Bayly AndrewANDREW BAYLY (National—Port Waikato): Yes it's good to be talking on the second reading of the Taxation (Income Tax Rate and Other Amendments) Bill. Thank you to the Minister for addressing the bill. I've just got to say that I find it quite absurd the argument that the Minister is putting forward as to why we should be increasing the tax rate. He compared the top tax rate in New Zealand with a number of other jurisdictions and said Look we are lower than them. They're much higher than us and therefore that gives us the basis for why we might increase it." I'd have to say to the Minister that that is a very strange approach.One of the things we have and one of our competitive advantages is that we have a very simple tax system that works well. We have only four levels of personal tax rates. We have GST and we have a company tax rate. And so the simplicity around our system is a hallmark and something that is the envy of the world. But to reason that because other countries have a higher tax rate it's fine for us to increase ours—I just think one of the things the lower the tax rate the better and as the Minister no doubt is aware virtually every country in the world is trying to do two things: first of all lower their overall tax rate so that they become more attractive as a place for investment and particularly to attract overseas people to come and live and work here in New Zealand particularly highly skilled people because they will look at their personal tax rate and will go "Is this a country I want to go and live in—particularly if I'm highly taxed?" So the more you push up that tax the less attractive we become to attract new people and also far less attractive in terms of companies wanting to come here and their staff. So I just think rather than use our tax system to a competitive advantage what the Minister was almost suggesting was that it's better and OK to increase it because some other countries have a higher tax rate. I do not get that and the other primary thing about this the simple reason about why we principally oppose this is the impact it will have on the integrity of the tax system. And I'll talk more about that shortly.But as a number of my colleagues have noted New Zealand is in an economic crisis. We've seen our debt go from $60 billion to just under $100 billion and it's going to double again to $200 billion over the next three or four years. This bill I see that will raise on average about $440 million a year will not significantly contribute to even paying down an ounce of debt and is not even going to pay off most of the interest payment that we're going to have to pay this year. As I said earlier today our current interest bill on our debt is about $3.5 billion which is the same cost as running the New Zealand Police Force and if you're raising only $440 million on average over the next five years—that's on a per annum basis—you're not even going anywhere near paying the interest let alone paying off any debt. And I think the main reason about this is that you cannot tax and the Government cannot tax its way out of this economic crisis. We have to look at an economic recovery which means getting our businesses and our people working much better. And by doing this by putting more tax on them it doesn't actually incentivise them to do that Mr Nash. The Minister says we flagged this well in advance. Well if that was flagged well in advance why is it that the bill turned up on this desk here at about 12 o'clock today and we had our first reading 45 minutes later? Why is it that there were such poor procedures that it could turn up at the last minute so that the Opposition doesn't even have the time to properly consider it? I think as a process that is not a good process and I'm looking at the Minister.The other thing is the lack of consultation around this bill and as the Minister knows because he's sat on the Finance and Expenditure Committee and has been a former finance spokesperson getting tax bills right the first time is vitally vitally important. And the rushed nature of this bill—and the officials are worried and have stated their clear concern about the implementation of this bill and the impact on the integrity and I think this should have had the time to have a proper process through the Finance and Expenditure Committee. We could have asked for submissions over the Christmas break. We could have done it much more quickly. But I can almost guarantee that we in this Finance and Expenditure Committee will be looking at this bill again and doing fix-ups to it and I note that the Minister only a matter of—what?—two or three hours after tabling the bill this afternoon has come up with his own Supplementary Order Paper his own amendment already to the bill. It's only just a matter of hours and he's already putting up new amendments to the bill.But I just want to talk about this integrity issue. I just think it is such a fundamental issue that the officials have noted in their report. So this is not being political; this is looking at what the IRD actually wrote about it. The first thing they said was that the estimate of the money that they're going to achieve from this—the $2.2 billion over the five years—is "highly uncertain". And they also go on to say "There is significant uncertainty in the assumptions and changing them results in substantial change in revenue." So first of all we've got a question around whether in fact we're even going to get the money that's been talked about but the second thing in terms of the integrity they state—and again I just want to quote—"This has non-monetary impacts as well such as eroding public confidence in the tax system and voluntary compliance. This would have a negative impact on tax integrity."This is one of the big issues about this bill and I noted this earlier in my speech today: this bill affects so many different aspects. We talked about its going to have an impact on the PAYE rules the fringe benefit tax resident withholding tax employer superannuation contribution tax residential land withholding tax retirement scheme contribution tax and tax for Māori authority distributions. It is a big bill. It has got far-reaching consequences and I think the biggest issue is this disparity now that we have between the top tax rate the company tax rate of 28 percent and the trust tax rate today. So what we've learnt today from the Minister of Finance is that yes even though he said only a matter of two months ago that he wouldn't introduce any more changes to the tax system other than this bill we're debating tonight he has made it clear that increasing the trust tax rate is on the table. And that is contrary to what he said two months prior and has been reconfirmed as policy after the election. So here we are: we've got the Minister turning back changing his mind around it and in my view breaking a promise to the electorate that he made back then. So one is the integrity and I think this disparity between the top tax rate the trust and also PIE rates are something very very substantial.I'll just go on. The other issue that the officials have noted is the issue of the efficiency costs with this and they're saying it's going to have a number of impacts. They note for instance a higher tax rate would likely matter more in sectors where the ability of New Zealand firms to access foreign capital is limited particularly smaller businesses unlisted businesses and rental property investment and further it will reduce the number of highly skilled workers in New Zealand and reduce the efficiency of the allocation of labour. These are the facts and these are the issues that this bill will lead to.I also just want to pick up on this Attorney-General thing. I think it's quite significant. It's very unusual for the Attorney-General to write to the committee and actually say the issue around the disclosure requirements—it looks like the Minister wants to send the IRD on a fishing trip to go and get information around trusts. That is a very very significant part of this bill which we will be debating very closely as we move through the next stages of this bill. But that privacy issue is something very very significant and I think whilst you've put some limits around that Minister I think the fishing trip that this is going to entail is something that many people are going to be particularly worried about."