Huo Raymond: Taxation (Income-sharing Tax Credit) Bill — First Reading 
Huo Raymond: Taxation (Income-sharing Tax Credit) Bill — First Reading 
[Volume:667;Page:14322] 
RAYMOND HUO (Labour) 
: 
 I thank the Hon Peter Dunne for confirming that this Taxation (Income-sharing Tax Credit) Bill is a direct result of the confidence and supply agreement between United Future and the National-ACT Government. It explains a lot. Thanks also go to Ms Amy Adams and my good friend Mr Paul Quinn for their contributions because the concerned parties will read between the lines of their  
Hansard 
 copy very carefully. 
Labour opposes the bill on the basis that it is badly targeted. It favours wealthy parents over families that really need extra support. The Hon Peter Dunne said in his speech a moment ago that the key word is “choice”. If that is the case if we consider this year’s Budget we realise that the choice has gone from a genuine tax switch to a tax swindle. On 1 October 2010 GST will rise by 2.5 percent. New Zealand taxpayers who are in the top 1 percent of income earners will benefit from 50 percent of a $40.3 billion tax package. A third of that package will go to the top 5 percent and people in the middle and at the bottom of the income range will go backwards after inflation. That is National’s choice. 
The Hon Peter Dunne also mentioned the Working for Families scheme. The  
Taranaki Daily News 
 published a very good opinion article on 6 September 2010 and I will read it out: “Since individual tax rates rise according to a person’s total income a single income family currently pays more tax than a family with two people earning the same combined income. The proposed income-sharing rules would mean families with the same family income would pay the same amount of tax regardless of whether one or both partners had derived the income. The eligibility requirements for the new tax credit largely mirror the current Working for Families requirements. Around 60 per cent of families that would qualify for the new income-sharing credit would also be recipients of Working for Families tax credits. Seventy-eight per cent of the benefits of the proposed tax credit are likely to go to families with combined incomes of more than $70000. The greatest benefit would go to families with one high income earner.” 
The Hon Peter Dunne said the key word is “choice”. I say that the key word here is not “choice” but “top-up”. The article went on to ask why families who already receive Government assistance require a further top-up under a different scheme. Working for Families already provides assistance to tens of thousands of families with children. Further many families who receive assistance through Working for Families already pay little or no income tax. Providing further assistance through an income-sharing scheme will only add to the distortions in the current tax system. The recommendations made by the Tax Working Group—many of which were adopted in this year’s Budget—aim to remove these distortions. An income-sharing tax credit would add complexity to the system and introduce another level of distortion. The key word here for the National-ACT Government is “confusion”. 
The other area where the National-ACT Government is confused is where it seems to be happy to provide further tax relief to working families with children at the expense of single people families with no dependent children sole parents and families with partners not in work. The fact that the same level of benefit would apply to a family with one child as to a family with five children seems to be very confusing. It is not surprising that Treasury the Ministry of Social Development the Department of Labour and the Ministry of Women’s Affairs—together with Labour—are all expressing serious concerns about the policy. The Inland Revenue Department confirms that the credit would not be available to all families and in particular it would not assist sole parents. The most significant gains would go to higher single-income households with the lowest gains going to low-income families. 
Treasury advised against introducing the credit because it costs too much is unfair and is poorly targeted. The Ministry of Social Development commented that income splitting provides additional income for a limited population with the most significant gains being for higher-income households and the lowest gains for low-income families. 
The Department of Labour highlighted the policy’s potential to reduce the incentives for secondary earners in particular to participate in the labour force and to invest in their own training and development. The Ministry of Women’s Affairs pointed out that by increasing effective marginal tax rates for secondary earners—who are mostly women—the proposal would encourage partners to have specialised roles thus discouraging women’s participation in the workforce and increasing their share of unpaid work. The ministry continued: “The credit appears inconsistent with the Government’s policy on labour force participation.” The ministry also considered the proposal to be unfair to sole parent families. So the key word here is “inconsistency”. 
Finally in the New Zealand Bill of Rights Act report the Attorney-General concluded that the bill limits the right to be free from discrimination and that that limitation could not be justified under that Act. The key word here is “discrimination”. Thank you very much.