Mallard Trevor: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
Mallard Trevor: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:663;Page:11089] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I think we can tell when there is real enthusiasm behind the speeches made by the Hon Peter Dunne. He is not one to sit down early especially a third of the way into his speech if he is truly enthusiastic about legislation he is promoting. He knows that the good people of Ohariu will not be happy about the Taxation (Budget Measures) Bill. He knows that the good people of Ohariu know the effect of inflation on their assets. They know that 5.9 percent inflation will not be covered by the extra that they will get as part of this package of measures. The people of Ohariu know that the person who gets $1 million a year and a $985 a week tax cut will be much better off than they are as a result of that. 
The Hon Peter Dunne is sitting next to the co-leader of the Maori Party. I say to Tariana Turia that I have some sympathy with her and the position her caucus is in with regard to this Budget especially the increases in GST. Because those increases are so regressive they will proportionately hit Maori much harder than the Pakeha population generally. There is no doubt that what Mr Harawira was reported in the newspaper this morning as saying was right. I disagree with the fact that he did not front and that his vote did not follow his voice. I had always thought of him as a warrior who would be here who would be around and who would not scuttle off after making comments like that. 
But going back to the legislation I can see the hand of Peter Dunne in it. I think it is fair to say that there is a change to do with middle incomes that he would have had much more responsibility for than John Key or people such as that. I am sure there will be people who appreciate that part of the changes. But what people will see in the end is something that benefits rich people and high-income people much more than those who are on middle incomes. It will be especially bad once Dr Bollard has a look at the inflation. Having myself been involved in a few meetings on this subject with the good doctor over the years I can accept that he will almost certainly accept the 2.02 percent increase in inflation arising from the increase in GST but the other 3 percent or 4 percent is something that he will look at and it will be well outside the requirements for tightening. I have not had a look at iPredict this afternoon but I would be pretty sure that betting on interest rate increases in the middle of this year later this year and early next year has gone up substantially as Dr Bollard has a look at the inflationary effects of this Budget and what it will do to the economy. 
What do we need now? What we do not need now is the choking off of business even more through the increased interest rates that will flow from this taxation bill. The Labour Party’s view on the GST increases has been made very very clear. GST is a regressive tax. It is a tax that disproportionately hurts poorer people. Increasing it hurts them more than it hurts anyone else and these increases will therefore hurt lower-income and middle-income people much more than they do people on higher incomes and people who have a higher proportion of discretionary income. It is sad because I thought there was general consensus across the House that the current GST was a good comprehensive tax. At 12.5 percent it is relatively high by OECD standards. I think we have the sixth-highest level of consumption tax in the OECD. If there was a debate it would have been that at 12.5 percent it is higher than most countries would think reasonable. But I think its comprehensive nature is something that has got support because it is seen to be relatively low and fair. What the Minister of Revenue has done in the legislation he has promoted is start to unravel that. As people see GST going up as they see us heading right to the very top of the developed world for the level of this type of tax we will see the support for it beginning to unravel. 
Clearly the Maori Party led the way on that. I have made my views clear on the Maori Party’s approach. The idea that we exempt all poultry and all vegetables would mean that Kentucky Fried Chicken and chips would become GST-free as healthy food— 
Hon Tariana Turia 
: No. 
Hon TREVOR MALLARD 
: It would under the definition in the Maori Party bill that is on the Table of the House. Kentucky Fried Chicken and chips would be healthy food under its definition. I say to Peter Dunne that the problem is that as he puts up the rate he opens it up to that sort of approach which I think undermines the tax. I accept what the member says—that as he puts up the tax level he opens it up to a number of other suggestions that would not have arisen if he had not taken the leadership in the way in which he has done in promoting this bill. I think it would be better to stay with the 12.5 percent GST rate and to stay comprehensive but the member knows my views on that. 
I think we have three things happening here—and I would be interested in the Minister’s views when he makes his reply. We have some loopholes being closed. I say to the Minister that no one can argue against closing the depreciation loophole; we all know that it is a rort. The changes made to thin capitalisation are again a good thing. I am not there yet on the company tax changes; my view is that the major beneficiaries of those are the Australian banks because for New Zealand companies of course company taxation is effectively a withholding tax and with the imputation credits it is a matter of timing rather than absolute amounts—and I am glad Mr Woodhouse is agreeing with me. So there is not a lot of benefit to New Zealand companies from these changes. The end benefit of the taxation changes is to overseas owners of New Zealand companies. 
In my view the closing of those rorts has effectively given some money to lower-income and middle-income earners in order to offset the increase in GST for them. But the revenue from the GST is what is effectively paying for the massive tax reductions for high-income earners. People on incomes similar to the Prime Minister’s full income will get about $1000 a week. People like the Prime Minister will get about $1000 a week in the hand as a result of these changes. I ask whether we as Kiwis think that is fair. I say to Paul Hutchison that most of his voters would have been happy if the Government had raised the threshold for the 38c rate to say $150000 or $120000. I think his voters would have said that yes they liked that and thought it was fair. When people such as the Prime Minister and a number of his mates are earning—or receiving; I do not want to say that the Prime Minister is earning it—$1 million of taxable income a year do most Kiwis really think that those people should have an extra $1000 a week? No we do not; we think it is fair for them to make a contribution to our system. This is a tax switch bill; it is a switch from the poor to the rich.