Russell DeborahHon Dr DEBORAH RUSSELL (Labour): Madam Speaker thank you for the opportunity to speak to this taxation bill. I want to focus on some of the statements that the Minister made in his third reading speech to this House. The first comment I wish to focus on is the Minister's claim that we have a broad based - low rate tax system in New Zealand. It's just not the case. We certainly have comparatively low income-tax rates. They are comparatively low. Our top income tax rate is 39 percent. Now the top income tax rate in Australia is 45 percent so we have comparatively low income-tax rates. So it is a low-rate system but what we do not have a broad-based system. And here is the contrast that will help people to understand the idea of a broad-based system: at the moment workers are taxed on every dollar they earn. Someone who is earning the minimum wage will pay tax on every single dollar they take home. Anyone who is on salary and wages will be taxed on every single dollar they earn. Someone who earns income through capital gains does not pay tax on those capital gains so there is a whole chunk of income that is simply not taxed. There is an exception to this. In the previous two terms of Government we ensured that at least some capital gains were subject to taxation. We did this through the brightline test and it was particularly in the space where it was not clear whether a person bought a property for long-term investment or whether they bought it with the intention of resale. Now it's a little bit ambiguous so we clarified that intention by picking up the brightline test that was introduced by the previous National Government and extending it to five years and then to 10 years. What that did was it taxed some capital gains. So there was some attempt under the previous Government to extend the base of the tax system: a movement towards actually instantiating that broad based - low rate tax system that we aimed for. This bill moves us away from that. This bill moves us back towards a more uneven and a more unfair tax system. This bill gives tax breaks to people who already own a substantial asset in addition to their own home while it still continues to tax workers for every single dollar they earn. That is why we do not have a broad based - low rate tax system and it is time that side of the House stopped claiming that we did.I want to speak in particular to the measures in this bill that are contained in the Amendment Paper that was tabled in the House last week and then debated this week in the committee of the whole House—so no select committee process for the measures that are contained within this Amendment Paper. In particular the issues that are sitting in here that we should have had a select committee process for were the changes to the brightline test and the changes to interest deductibility.Now what we had done in the previous Government was to remove the ability for landlords to deduct all of the interest expense on their mortgages. And there was a really good reason for that: in this country we have been pricing homes out of the reach of ordinary people. You see that's the problem. That side of the House does not seem to understand that an investment property is not just a tradable good; it is a home. It is a place where people live. It is a place where people establish themselves where they have their standing place where they can build their lives from. It is not something that can simply be traded away at the click of the fingers. The changes that we put in place around interest deductibility were to try to curb this rampant trading in homes. And it worked—it worked. More homes were brought within the reach of first-home buyers. More people were able to buy homes and this is critically important for all sorts of reasons. Look let me start at the other end. We often talk about young people buying their first homes but increasingly we have our senior citizens people who are entering retirement—entering retirement—without owning their own home. Yet our major strategy for supporting our senior citizens is to have them aging in place in their own homes. We fund our senior citizens through New Zealand Superannuation but it is predicated and set at an amount that assumes that people own their own home. Yet increasingly we are removing the capacity for people to own their own home. There are many people in their middle years who are renting moving from place to place.Now ordinarily we would expect that young people rent. They rent as they build up the resources to buy a first home. They rent as they are in the stages of establishing their career and perhaps moving from place to place so renting makes sense. But the hope is and the plan is and the dream is that they will be able to build up the resources to buy their own home. And in fact we even support this through our KiwiSaver settings. We want people to be able to buy their own homes but that capacity has been removed and it has been worked against by this bill because it restores interest deductibility and delivers a powerful tax break to landlords. That is a real shame.Now the other side of the House has said that delivering that interest deductibility break will make sure that rents go down; the evidence is against them. The evidence is really straightforward. Rents are not primarily driven by landlords' costs; rents are driven by the market. That's where rents come from. In fact the rent increases in recent years have exactly matched inflation in recent years. And rents where they have started to fall have done so because more houses have been built. If we want to solve the problem of homeownership if we want to ensure that people can continue to buy their own homes we need to continue the strategy of the previous Government which was simply to build and build and build more homes: more Kāinga Ora homes more social housing homes more first homes through KiwiBuild. That was what we attempted to do.There is something else I want to talk about in my last couple of minutes and that is something that the Minister said. He said that—and these are his words—tax provides for services and functions" and it was a sentiment that was echoed by the speaker from the ACT Party. Indeed this is what tax is about. It is about building up our resources so that we can build ourselves up as a country. The speaker from the National Party the member for Tukituki Catherine Wedd gave a brilliant example of what taxes are used for in terms of supporting people. She talked about the roll-over relief that had been provided to people in Tukituki to people in Hawke's Bay to people in Auckland to people who had been affected by the North Island weather events last year. We are able to do that precisely because we build up our resources through taxation. Taxation is what we do in order to provide healthcare in order to provide education in order to provide welfare. Taxation pays for our roads it pays for our medicines it pays for health. When we pay our taxes what we are doing is making a contribution to our society and it's the sort of contribution that builds us up. It is a contribution that we pay forward. Our parents our grandparents paid in order to build up the infrastructure of this country. Now it is our turn to do the same to pay our taxes to pay our share to ensure that our children and our grandchildren live in a flourishing society.So when we see tax breaks for landlords when we see a tax system that is not a broad-based system and when we see little assistance given to people on the lowest incomes then we are walking away from that vision of a society to which we all contribute through our taxes and from which we all benefit. This bill does nothing to help the lowest income earners. It does nothing to help the marginalised. It does nothing to help anyone except for people who are already high paid. We cannot support this bill."