Smith Lockwood: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
Smith Lockwood: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
[Volume:639;Page:9430] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 This Taxation (KiwiSaver and Company Tax Rate Amendments) Bill is the first measure to implement the Government’s great money-go-round Budget. 
Hon David Benson-Pope 
: Can’t you do better than that? 
Dr the Hon LOCKWOOD SMITH 
: What is the Minister’s name? Mr Benson-Pope thinks it is boring. I guess that is why he gets into exciting things like stuffing tennis balls into students’ mouths. Is that the kind of excitement that that member likes? 
As I said this bill implements the first part of the great money-go-round. This Government is fairly used to that kind of thing because we already have a great money-go-round in this country and it is called Working for Families. Probably now in excess of $1 billion is taxed off these New Zealand families by this Labour Government that knows best. This Government knows best! New Zealanders are dumb people! Only this Labour Government—and Dr Cullen in particular—knows best. So it taxes that $1 billion off these New Zealand families and then gives it all back to the same families. It alters the balance a bit and gives some families back a bit more than it took off them. OK so it alters the distribution of it a bit. 
But in essence one can actually calculate exactly how much is purely a money-go-round by looking at the average tax rate every family pays. If one looks at the tax graph of average tax rates—at the area under the tax line for those people with no children compared with the area under the tax graphs for people with children—one can work out exactly the money-go-round and how much the same families are taxed and what they get back from this Government. It is not redistributed; it is the same tax that is taken off families and handed back to exactly the same families. This Government is reasonably familiar with the manipulation of money-go-rounds. The sad thing is that it has been estimated that to collect that $1 of tax it probably costs $1.20. While the money is churned through the bureaucracy to go back to the same people there is a cost on the way. Of course New Zealand is the worse off for it. 
The Government has some experience in these money-go-rounds but this one is a new one—whereby the Government on the one hand says it is going to reduce the amount of tax it takes off businesses and employers but on the other hand it is going to require them to make compulsory contributions to this KiwiSaver scheme. Of course that is another money-go-round because on the one hand the Government says it is taking less off employers but on the other hand it is imposing what is in effect an employer tax. 
As we look at this bill which implements the employees’ side of the KiwiSaver tax credits one has to ask oneself what Dr Cullen is actually trying to achieve with this legislation. If one looks at what has happened in the economy over the last few years one can ask what the major problems have been. I would have thought given the seriousness of the situation the New Zealand economy is in right now—and Dr Cullen admitted in his Budget speech that it is unbalanced; he used the word “unbalanced”— 
Hon Dr Michael Cullen 
: That’s right. 
Dr the Hon LOCKWOOD SMITH 
: He acknowledges that fact here now. But is this lack of savings as he calls it the biggest problem contributing to the lack of balance? I put it to Dr Cullen that there has actually been no shortage of capital in New Zealand. There has been no shortage of ability for businesses in New Zealand to acquire capital. But Dr Cullen seems to have this view that capital is only good capital if it is owned by New Zealand people. That is a kind of childish view of a global economy. What is critically important is whether businesses have the capital they need to invest in improving productivity. There is no evidence that there has been a shortage of capital. There sure is evidence that there have been problems with productivity because under Dr Cullen’s rule he has been extraordinarily successful in damaging productivity. He inherited an economy that was growing during the 1990s. Productivity growth was 2 percent a year during most of the 1990s. It was 2 percent a year from 1992 to 2000. Dr Cullen has succeeded in reducing that productivity growth by two-thirds and he has now stalled it. Productivity growth has now virtually stalled in this country. 
There has been plenty of capital available so it is quite clear that availability of capital has not been what has stalled productivity growth in this country. Yet productivity growth is the No. 1 issue if we want non-inflationary growth. I am sure Dr Cullen does want it because he does not want the Reserve Bank to keep upping the cash rate because we do not have non-inflationary growth at the moment. The bit of growth that we are getting is putting a lot of pressure on inflation. Dr Cullen knows that. He knows that yet nothing in this bill will change that balance. There has been plenty of capital available but our productivity has collapsed and that is the No. 1 economic problem facing this country. 
Dr Cullen might claim that he is bringing the corporate tax rate down from 33c to 30c—and I accept that that is a positive step; we do not argue against that—but even he knows that corporate tax is not the final tax paid by New Zealanders. He knows that. And of course many New Zealand businesses and employers are not corporates. Sure those that are incorporated will get the benefit of that tax cut but we all know that corporate tax is not the final tax paid by New Zealanders. Personal tax is the final tax paid by New Zealanders and this bill does nothing to help hard-working New Zealanders. 
That is the first serious point I make. There is no evidence that New Zealand business has been short of capital; no evidence whatsoever. Sure the price of capital in New Zealand is unacceptably high—that has a lot to do with the Government’s massive spending programme over the last 6 years—but there is no evidence of a shortage of capital. So this bill which is the first step in this programme to try to force New Zealanders to save a lot more because Dr Cullen knows what they should do with their money a lot better than they do will not actually do anything to New Zealand’s economy. A shortage of capital is not the issue. The issue is productivity and the damage done to our economy by excessive regulation an excessive tax burden and totally inadequate programmes to address the infrastructure problems of this country. 
The second point I will make in relation to this bill is this. I listened to Laila Harré on the radio this morning. I ask my colleagues whether Laila Harré is a paid-up National Party member. 
Tim Groser 
: Not when we last checked. 
Dr the Hon LOCKWOOD SMITH 
: I am told that she was not when we last checked. I remember Laila Harré in this House. I remember Laila Harré being far more aligned to the left and to Labour Party thinking than to ours. What did Laila Harré say this morning about Dr Cullen’s KiwiSaver tax credit system? Laila Harré said that sadly it will not do anything for her members. That is the point I was trying to make to Dr Cullen yesterday—this measure this Taxation (KiwiSaver and Company Tax Rate Amendments) Bill does nothing for the low-waged. 
Sadly in New Zealand as in all countries we have people who do not earn enough. Maybe they do not have the skills to earn enough or maybe life has not smiled sufficiently on them. Either way they do not earn enough and sadly it is those people who will get nothing out of this. They got nothing out of Dr Cullen’s Working for Families in the last Budget prior to the last election. That targeted middle New Zealand—not low-income people or people on benefits. This Minister talks about caring for the left. I see that Tariana Turia is nodding. She knows that many Maori people are caught in these low-waged positions and we all know in truth that this bill does nothing for them. It is a cynical manipulation by Dr Cullen who thinks that he knows best. 
One of the stunning features of this Labour Government is that its members think most New Zealanders are stupid. They think that most New Zealanders are stupid and that they do not know what to do with their own money. Government members think that Dr Cullen is the saviour and that he should dictate how people’s lives should be lived how they should raise their families and how they should spend or not spend their money—and New Zealanders are sick of it. They are sick to death of having Dr Cullen and Labour telling them and dictating to them how their lives should be run. I look forward to the day when more New Zealanders can pursue their dreams and goals and not have Dr Cullen foist it on them that Labour knows best. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Before I call the next member I would ask the members on my right to look at Speakers’ rulings 57/3.