Dunne Peter: Taxation (Budget Tax Measures) Bill — First Reading Second Reading In Committee 
Dunne Peter: Taxation (Budget Tax Measures) Bill — First Reading Second Reading In Committee 
[Volume:654;Page:3979] 
Hon PETER DUNNE (Minister of Revenue) 
 on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Budget Tax Measures) Bill be now read a second time 
. As I said in the previous debate this bill is necessary to ensure the Government can deliver its explicit medium tax policy goal of a broad based - low rate system that raises revenue in the most efficient manner to support the objective of aligning the top personal the trust and the corporate rates at 30c in the dollar. It is something that I have long advocated. I think it is a necessary solution to the problems we currently have within the system of people using companies and trusts to shelter personal income because the current misalignment of the rates provides scope for people to use those entities to structure their affairs in a way that benefits and reduces their liabilities. 
Hon David Cunliffe 
: Just stop progress to that end. 
Hon PETER DUNNE 
: I should say to the member that we have in place the tax policy work group under the aegis of Victoria University and it will be putting forward a wide range of options for public debate in an open environment over the next few months. The Government will then make some calls early next year on where it wants to go in terms of those options and the pursuit of that objective. One of the things that we have lacked in this country for a long time— 
Hon David Cunliffe 
: You can’t make money out of thin air. 
Hon PETER DUNNE 
: I would have thought that the member opposite would be keen to have an open wide-ranging debate about tax policy and about the future structure of tax policy. 
Hon David Cunliffe 
: We’ll be there. 
Hon PETER DUNNE 
: The member says that they will be there. I welcome that. I look forward to his input and I look forward to the outcome being one that will see us better placed to achieve the objective that I have just stated. Let me come back to the bill. 
Hon David Cunliffe 
: Roger Douglas wants 20c. 
Hon PETER DUNNE 
: Well I am not Roger Douglas. 
Hon David Cunliffe 
: But you are heading in that direction day by day. You should be very afraid! 
Hon PETER DUNNE 
: Let me say to the member that he might like to speculate upon many things but I think both Sir Roger and I would be horrified if we ever ended up in common company. 
Hon David Cunliffe 
: You both used to be in the Labour Party. 
Hon PETER DUNNE 
: The Labour Party was a very— 
Hon David Cunliffe 
: It was a very broad church in those days. 
Hon PETER DUNNE 
: That is dead right. In fact I do not think there are many people in New Zealand who were not in the Labour Party at some stage; the trouble is that most of them grow up. Let me move on. When the Government’s tax cuts in April this year—[ 
Interruption 
] Well there is one over there. The problem with the Labour Party is that it is a great launching ground for political careers; most people however grow up and move on to other things. 
Let me come back to the bill. Delivery of the first round of personal tax cuts in April this year was a critical part of this Government’s policy. It followed on from the legislation introduced before Christmas and it put an extra billion dollars into the pockets of about 1.5 million New Zealand workers. That round of tax cuts and the tax cuts introduced by the previous Government in October last year were affordable. The April tax cuts this year were funded by concurrent changes to the KiwiSaver programme the abolition of the research and development tax credit and the replacement of the out-stages of the previous Government’s tax cuts. So those changes currently in place are not affected by the bill before the House today but the future tax cuts for 2010 and 2011 have become unaffordable in the meantime for the reasons outlined in the Budget. If we look at the Budget tables we see a revenue decline that shows that the 2008 revenue levels are unlikely to be reached for another 3 or 4 years. There is a question of how one pays for those costs. 
To go ahead with tax cuts in this environment would simply add to Government debt at a time when we are already in deficit and when we need to reduce the debt burden not just on the Government and the economy but on households which bear the burden. 
Hon David Cunliffe 
: That’s right. 
Hon PETER DUNNE 
: I am glad the member opposite agrees. 
Hon David Cunliffe 
: You knew before the election. You did. 
Hon PETER DUNNE 
: At the time of the election a lot of things were going on in the international economy and they were changing day by day. To suggest that there was a crystal ball out there that made all of what has happened this year and all of the changes that the Americans the Australians and the British have had to cope with predictable in October or earlier last year is simply fanciful. No one actually knows what the depth of the international recession is except perhaps for Mr Cunliffe who is now sharing his knowledge with us. I think it is wonderful to have his omniscient presence in our midst and I am sure that when he does speak he will share some more wisdom with us about the state of the international economy when New Zealand will recover and all of the things that we need to be doing by way of economic policy. 
In the meantime let me come back to a bill that has to be passed now to put on hold those tax cuts for the future to make clear to New Zealanders where they stand and also to give some certainty and direction which has already been positively welcomed by the rating agencies since this Budget was brought down. 
Part 2 has effect more urgently. It closes off the KiwiSaver mortgage diversion option. The member who spoke at the end of the first reading debate Nathan Guy said it was a United Future initiative and he was absolutely right. It was put forward by a former colleague of mine; it has not worked. I was the Minister who recommended it— 
Hon David Cunliffe 
: There are a lot of those. 
Hon PETER DUNNE 
: Yes of his particular initiatives. I dare not mention his name because it causes me grief—the member will know why. But the fact of the matter is that it was my proposal to get rid of it because it is simply not working. We have more than 1 million people in KiwiSaver but fewer than 600 have taken up the mortgage diversion arrangement which is spread over a number of funds and in a number of cases there probably are fewer than 100 people per fund. It is simply unworkable. We therefore are saying that those people who are currently in the system can stay in it as long as their fund providers wish to retain the option but for new entrants we are closing it off with effect from 1 June this year. It was potentially a good idea but it has not worked. I am sure the member opposite who is nodding his head would agree with me that if there are good ideas that do not work we should get rid of them. This is one of those and I do not think anyone will greatly mourn its passing. 
With those few comments I am very happy to commend the second reading of this bill to the House this evening.