Fitzsimons Jeanette: Taxation (KiwiSaver and Company Tax Rate Amendments) Bill — First Reading 
Fitzsimons Jeanette: Taxation (KiwiSaver and Company Tax Rate Amendments) Bill — First Reading 
[Volume:639;Page:9387] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 Probably only three or four people in this House—if that—have had the opportunity to read the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill. Therefore all that the rest of us can do is reply to what the Minister Peter Dunne said in his introduction of the bill and to the explanatory note on the front of it. Nevertheless the intention of the bill is reasonably clear. 
The KiwiSaver-related tax credits are a very smart way to increase savings and to give tax cuts to those who save while avoiding consumption-led inflation with all its evils—pushing up the dollar and interest rates—and ensuring that the benefits from those tax cuts are not captured by the very wealthy which is what usually happens with a tax cut regime. The tax credits are also a clever way to get employers involved in matching the superannuation savings of their employees with the sweetener that initially it is at no cost to them and what cost there is will be partly subsidised forever. 
So far so good. I think the Greens will be able to support that idea. But let us look at who misses out. This scheme is not one that offers opportunities equally across all of society. First of all anybody earning less than $500 a week will not achieve with their 4 percent savings the maximum subsidy that the Government is prepared to give. Anybody saving 4 percent of a less than $500-a-week income will receive less from the Government in these tax credits. That might be for a number of reasons. It might be that those people are on the minimum wage. Anybody who is on the minimum wage will not get the maximum tax credit from the Government. It might be because they are working part-time. 
I have not had the opportunity to see exactly what is stated in the bill about full-time and part-time workers. People might be working part-time for a variety of reasons. It might be that they cannot get full-time work. It is much more likely that they are trying to balance work with the needs of their children—I think particularly of solo parents who have decided that they want to work while they bring up their children and not go on a benefit. Some parents do that and work very hard but they cannot work 40 hours a week and if they are on a low income then they will not get the full tax credit. 
There are those who for whatever reason are on a low income and simply cannot afford to save 4 percent of their income. Their employer might be topping it up so that they can still have some superannuation savings but the employer’s contribution will not be matched. Then of course there are those who are not working at all who get absolutely nothing out of this scheme. People on invalids benefits domestic purposes benefits and unemployment benefits will get no tax credit at all. Working for Families started to drive quite a big wedge between those who are in employment and those who are not. That wedge will now get a whole lot bigger. 
The KiwiSaver scheme means some people will have not only permanently low income during their working lives but much lower superannuation than others when they retire as well. I challenge the Minister Peter Dunne to tell the House at some stage in this debate how many people in New Zealand earn less than $500 a week—if he knows—and how many people will miss out on this scheme even if they would like voluntarily to join it. 
The second issue I want to address is that of lowering the tax rate on managed funds or portfolio investment entities. At first sight that appears to be non-contentious and straightforward. It simply brings the tax on managed funds into line with business taxes generally. But when one looks at it it is actually a disguised tax cut for people on the top tax rate. It works like this: the KiwiSaver legislation as it stands now passes through the tax rate of its investors. So for an investor in a managed fund who is on a 19c tax rate the fund pays 19c on that person’s investment and the investor gets the benefit. But the KiwiSaver legislation does not pass through the tax rate of those investors who are on a 39c tax rate. A person on a 39c tax rate who invests in a managed fund is already getting a 6c tax advantage in that the managed fund pays only 33c; now they will get a 9c advantage. 
Then there is the business tax cut. I have spoken a number of times before—in the House and elsewhere—of the missed opportunities to target some of this business tax cut towards investment in sustainability. That was a huge missed opportunity because it was never part of the options that were discussed initially. It has another effect as well and I challenge the Minister to quantify it for us. A lot of that business tax cut will go to the overseas owners of the New Zealand economy; it will simply disappear from this country. I ask the Minister how great overseas ownership of the New Zealand economy is. There must be some figures on that. We can look at Telecom and all the banks at most of the forestry industry and forest processing industry and at all of our metal smelting—and that is before getting down to medium and smaller-scale businesses. I am challenging the Minister to tell us—I am working from memory here because this has all been at such short notice—how much of the $680 million that he says the lowering of the business tax rate will cost us will disappear straight overseas with no benefit to the New Zealand economy or to New Zealand investors. 
The second question is—when businesses receive this tax cut—what it will do to the amounts that they reinvest in productive enterprises as distinct from what they pay out in dividends. Because most New Zealanders’ investments are in their homes or in other housing they need dividends from any investments they have in the share market—housing after all costs them money. They are investing in housing in order to get a capital gain later on. 
New Zealand businesses tend to have a very high rate of paying out dividends rather than retaining earnings to reinvest in productive enterprise. I ask the Minister whether that will change and whether we will see any difference in the amount that is paid out in dividends. I understand that Telecom pays out 90 percent of its earnings in dividends. I ask the Minister whether we are really going to see the investment in productive capacity increase in New Zealand as a result of this tax cut. I think it is very unlikely. Those are the questions that the Minister needs to come back to the House and give us the answers to.