Smith Lockwood: Income Tax Bill — Third Reading 
Smith Lockwood: Income Tax Bill — Third Reading 
[Volume:643;Page:12743] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 National will support this motion because this really has been a bipartisan effort to rewrite New Zealand’s Income Tax Act. As has been acknowledged it was actually started by the then National Government during the 1990s. The current Minister of Revenue as he said was involved in 1996 in that process. 
Just reflecting on the comment the Minister of Revenue made a moment ago I would hate the thought of someone like Dr Cullen having the power to levy whatever taxes he chose on the people of New Zealand. Dr Cullen has been proven to be one of the most rapacious tax collectors as Minister of Finance that this country has ever seen. It is just staggering to think that in the 7 years almost 8 years that this Labour Government has been in office the average fulltime wage has gone up from about $36000 to about $45000 something like that. One would think that was quite a significant increase in income yet after we adjust for the fact that a person has gone into a higher tax bracket after going over $38000 of income—after we adjust for that fiscal drag and calculate how much tax they are paying today and after we adjust for inflation over that time period—the average income earner in New Zealand under this Labour Government is actually worse off. 
That is why I say that Dr Cullen has proven to be one of the most rapacious tax-gatherers this country has ever known. It is just outrageous that during a time of economic growth—not much to do with this Labour Government; world economic growth has been pretty good—because of the foundations laid by the third Labour Government in the mid-1980s and then by the National Government of the 1990s the Labour Government has cruised under pretty benign world economic conditions. It was a wonderful opportunity to raise standards of living in New Zealand. But what has happened? The average income earner in New Zealand is actually—in real dollar terms after accounting for tax—worse off than when Labour came into office. I think that is an indictment on this current Labour Government. 
I too add my thanks for the work done by Sir Ivor Richardson and his team on this income tax legislation rewrite. I also acknowledge the massive input by a group of officials at the Inland Revenue Department who I think serve New Zealand particularly well. I want to acknowledge one of the senior officials Robin Oliver who has done a lot of work for successive Governments on tax policy. He is an outstanding public official for New Zealand and I acknowledge the tremendous contribution that he and his team have made to this daunting process. 
When one looks at the bill on the Table of the House this afternoon one wonders whether they actually have had to strengthen it to hold the bill because 3000-odd pages of it is certainly a weighty piece of legislation. 
Having said that I congratulate those who were involved in this work I do want to raise a concern that I have. One of the successes of the successive ongoing rewriting of parts of this Act—as various parts have been rewritten over the years—is that there has been thorough examination of the rewriting work at the Finance and Expenditure Committee. New Zealand’s accounting experts have been able to come along to the select committee and argue fine detail such as whether “place of abode” means the same as “dwelling place” those kinds of things. It may sound meaningless whether “place of abode” is the same as “permanent dwelling” or language like that but in fact these issues were proven to be important for tax purposes. So the select committee had to reason with the officials and make sure that the wording that was used in this new rewrite did not change the meaning of our tax law. 
I believe that that was a very important part of the process and that it helped make the successive rewrites of the various parts work for New Zealand. What happened in the final stages was that right at the last minute the Government brought into this House Supplementary Order Paper 136—a Supplementary Order Paper of 250 pages. That Supplementary Order Paper contained a rewrite of legislation that was passed by this House basically in the last 12 months—such things as the Taxation (Savings Investment and Miscellaneous Provisions) Act of 2006 which was the Act that brought in the very complex legislation around the changes to taxing offshore portfolio investment. That Act brought in what Labour calls the fair dividend rate. I would not call it a fair dividend rate but that is what Labour chose to call it. 
That Supplementary Order Paper brought a rewrite of those kinds of provisions into this rewrite of the Income Tax Act. What was important about it—and I really emphasised this at the Committee stage of the bill—was that the select committee never got to hear what tax experts up and down the country thought about the incorporation of those provisions which were not written in the language of this rewrite. Those provisions were not written in the language of this rewrite of the Income Tax Act yet they were incorporated into it. I presume the language was changed to actually make it consistent with the rewrite of this Act. The select committee was unable to hear any submissions on that work—and it involved a lot of work because there were 250 pages of tax legislation in Supplementary Order Paper 136. 
What troubles me still further is that during the final consideration of this rewrite by the Finance and Expenditure Committee I questioned officials about some parts of the income tax that had not actually been rewritten at that stage. For example parts covering Part M and Part N but particularly Part M of the Income Tax Act because Part M in particular covers the legislation surrounding the family tax credits. This Labour Government did not introduce these family tax credits—they were introduced by the then National Government in fact in the 1990s—but it has expanded them and made them hugely more complex since it has been in office. 
What we were told at that final Finance and Expenditure Committee consideration of this legislation is that the material covered in Part M was just too complex to include in this rewrite—“too complex” was what we were told. People who are familiar with our Income Tax Act and familiar with Part M—the whole Working for Families tax credit part—will tell one that it is incredibly complex legislation. Very few people understand it. That has now been incorporated into this rewrite that we are debating in this third reading this afternoon. The select committee has had no chance to hear tax experts’ views about whether the complexities of Part M have been adequately covered in this final version of the bill that we are debating in this third reading and it will go into our law this afternoon. 
That is what troubles me about this Labour Government’s final handling of this long and important rewrite—so carefully handled right up until this last stage and then at this very last hour with Supplementary Order Paper 136 being rushed into the House such complex and important parts of our legislation being incorporated into the rewrite without the chance for the select committee to debate or hear the views of our tax experts up and down the country on it. 
Finally let me make these points about this tax legislation because the Income Tax Bill covers most of our tax law. Tax issues have become a major focus in recent weeks with proposals by both major parties in Australia for a coherent programme of tax reductions. Under the proposals in Australia low-income workers are going to be so much better off than will be the case under this Labour Government’s tax policy here. For example a low-income person in Australia earning up to say $16000 a year once those proposals are implemented in Australia would be paying no tax—no tax at all. That same person earning $16000 in New Zealand under this Labour Government’s tax laws covered in this bill will be paying $2790 in tax. That is $2790 more on $16000 of income than someone would pay in Australia. That is almost $54 a week more tax paid here in New Zealand by a low-income earning person than in Australia. 
That is just one issue. Take the Government’s much-vaunted Working for Families tax package. It says that it has raised so many children out of poverty. What the Government seems to ignore is the poverty trap as so many women in this country try to work their way off a domestic purposes benefit. We all know the figures or at least Labour should. If a person is earning $10000 a year he or she is still getting most of his or her domestic purposes benefit. To get off the domestic purposes benefit that person has to be earning over $25000 a year. To earn that extra $15000 a year that person basically has to work an extra 20 hours a week at $15 an hour—an extra 20 hours a week. At $15 an hour that person will get to keep about $1.60 of that $15 an hour. That is a poverty trap for low-income people and these Labour members do not give a stuff about it. They do not care because Working for Families at the last election was just a big vote-buy just like interest-free student loans. They did not care a jot about low-income people and all those anomalies are in this Income Tax Bill.