Smith Lockwood: Future Directions (Working for Families) Bill — Second Reading Instruction to Committee In Committee Procedure 
Smith Lockwood: Future Directions (Working for Families) Bill — Second Reading Instruction to Committee In Committee Procedure 
[Volume:617;Page:13479] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I would like the Minister in the chair the Hon Steve Maharey to explain to the Committee—because this is very important—why this legislation is not being referred to a select committee. There is absolutely no reason why it should not be referred to a select committee. Nothing in this bill that I can find happens before 1 October. If there is something that happens before 1 October then let the Minister get to his feet and tell us what that is. 
Anyone who knows anything about the interaction between our benefit system—the way benefits abate how those interact with our tax credit system and how that interacts with our stepwise progressive income tax system—knows that these issues are hugely complex. I tell the Minister in the chair that he and Dr Cullen are not the only people who have done a lot of work on this sort of stuff. If the Minister and Dr Cullen think they can stand in this Parliament and arrogantly say that the only way National could address this matter through the tax system is by giving massive tax cuts to certain people they are showing they have not opened their minds to what is possible through innovative thinking. 
The Inland Revenue Department is involved in the policy work on the interaction between benefits tax credits and the income tax system. It is so complex—and I would like the Minister to listen to this—that the department has struggled at times to actually work out correctly how the system currently works. This legislation will make it even more complex. 
Given the complexity of those interactions it is inexcusable that this bill is not going to a select committee. I wager there will be problems with what this bill is setting out. Let us forget the policy and forget for a moment what the Government is trying to do because this Committee is meant to be scrutinising the detail of this bill because it is not going to a select committee. The Minister cannot guarantee there will not be huge problems because of a lack of scrutiny of the detail of this bill. It will go through all stages today and there will be no detailed scrutiny in terms of what it does. I simply repeat that the issues are hugely complex. 
I would not mind betting that the Minister in the chair probably does not even know how one calculates the net tax position of someone on a benefit who receives tax credits and also pays income tax. I would not mind betting that he has never actually worked it out. I would not mind betting for example that he probably does not even know how the different benefits and credits that this bill is talking about abate—whether they abate on gross income or net income whether tax then applies whether things have to be grossed up to sort out final tax commitments and all that kind of thing. It is hugely complex and I have studied it in some detail. 
This legislation would be some of the more complex that we have seen before this Parliament yet it is not even going to a select committee; and we know why. It is because this legislation is so poor. It is just tinkering with old systems and there is nothing new in it. It is fiddling with old systems that are already struggling to cope with the requirements. There is nothing wrong with helping low-income families. National supports that view. We support the relief for low-income working families. However the problem with this legislation is that it uses old frameworks that are already failing to deliver properly and turns tens of thousands more people into beneficiaries when there is no need to do that. 
Darren Hughes 
: No. 
Dr the Hon LOCKWOOD SMITH 
: I refer that member to clause 6 which states that the definition of “income” in section 3(1) of the principal Act is amended by excluding any tax credit or amount received under certain provisions of the Income Tax Act 2004 the Income Tax 1994 and its predecessor. I ask Darren Hughes what that means. He would not have a clue. I will tell him what that means. It means that tax credits are now being treated as benefits because clause 6 refers to section 3(1) of the Social Security Act which I have right here. Section 3(1) defines income for benefit testing from what I can work out. We will see that tax credits will no longer be treated as income.