Swain Paul: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — Second Reading 
Swain Paul: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — Second Reading 
[Volume:644;Page:13443] 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 We live in curious times when National when presented with a bill that introduces a research and development tax credit which for as long as I have been here National members have either been talking about in Government or promoting in Opposition votes against it. The bill cuts the company tax rate from 33c to 30c which National members talked about in Government but never did—I remember that in 1990-99—yet National is voting against it. National members always talk about the fact that company tax rates are too high but when they had the chance in 1990-99 to change them they never did. Here National members are now presented with legislation that allows that to happen and they will vote against it. 
This legislation increases the tax incentives for people in companies to make charitable donations which is something that National members have also talked about. They get presented with the legislation and they vote against it. When legislation appears that liberalises tax penalties so as to encourage voluntary compliance with the tax regime—which is something that National has campaigned for alongside Rodney Hide from ACT over many many years—they vote against it. It is unbelievable that National can vote against research and development tax credits—for which the business community has been calling for for a very very long time—and vote against a corporate business tax rate cut from 33 percent to 30 percent. 
I think the business community needs to understand that on this kind of thing the National Party is all hat and no horse. Its members talk about tax reform but when they get the opportunity to vote on it they oppose it. It is an absolute unbelievable outrage that National can go around and parade itself as somehow the business-friendly party. 
There are just a couple of quick comments I want to make. Firstly I want to make one on the KiwiSaver regime because a number of people have talked about that. Then I want to talk a little bit about the research and development tax credit and address the issue that Lockwood Smith raised which I thought was quite a fair point. 
The first point is on the KiwiSaver scheme. Everyone recognises that compared with other countries overseas New Zealand’s savings rate is low and we have to do something about it. When we look at the countries that have sustained better economic growth than New Zealand—even though we have had pretty good economic growth over the last 5 or 6 years—we see that all those countries that do better than us have a much better savings regime. 
This savings regime that we are promoting—“KiwiSaver I” introduced it and “KiwiSaver II” introduced the employer contribution—does a number of things; it allows a number of things to happen. First of all it promotes security in retirement. I was amazed to hear the Maori Party oppose this legislation on the basis somehow that Maori should not be secure in retirement. I simply just cannot believe that the Maori Party which is supposed to be talking about the future is harking back to the past all the time. Its members are always whingeing always grizzling and always moaning. Here is an opportunity for Maori in particular to actually get decent security in retirement and the Maori Party members are thumbing their noses at it. I think it is ridiculous. Security in retirement is a critical thing. 
The other critical thing KiwiSaver does is reduce consumption. It takes pressure off inflation and therefore takes pressure off interest rates which is a good thing for those people who are looking to try for example to own their own homes. So that is a good thing as well. Of course the final thing KiwiSaver does is that it starts to create and generate a pool of local investment capital that business can use instead of constantly going offshore and thereby picking up the problems of the exchange and interest-rate risks that are associated with that. 
No one disagrees with the idea that we need better savings; I have not heard anyone say that. But everyone says: “You should not do it that way; you should do it some other way.” Well here is the way that the majority of us on the Finance and Expenditure Committee thought was the best way and I think it has huge support across New Zealand—as the chair of our select committee went on to say during his speech. The Maori Party asks why we did not just phase something in and says that 4 percent is too high. Of course the select committee did come up with some changes. We said that in the end the minimum contribution from the employee up until 1 April 2010 should be 2 percent and so should the employer minimum contribution. It is a phase-in period where the total contribution will be 4 percent. That is up to 2010. By the next year it will be three plus three—3 percent from the employer and 3 percent from the employee—making the contribution 6 percent and phasing in the total contribution after 2011 to four plus four or 8 percent. So we did listen to a lot of the submissions and brought in some transition periods and that is a good thing. 
Just finally I return once again to the tax credit for research and development. The Hon Dr Lockwood Smith says that this tax credit does not apply to Crown research institutes that enter into partnerships or joint ventures with private companies. That is not actually true; it appears that way on the surface. Dr Smith acknowledges that tax credits could not be applied automatically to Crown research institutes because they have already been Government-funded. People came to the committee and said we could not allow Crown research institutes to double-dip. We could not put a whole pile of tax money into them on the one hand and then give them round the back door a tax credit. 
So the argument settled on what happens if a Crown research institute enters into a joint venture with a private company. That is a fair issue. The point is that most of those joint ventures are fifty-fifty arrangements. If they are fifty-fifty arrangements then the tax credit does not apply to that joint venture. But if the joint venture is restructured so that the private sector has 51 percent ownership then it can get the tax credit. So the Crown research institute has to work out that if it wants the tax credit it has to lose some of the control—it is as simple as that. Crown research institutes can get the tax credit if they are prepared to restructure themselves in the interest of the joint venture. That was ultimately the point that was made at the select committee and I do not think it is right for Dr Smith to say that somehow this will kill off these joint venture arrangements. It will only kill them off if the joint venture or the partnership cannot restructure—which is what my recommendation to those joint ventures would be if they want to take advantage of that tax credit. 
In conclusion this is thoroughly good legislation. It is classic good Labour-led legislation that promotes savings promotes investment in research and development and also promotes business confidence by reducing the company tax rate. 
I end where I began. Here is an opportunity for National to vote for tax reductions for business and it decides that it will vote against them. The National Party members will vote against a cut in the company tax rate from 33 percent to 30 percent. People may ask why National members would do that. I say to people in business that they need to be able to talk to their local National member of Parliament and ask him or her: “Here was the opportunity to vote for a cut in company tax which you have been talking about for years and you voted against it. Why was that?” I can tell members that I was on the select committee and I am still at a loss as to understanding that. It is one of the great National mysteries of all time like the mysteries associated with such things as climate change and other matters that National seems to be flip-flopping on. The second issue is that National members are voting against the research and development tax credit when they and the private sector have been talking about it for years. 
The final thing I say is that when it comes to the election next year voters need to look at National’s approach to KiwiSaver because its members have been very very vague on that. The book called  
The Hollow Men 
 states: “Be vague going into the election”. I say to the New Zealand public who have overwhelmingly endorsed KiwiSaver that if they vote National that KiwiSaver programme is in peril. It is in peril because National will fiddle with it and will ultimately get rid of it. It says in that book that National will say one thing during the election campaign and do something different afterwards. 
I think this is great legislation and it is unbelievable that National is voting against it.