Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): This is an excellent piece of legislation—an excellent piece of legislation—that fulfils a key campaign promise made by the Labour Party and as the party that was elected by over half of New Zealanders we have a New Zealand that has endorsed this legislation and has accepted it and we are implementing our campaign promise. So it is straightforward legislation that implements a campaign promise.I wish to take issue with a number of things that the immediately previous speaker Andrew Bayly said about this bill. First up the immediately previous speaker said that it was a complicated piece of legislation—a complicated piece of legislation. To the contrary it is actually a very simple piece of legislation. What is does—very straightforwardly—is implement a 39 percent tax rate on income over $180000 and in order to do that properly it entails making sure that that particular rate change goes through all the relevant sections of the Act. It affects not just the income tax paid on say salaries and wages and business income and so on but it also affects the rate paid on fringe benefit tax. So the fringe benefit tax changes in here—the rate changes in here—simply reflect the 39 percent rate. It is a simple change which happens regularly when tax rate changes go through.The same thing applies with respect to the employer superannuation contribution tax the ESCT. The changes there simply reflect the 39 percent rate being applied across all the relevant types of tax within the Income Tax Act. And so on it goes with residential land withholding tax with retirement scheme contribution tax with the taxable Māori authority distributions—any place where the rate is determined by the Income Tax Act any place in the Income Tax Act where that occurs any particular type of tax it applies to that rate is simply applied right through those changes. So that's what we see in this Act: that 39 percent rate being implemented right through the relevant tax types in order to reflect the change in the income tax rate. So it is not a complicated piece of legislation. It is a set of simple technical changes that are made every time a rate change is made. It is straightforward. It has been done many times before. It is not difficult to do at all. So it is a simple bill.It is also a very very important bill—a very important bill—because at its heart lies the concept of fairness and vertical equity in taxation; the idea that the way we do fairness in taxation and this has been proven again and again in New Zealand is we do it by using a progressive income tax scale. And a progressive income tax scale means that those who earn more pay a little bit more tax. In particular in this case what we are saying is that people who earn over $180000 should pay just 6c more in the dollar for income over $180000—just 6c more. So if someone earns $190000 they are simply paying 6c more in the dollar for those first $10000—for that $10000. It's a change of $600. That's it. And so on it goes up through. If someone earns $200000 they pay $1200 more tax. So someone who earns $20000 more than $180000—which is a high income in the first place—simply pays $1200 more tax. It is a small change. And the interesting thing about that $180000 threshold is that only 2 percent of New Zealanders earn income above $180000. Many members of this House do not earn that much. The salaries of backbench MPs fall below that threshold. That is how high the threshold is set. So it applies to only a very small percentage of New Zealanders.In terms of fairness it's really worth considering income tax rates that have applied in the past. We remember those of us who are old enough and I appreciate that some people in this House are not when under the National Government led by Robert Muldoon the top tax rate was 66c in the dollar—66c in the dollar under a National Government. I certainly remember that rate Mr Speaker; I imagine you do too.SPEAKER: I never paid it.Dr DEBORAH RUSSELL: It was an extraordinarily high rate.SPEAKER: I was an MP at the time.Dr DEBORAH RUSSELL: So I think it is not an outrageous rate. It is simply a rate that expresses our ideals of a fair tax system being a progressive tax system.I wish to address the issue that Mr Bayly raised about tax avoidance. First of all he said that tax avoidance was acceptable which is actually not the case. If we look at section BG 1 of the Income Tax Act it says that a tax avoidance arrangement may be struck down by the Commissioner of Inland Revenue. A tax avoidance arrangement is an arrangement whereby someone sets out to exploit the tax laws in such a way that they pay less tax than they otherwise would have. It's when people enter into complicated arrangements the purpose of which is avoiding taxation and it is against the Income Tax Act.Mr Bayly did raise the point that the last time there was a differential rate between the highest income tax rate and the trustee income tax rate we did see some tax avoidance behaviour and indeed that tax avoidance behaviour was caught and penalised by the courts. They did their job. The tax avoidance arrangement was famously ruled out. So our courts and our laws do have the tools to deal with tax avoidance. Of course there are many very very smart and able tax accountants and tax lawyers and no doubt some of them will find some way through these rules; that's what they do and then we respond. It's the way that the tax law grows and evolves. But in order to manage this we will be collecting more information to see if there is a need to make further changes to see if there is a need to make a change to the trustee rate as well. So that's part of what this bill does. It enables the revenue to collect some more information so that they have better information against which to assess whether or not they should advise us to change that trustee rate. So that information will be collected and used in order to develop better policy in this space.I do just wish to point out one other thing here: that Mr Bayly was very concerned about the differential between the income tax rate and the company tax rate. That differential has existed for quite some time and it is already well managed; the tools are there to do it. Of course we can improve those over time but there is not a screaming need to do that right at present.I wish to draw attention to one other matter that is sitting in this bill and that is an increase to the minimum family tax credit. Now that is a tax credit that exists in order to ensure that people who are in work do end up just having slightly more income than people who are on benefit. So it's set through a series of calibrations to make sure that people who are able to work do actually earn a little bit more than they otherwise might given their family situation if they were on benefit. It's part of the structure of our benefit system. That minimum family tax credit does need to be adjusted most years and this bill achieves that as well.So this is excellent legislation. It achieves what we set out to do as a campaign promise in a campaign when the Labour Party was elected by over half of New Zealanders. It is a simple piece of legislation that propagates that particular tax rate through the Income Tax Act as needs to be done in order to keep the system fair. It is a piece of legislation that expresses our values as a country where we have a progressive income tax scale. It enables us to collect a little more information so that we can understand better what is going on out in the world of tax specialists and tax advisers and people who do use trusts for various purposes. And it increases the level of the minimum family tax credit in order to keep that basic promise we make to ensure that people have at least livable incomes when they are in work. So Mr Speaker an excellent piece of legislation and I commend it to the House.