Clark David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — First ReadingText is incorporated into the Bound VolumeClark David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — First Reading[Sitting date: 11 June 2013. Volume:691;Page:10999. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North):Kiwi power bills are too high. John Key is on the side of the energy companies and Kiwis are hurting. Labour will reduce power bills. These are the big issues—these are the big issues. We know that power bills are too high we know that John Key is on the side of the energy companies and we know that Labour has a plan to reduce those power bills. And what are we debating here? We are debating a remedial tax matters bill again—again. We are debating the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill.This is not the first time we have debated minor tax law in the last 12 months. My colleague the Hon David Cunliffe will agree that we have spent a lot of time in this House debating minor amendments to the tax legislation when the fundamentals of this economy are wrong. But this Government is not prioritising correcting the big things that are wrong in the economy. We have to ask ourselves why. Why are we debating these matters when the economy is struggling when ordinary Kiwis workers are struggling and when the fundamental settings of our economy are wrong?The IMF says that New Zealand has the worst current account deficit in the developed world. It is worse than that of Greece. What is this Government doing about it? I asked the Minister of Finance when he came down to Dunedin on a rare visit by the National Party to Dunedin what he would do about addressing this fundamental imbalance in our economy. He did not give a straight answer to that question. This Government does not have a plan. It is so focused on bringing down Government debt which is not the real problem. This Government inherited zero net Government debt; that is not the real problem. Labour would bring us into surplus in the same time frame that this Government would. The Government is hoping to get there next year or the year after and we think it probably will. That is not the real issue.The real issue is that New Zealand is continuing to spend more than it is earning. That means long term that borrowing in New Zealand will become more expensive and that will hurt Kiwi businesses. This Government does not like business. This Government does not like small business because small business has to borrow. Everything is setting itself up against small business. I do not understand why this Government does not like small business but it does not. How can we get there? How can we correct those things that are wrong in our economy? Well I will come back to those things. First I want to say a few things about this bill.There are some good things in this bill. It is attempting to address some of the minor problems with the taxation system and we will not oppose it going to the select committee because we want to see these minor things fixed up too. But we are frustrated that the big issues are not being tackled and they are not being tackled of course because this Government does not want to tackle them. It benefits from having its supporters benefiting from an unjust regime.One of the big issues dealt with in the bill is that of foreign superannuation charges. As a former tax spokesperson for the Labour Party I have had plenty of phone calls from those who are experts in the field and they are asking why the Government is doing it in this way. The proposal is preposterous. The first issue that is dealt with hereis that all transfers—from British schemes in particular and this is where people are the most het up—will be locked in made to enter a locked-in scheme such as the KiwiSaver fund and they will attract an expectation of a tax payment. So in this case it is proposed to allow the taxpayer to withdraw an amount up to the value of the tax due from their KiwiSaver scheme. It sounds good but it ignores the fact that where the transfer is made from a UK pension fund withdrawing funds would possibly either invalidate the transfer or trigger a 55 percent tax charge in the UK. The two systems are different and this legislation does not deal with that.I am fairly certain that we will have some fairly substantive and energised submissions to the select committee on this particular issue because there are a lot of New Zealanders who are returning from overseas and have money in UK pension funds or immigrants who are coming here and are going to be treated in a really rough way by this Government. These people also have a lot invested and their life-savings are under threat because of a system that is set up to be unfair.According to the regulatory impact statement an “amnesty is not recommended as it would create an unfair advantage”—and I am quoting here—“for non-compliant people over people who have complied with the law and fulfilled any resulting tax obligations.” I would like members of this Parliament to contrast this with the leeway given by the Speaker to Peter Dunne leader of the deregistered United Future party. He has been given time to get his affairs in order while still claiming Parliamentary Service funding for his party with no penalty. By contrast taxpayers are expected to pay tax on transactions involving law that is in the Inland Revenue Department’s own words “complex and difficult to understand …” and about which the department has offered no guidance.Hon David Cunliffe: There’s 70 percent non-complianceDr DAVID CLARK: There is 70 percent non-compliance as my colleague here says—this is a lot of people who are affected. The Inland Revenue Department has given no guidance. If the Inland Revenue Department is concerned about equity it could either allow those taxpayers who previously paid tax in relation to a transfer to reassess their position using the proposed 15 percent option or refund the tax paid. The fact that it will not do so demonstrating its desire to raise revenue has triumphed against equity in this case.I am quite certain we will get some full submissions on this. I have talked to some people who are very exercised about this. Where you have a situation where an unfair rule is proposed one that will disadvantage the 70 percent who are non-compliant—and they are non-compliant not because they are intending to be that way; it is because they have had advice that they did not need to do things this way or that it was too complex or the Inland Revenue Department could not give them guidance—we will see those people come back and say that this is just simply not fair. I am sure that once this bill gets to the select committee this matter will need to be addressed.I hope members opposite will give the matter the attention that it deserves. There are a lot of people out there who face bankruptcy because of this legislation and that is not fair. The Inland Revenue Department is there to collect what is due to it—that is quite correct—but it is not there to send people to the wall through unfair systems and unfair treatments. So I think that is something we will hear more of in the select committee.In the bill there are a number of other measures that although worthy are minor. They do not address as I said at the beginning the fundamentals that are wrong with our economy. What we need to be seeing in bills like this is measures that bring about pro-growth tax reform. We need research and development tax credits. The OECD says we need a capital gains tax. The Labour Party says this. The OECD says this. The IMF says this. Almost every single OECD country has one. New Zealand does not have oneand that creates a distortion in our system. We know from recent statistics that of those people in New Zealand with net assets over $50 million—with assets over $50 million—75 percent of them are not on the top tax rate. That is not fair.I beg one member opposite to say that that is a fair system when 75 percent of those in New Zealand with assets over $50 million are not declaring income of more than $70000. There is silence on the other side of the House—silence. None of them are willing to defend that. They all know that the tax system is not just and that the gap between rich and poor is growing at a frightening rate in New Zealand. But they will not do anything about it because their mates are benefiting. They are not willing to tackle these issues. They do not care about the equity issues. They do not care about the future of society and investing in all citizens. They are prepared to let those who have got the money now build more money through an unfair system. The OECD says it is unfair and what is more it says that the economy will suffer because of it.This inequality is not just a social bad; it is hurting our economy. It is part of the reason why this Government has the worst economic record of any Government in the last 50 years. I will repeat that: this Government has the worst economic growth record of any Government in the last 50 years. Mr Henare knows it is true.Hon Tau Henare: Boring.Dr DAVID CLARK: He is saying it is boring. He does not care about growth. That party does not care about economic growth and that is part of the problem—that is part of the problem. It is concerned only about looking after those who have already got the money. That was clear from the 2010 tax cuts where 40 percent of the value of those tax cuts went to the top 10 percent of earners in New Zealand. Just 2 percent of the value of those 2010 tax cuts went to those in the bottom 20 percent and that is an outrage but it tells you where this Government is coming from. It wants to make sure that the privileged few are looked after. The middle classes who are being hollowed out who are suffering are not getting any relief. It is bad for society and it is bad for our economy. Our economy will not grow unless these issues are addressed.