Roy Eric: Income Tax Bill — In Committee Third Reading 
Roy Eric: Income Tax Bill — In Committee Third Reading 
[Volume:641;Page:11294] 
ERIC ROY (National—Invercargill) 
: 
 I have been here this afternoon listening to the debate on the Income Tax Bill and I am moved to take a call. Two or three issues have encouraged me to take that course of action. 
The first is that I have in front of me Supplementary Order Paper 136 which is dated Tuesday 14 August. It consists of some 284 pages. For those who are listening to the radio as they drive home I note that a Supplementary Order Paper is an amendment or amendments to a bill. The bill is a significant piece of legislation. [ 
Interruption 
] Well it is five tomes and each one is bigger than the Wellington telephone directory. This bill is a complete rewrite of the Tax Act as I understand it. 
Hon Bill English 
: The Income Tax Act. 
ERIC ROY 
: Yes the Income Tax Act. I guess that for the average punter there is an issue of comprehension. I do not know whether there is anything we can do about it but we are locked into a kind of accountancy mentality and the common man I am sure would have grave difficulty trying to work his way though this legislation. Someone in my electorate has an issue about companies on the “grey list”. I have just been reading the clauses on the Supplementary Order Paper and I have to confess that despite having studied what is there I am not in a position to give any advice to my constituent who came to see me. So my first issue is that this is rather complex legislation and I am concerned that a Supplementary Order Paper of this size—284 pages—has been dropped before the Committee. I think something as big as this Supplementary Order Paper should have been referred to the select committee that considered the five volumes that make up the bill. That may have happened but my understanding is that it did not. If we are going to do these rewrites we need to get them right. Tax is a crucial issue. There are a few areas on which parties across the Chamber have some agreement and I think we would agree that people who should be paying tax should be paying tax and they ought to be able to understand the rules that determine the amounts they should be paying. 
One or two speakers said early on in this debate that there was some kind of loose agreement that we would not get into the philosophical bit about why we pay tax but each person who made that statement immediately dropped himself in there and made it a part of his contribution and I intend to do the same. I can recall very clearly a very wealthy uncle of mine who paid what I considered at the time to be huge quantities of tax. I told him he needed to buy some more investments so that he could have some tax write-offs. He said: “I wish I was paying a lot more tax because then I’d be a wealthy man.” then climbed into his Mercedes 500 and disappeared over the hill. The notion was that the more tax one paid the better off one was. Well that to a degree is right. But the impost of paying tax does have an implication and if I look at the New Zealand economy I have to say there are some issues that we should deal with philosophically. 
Our economy for example gets the speed wobbles if it gets growth rates of over 3 percent. We have never seriously addressed how we get the New Zealand economy to grow and not get those speed wobbles. If we look at Asian models or any other kind of model where growth rates are in double digits we see that they seem to be able to manage it. I would have thought that if we were addressing a rewrite of the Income Tax Act we would look at issues such as the philosophy behind how we tax and why we tax what the levels should be and what the impact on individuals and on the economy should be. You see what we have now with the current administration the Labour-led Government is increasing tax rates and that has occurred not because the rates have gone up but because they have not come down at the rate at which income has gone up. For goodness’ sake some of my kids tell me they are nearly in the top rate now. When they began work 5 or 6 years ago they did not think the top rate was something they would pay in their lifetime. The impact of paying that tax rate is a disincentive. 
I said our economy gets the speed wobbles if growth rates get over about that 3 percent level. We have had week after week in the House the Labour Government extolling the fact that the unemployment level is quite low. Yes it is but so is our productivity level. It seems to be creeping back and back. It is of concern to me because when our productivity level goes down we do not compete as well with other nations in this global village which as an export nation we sell our product to. We need a tax system that incentivises productivity. It is one of those things among the matrix of factors that we build into an economy that can encourage certain outcomes. One of those outcomes which this Government has not performed well on is productivity levels. We have become kind of State dependent in a whole lot of ways. Working for Families has dragged in a whole lot more people. Yes they need support but the mechanism has made them dependent. We have lost that kind of intuitive No. 8 fencing wire attitude—go out and make it in the back shed get in there learn a few more skills go the extra mile work the extra hour—that means we do those bits we need to do to lift productivity. I say that the sort of taxation regime we have where we have not reduced tax as incomes have gone up has a big bearing on the productivity rate on the desire of individuals to go forward and do things. 
Another point about the taxation rate we have is that one of the things this country needs to engage in—and we are well behind in every measure that one likes to take—is our investment in research and development. Some of us about 4 weeks ago went to Taiwan. Over there the percentage of GDP that goes on investment in research and development is 2.4 percent. We came back and looked up the figures here; we are about 0.8 percent. That is just not good enough. When the Government creams off all the tax that it is currently taking there is not really enough left for individuals companies or anybody else in the private sector to do that investment in research and development. 
That is another philosophical difference between the major parties and I believe we have to address it. I believe that when we do a rewrite of the Income Tax Act that sort of philosophical stuff should be discussed and we need to have some focus on it. Quite clearly we have low productivity we have a lack of investment in research and development and we are losing our competitiveness with competing exporting nations around the world—our competitors out there that are producing similar sorts of stuff. We are losing the margins on that and tax does have a very big bearing on that. I am saying quite clearly that here we have a major rewrite—five times bigger than the Wellington telephone directory—of the Income Tax Act plus a Supplementary Order Paper that would choke a bull and we are not really dealing with fundamental issues that this economy needs to have dealt with. If we need to do all this stuff just to institute a fair tax system if we put energy into wading through all that information we should look at the wider picture at the philosophical stuff that we actually need to deal with.