Boscawen John: Taxation (Budget Measures) Bill — In Committee 
Text is incorporated into the Bound Volume 
Boscawen John: Taxation (Budget Measures) Bill — In Committee 
[Sitting date: 20 May 2010. Volume:663;Page:11159. Text is incorporated into the Bound Volume.] 
JOHN BOSCAWEN (ACT) 
: 
 We are debating Part 2 of the Taxation (Budget Measures) Bill which makes changes to the Working for Families allowances and also adjustments to the personal rates of taxation. It sets up much lower rates of taxation. In particular it drops the rate of taxation for those earning less than $14000 from 12.5c in the dollar to 10.5c in the dollar; for those earning in that big bracket from $14000 to $48000 the rate goes down to 17.5c in the dollar and for those earning from $48000 to $70000 the rate is reduced to 30c in the dollar. One of the reasons the Government has given for these reductions in personal income tax rates is the need to compensate for the increase in GST. Of course the first part of this bill gives effect to that increase in the GST rate from 12.5 percent to 15 percent. 
But I challenge these decreases in personal tax rates. I was very pleased to hear Brendon Burns say just a short time ago that one of the things these tax reductions will not do is compensate for the increases in power and petrol that we can expect from 1 July as a consequence of the emissions trading scheme. Mr Burns has been the first MP I have heard from the Labour side to acknowledge that the emissions trading scheme will have an effect on inflation. I am very pleased that Mr Burns has done that because his colleagues have talked in very general terms about the inflation rate of 5.9 percent and how a rate of 5.9 percent will eat into these tax reductions. There are two components to that 5.9 percent: there is the general effect of inflation and there is the one-off effect of the increase in GST and in the price of power and electricity which will flow throughout the economy as a consequence of the emissions trading scheme. 
I find it also interesting that Labour is constantly referring to Paul Reynolds the chief executive of Telecom and the impact that these tax reductions will have on his take-home pay. I suggest that another group of people we should be looking at is not individual persons but farmers. I ask what impact these personal tax reductions will have on the incomes of farmers who are the actual backbone of our economy. We have heard a lot from the Government in recent times about the fact that the costs of the emissions trading scheme will not affect agriculture until 2015. But farmers like all New Zealanders will be affected by increases in electricity petrol and diesel prices from 1 July. Meat and Wool New Zealand the lobby group that represents sheep and beef farmers has said that the impact on farmers as a consequence of the electricity and petrol cost increases will be about $1300 a year and will be a further $1300 at the beginning of 2013 when the emissions trading scheme is effected. Essentially that is $2600 for electricity and petrol costs. Will these tax reductions fully compensate farmers for that? No they will not. 
There is another cost that the emissions trading scheme will impose on dairy farmers’ incomes from 1 July. Fonterra has announced publicly that the cost on its company from 1 July will be about $38 million which is firstly a consequence of electricity price increases but also because the emissions dairy herds give off will have to be accounted for in the processing of milk. That cost of $38 million on Fonterra will be passed directly back to farmers. Dairy farmers will be paying on account of the emissions trading scheme and the processing of milk about $2600 a year from 1 July and a further $2500 from 1 January 2013. All up those two costs—on the one hand the cost of electricity and petrol and on the other hand the cost of Fonterra processing dairy farmers’ milk—will affect dairy farmers’ incomes by $3900 on 1 July 2011 and a further $3900 on 1 January 2013. I acknowledge that the Government has said that it may well review the emissions trading scheme and that that secondary increase may not come in but certainly Meat and Wool New Zealand are quoting $3900 as the first one-up impact on dairy farmers’ incomes. Thank you.