Seymour DavidDAVID SEYMOUR (Leader—ACT): Thank you Mr Chair.Kieran McAnulty: Point of order Mr Chair. Thank you Mr Chair. I apologise to the member. However this is a debate on Part 1 and that was the fourth member in a row where you did your signal to keep to the bill. We're more than happy to have the debate but it should just be relevant to Part 1 of this bill.CHAIRPERSON (Ian McKelvie): Thank you for your advice Mr McAnulty.DAVID SEYMOUR: Thank you very much Mr Chair. I apologise. I didn't realise that was the signal that you were making; I thought that you were resisting the urge to clap through my speech. I thought He agrees with me but he's too professional to show it audibly." But now that I know that you were talking about narrowing the debate it will certainly be clear that my contributions are about this very important topic. It's the only real debate that this Parliament has all year about the most important thing it does which is pass laws so that taxation is done with representation and the amount of money taken out of people's income is at least debated in this House even though many people don't agree with it.I want to talk a little bit about the implications of these tax rates in relation to administration and compliance costs. Now it was very interesting to hear Simeon Brown from Pakuranga get up and say that the Labour Party in Government has never cut taxes in his lifetime. I thought that's interesting because in 1986 with Sir Roger Douglas as finance Minister the Labour Party in Government halved the top tax rate from 66 percent to 33 percent. Simeon Brown: I wasn't here in 1986 my friend.DAVID SEYMOUR: He's just corrected us. He wasn't born in 1986. I was worried that he might have been misleading the House but actually he is just too young to remember a Labour—Simeon Brown: I raise a point of order Mr Chair. I wasn't misleading the House. I wasn't born until 1991. I just want to correct that. Thank you.CHAIRPERSON (Ian McKelvie): That I'll remind the member is not a point of order.DAVID SEYMOUR: Mr Chair I'll tell you what: he's older than he looks then. In any case that was an important period in New Zealand history because by halving the top tax rate the amount of revenue collected off the top tax rate actually increased. The reason for that is that when Governments have a wide range of rates of tax it creates more and more opportunities for people to change the incidence of their tax—to change how they pay it what entity pays it and in what time period. If they can shift some of their income into another time period then they can reduce the amount of income tax paid. Now to some extent that's an inevitable result of any tax system but the more complex our taxation system gets the more difficult it is for Government to collect tax and the more difficult it is for citizens to comply with tax law. The net result is that New Zealanders spend more time on administering tax from the IRD side and complying with tax from the citizens' or the taxpayers' side. That leaves less time to do the kinds of things that make life worthwhile. Nobody as far as I'm aware actually enjoys tax compliance or even in the case of Inland Revenue staff tax administration.This is a very important feature of this debate that is often missed. We have an increasingly steep and complex tax structure that leads to more time spent on administration and compliance and that is the reason why we should be trying to have lower flatter fairer taxes: so we spend less time on administration and compliance. This 39 percent rate is going to raise very little revenue but it will mean that for a whole range of people it's worth—for 6 percent of your income over a certain level—paying accountants more to avoid it. That creates a cat and mouse game between the Inland Revenue Department; the Finance and Expenditure Committee which oversees tax lawmaking which I used to sit on; the tax accountants; and the taxpayer. It's wasteful behaviour.You only have to look at other countries to see how bad it can get. You look at the proportion of New Zealanders who can fill out their tax return without a tax accountant and we're actually one of the best systems in the world. You go over to Australia: most people need a tax accountant to do their returns because their system is complicated it has more rates it has more exemptions and they just spend more time paying tax. That is not helpful. You go to Canada or worse still you go to the United States where their levels of taxation have more rates more exemptions and more complexity—a tax system like Swiss cheese—and people spend an enormous amount of time on tax administration and compliance. That is one of the reasons why I've put amendments on the Table for this legislation that would go some way to improving the simplicity of our tax system by getting rid of that 39 percent rate and dropping the 30 percent rate. So instead of having five different rates of tax we'd have three. Up to $14000 you pay 10.5 percent. From $14000 to $70000 you pay 17.5 percent. Above $70000 you'd pay 33 percent up to the sky. If we had that system we would just be moving a little bit closer to the ideal of a low flat tax system that does not have all sorts of incentives for people to come up with trusts and schemes and arrangements to try and avoid paying tax—because that's no longer profitable when you have fewer rates—or less profitable. And it means that tax law is less complicated and we can get on with being productive and making stuff and doing stuff that makes life worth living.Now actually we really need to go further because even with the proposals that ACT has on the Table that are fiscally affordable under the current circumstances—the Government just borrowed 60 billion bucks and so on; closed the border and decimated the economy; and printed a lot of money and can't know what to do with it—even then there's still a lot of work to be done. For example we have a trust rate of 28 percent a company rate of 28 percent and three different income tax rates above that. ACT would take that to one tax rate above that. But you'd still have a 5 percentage point gap between the top income rate and the trust and company rate. The place we'd like to get to is actually to say we have one top rate and the incentive of that is that suddenly it's not profitable to get your accountant to try and change the kinds of arrangements that you have. We have a simpler tax system. We spend less time administering and complying tax; more time doing stuff that makes life worth living. If we were to go that extra step then we would find ourselves in a position where actually we started to be looked at like we once were: as a country that had policies that led the world; instead of a has-been policy environment that is slowly degrading into all the problems that were got rid of just in time for Simeon Brown to be born. We were clearing the way for you mate!Simeon Brown: Thank goodness!DAVID SEYMOUR: Yes I know. If only you'd made more of it. That is what we could be doing. We could be having that debate about New Zealand being the best in the world—about having the simplest fairest flattest tax structure. Instead we have a Government that wants five different income tax rates plus another different rate for companies and trusts and a growing amount of administration and compliance opportunities that are not actually good for New Zealand's future as a place where people have time to get on with making life worthwhile.That will probably be my final contribution on this part—unless of course we get some answers from the Minister and hope springs eternal. But I think people need to consider first of all the culture that you get from your tax system. If a large group of people pay little tax and vote for a small group of people to pay most of it I don't think that's good for cohesion in our society. When we have a Government that's taken $2138 more per person adjusted for inflation in the last 4½ years that leaves a hole in household budgets and that's why people are struggling at the supermarket checkout and the petrol pump. Income taxes are not just a cost that you pay after you get paid and buy stuff; they're also a cost that increase the prices that businesses charge and they're also something that you have to factor in when you look at the true cost of things you buy. It's not just the price that you pay at the pump or the checkout; it's the money you had to earn to pay the income tax to get there to pay that price. When you look at it that way the amount of money that the Government is taking out of New Zealanders' real resources to provide for themselves and their families is actually greater than is commonly believed. Those are all reasons why I hope this House will support the amendment I've put forward to drop that 39 percent rate down to 33 percent and drop that 30 percent rate down to 17.5 percent and go from an increasingly complex system of five different tax rates down to a system with three rates that is flatter fairer and simpler for the prosperity of all New Zealand. Wouldn't that be something to get behind and something we could be proud of as a country? Thank you Mr Chair."