more than $50000 invested in shares in those “grey list” countries of the UK the United States Canada Germany Japan Norway or Spain will now have to pay tax on capital gains whether or not they are realised from 1 April next year. 
The problem is that it is not just the rich that Dr Cullen is socking. If we look at what our Retirement Commissioner is saying on her website—I think it is the Sorted website—about the kinds of savings people need for their retirement we see that someone earning less than $60000 in New Zealand should according to the Retirement Commissioner have saved over $200000 for their retirement. That is way above the $50000 threshold that Dr Cullen is allowing for investors with this legislation before they get clobbered by a capital gains tax. Middle-income earners in New Zealand who are trying to save the kind of nest egg that the Retirement Commissioner says they should have for a secure retirement will be clobbered by this capital gains tax for daring to invest prudently sensibly and wisely in a range of economies around the world. 
We have to ask ourselves why this Labour Government is hitting those sensible middle-income wise New Zealanders who are trying to save for their retirement. Dr Cullen says they are far too rich—he will make them pay a capital gains tax on unrealised capital gain something that will hit a lot of retired folk very hard. Fifty-thousand dollars is not a lot of money to have saved. For anyone trying to have a better retirement $50000 saved and invested prudently around the world is not a lot of money. Yet Labour members and it seems Peter Dunne think such people are wealthy and will clobber them for daring to invest prudently around the world. 
It is interesting that even investment advisers are saying that this is very unwise legislation. The general manager of Equity Investment Advisers and Sharebrokers Ltd John Commins said yesterday that prudent investors who have saved for their retirement and diversified their risk by investing offshore will be penalised. It is a shame that Dr Cullen thinks those kinds of investors should be taxed more. 
National opposes this legislation for that reason despite the fact that we support some of the measures around collective investment vehicles. We are supportive of the portfolio investment entities not being taxed on capital gains. We are supportive of the fact that lower-income investors can be taxed at their personal rates of income tax on investment in collective funds. But why will the Government clobber other wise investors at the same time as it is doing that? 
 Labour knows it is on shaky ground because when this proposal was first put forward it was going to include investment in Australia in the capital gains tax. What happened is that the Government backed down on that one. Peter Dunne acknowledges it backed down on that. Of course what happened then is that 28000 shareholders in the Guinness Peat Group here in New Zealand said it was outrageous that they were going to be clobbered with a capital gains tax through investing in that company. What did Mr Cullen do? He backed down again and gave a 5-year exemption from the policy for those New Zealanders who have shares in the Guinness Peat Group. I do not say he was wrong to change the policy but he should have changed it for everyone. Why did he just change the policy for investors in the Guinness Peat Group? I see Peter Dunne smiling. What or who twisted Dr Cullen’s arm on this? Was it all the emails the Prime Minister was getting? Was it one of the coalition members? Was it Winston Peters who said to Dr Cullen that his support depended on that change being made? I would say there was a fair bit of murkiness in the background because it is not a rational policy change to exempt just a selected group of shareholders. Dr Cullen should have allowed all the shareholders to be exempt from this change because it is bad policy. It is anti-savings and anti - prudent diversified investment. In fact it will probably strengthen the current bias in our investment towards property in New Zealand. 
I note that Dr Cullen is about to speak next and I will finish by saying this to him. This bill confirms the tax rates for this coming year. If he thinks a Government that is taking 92c in every dollar from the income earned by a woman who is looking after three children as she tries to get off the domestic purposes benefit is a Government that shows concern for people on a low income—one could almost say people in a poverty situation—then he disgusts me. He gave away hundreds of millions in his Budget to buy votes from higher - income earning New Zealanders—with up to $140000 of income—and he crapped on those low-income people. He did not give them one cent of tax relief. For him to stand in this House a few minutes ago and claim he was doing a lot for people in poverty was outrageous.