Bayly AndrewANDREW BAYLY (National—Port Waikato): Thank you Mr Speaker. I rise to talk on the Taxation (Income Tax Rate and Other Amendments) Bill. I'll just pick up on the first point which is by the speaker who's just sat down the Minister Michael Wood. If this intent to put in place this tax change has been signalled so well why is it that the papers and the actual legislation have only literally been tabled probably less than 45 minutes ago? I think it is absolutely outrageous that a major tax bill has not been tabled so the Opposition can have a proper review of it. It is a significant piece of legislation. I just think in terms of procedure and in terms of good governance especially as this piece of legislation is going to be rammed through by this Government under urgency which means that it's literally probably going to be passed by tonight—Chris Bishop: Tomorrow.Hon Michael Woodhouse: Tomorrow morning.ANDREW BAYLY: Or maybe tomorrow morning right? But we're going to have no input from any tax advisers no consultation with the tax community or the business community. This is a piece of legislation that has been worked out by the Government in secret and tabled at the last moment so people cannot see what's in it. If I went out to the tax community right now and said What's in here?" they would not know.Just to raise the issue it is a complicated bill as set out in the legislative statement from the Minister. This tax bill will not only involve a new piece of legislation with that but will have the impact on PAYE rules fringe benefit tax resident withholding tax employer's superannuation contribution tax residential land withholding tax retirement scheme contribution tax taxable Māori authority distribution non-declaration rate. It is a complicated bill. This is how you end up with tax bills that create the opportunity for people to work their way around it because it hasn't been properly thought out it hasn't had the proper consultation and it hasn't gone through a proper select committee. I think it's outrageous—absolutely outrageous.But let's just talk about the general intent of this bill. This bill seeks to raise $550 million—half a billion dollars. So just to put it in context. As a Government we raise roughly about $85 billion a year from tax revenue. So this is $550 million—it's less than 1 percent. So here we are we've got this piece of legislation and we've got debt that's gone from $60 billion to just under $100 billion over the last seven months and which is forecast to double again to $200 billion—eye-watering amounts of money. In fact the annual cost of the current debt is about $3.5 billion projected. That is the same cost it takes to run the New Zealand Police force.So $3.5 billion just to pay the interest costs. And by the way because we're not making any money in the country we're borrowing to pay the interest which is really bad. But here we are we've got a bill we're ramming through that's going to raise $550 million. It's a pittance in terms of the New Zealand Government's tax revenue. But the issue about this is you cannot tax your way out of a recession. New Zealand is essentially in a recession. You cannot tax your way out and raising half a billion bucks is not going to do it by any means. The issue about what this Government should be talking about today and what we should be debating is how we're going to grow the economy of New Zealand.I think the worst thing about this—because it's going to be rushed through—is we're going to basically create an environment where there are going to be unwelcome behaviours. There is such a thing as legitimate tax avoidance and there's a thing about evasion of tax. So there is an issue about minimising tax legitimately and when you do things illegally. And this piece of legislation has got the potential to lead people down a route of trying to minimise their tax—and they have a legitimate right to do that.So the first question—even the half-billion dollars that they're quoting that they're going to raise out of it—is we have no indication whether in fact that $500 million is going to be achieved. I suspect that is going to be something we will be focusing on over the next three years because the expectation that people are going to pay this tax and pay that amount of money I think will be maybe seen to be a bit of an issue.But I think the other thing about this bill is the only beneficiaries out of it are basically going to be tax lawyers and tax accountants. We're going to spawn another regeneration of those types of people because they love it. The one thing about the New Zealand tax system at the moment is we are the envy of the world because it's a very simple system. We have one GST rate we have four personal tax rates and we have one simple company tax rate. And here we are we're going back—this is back to the future by the way because we used to have a higher tax rate and of course that's all been reduced over time. And here we are we're going to now go back to the future and raise the top tax rate. I think as I keep saying the complications around this are very very significant.So just to talk a little bit on it I think the first thing is: what's going to happen before the bill comes into play? So there is going to be a significant push to make sure those people in the situation will try to leapfrog before this legislation comes into play. So you're going to see things like early payment of bonuses to employees and you're going to see early payment of dividends. So already in the tax system there will be people sitting there and trying to work out how to minimise the tax and they are legitimate queries and actions they can do. So we're going to see behaviours even before the bill comes into play.Once it comes into play I think the biggest issue is we have now ended up with quite a complicated structure. We're going to have a top tax rate of 39 percent we are going to have a trust rate of 33 percent we're going to have a company tax rate of 28 percent and we're going to have a top portfolio investment entity (PIE) rate of 28 percent. And what we've done—and we are now going to end up with the biggest gap between a top personal tax rate and those other entity tax rates. That is the biggest mismatch in terms of having a high tax rate versus a low tax rate since I think the early 2000s. That is why there was a lot of effort put into simplifying the tax system. And what we've done here with this bill is we're going to make it incredibly more complicated.So the issue with trusts which is an important issue—we're going to have a rate of 33 percent versus 39 percent. So that will drive certain behaviours. And this bill has got some most Draconian aspects to it—particularly new section 17GB where the Commissioner of Inland Revenue may require information or production of documents for tax policy. But more specifically in relation to trusts around new section 59BA there is a lot more information which is a way of the Government trying to deal with the issue of why the system will be at risk. So the simple raison d'être—the reason for bringing in this tax—is already compromising the tax system.The other aspect to it is the large differential between the corporate and the new top personal rate. Just to highlight this—yes this is the figure I've got: the biggest differential we have was 9 percent in 2009 and differential since the year ended 31 March 2012 was 5 percent. So we've got this very large differential of 11 percent now. That is really significant in terms of good tax policy.The other thing is around family holding companies—what happens to them. The last thing is the PIE rates: how people are going to use those entities. So all we're going to do is we've got a Government going to have to spend the next two-three years pushing through new changes and updating this legislation through the Finance and Expenditure Committee where hopefully we will start to get some experts turning up and telling the Government why they've done this wrong and why they should have actually paused and done it properly and we're going to spend a whole host of time actually fixing up a bad piece of legislation."