Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): Thank you Madam Deputy Speaker. I'm delighted to have a full 10 minutes to speak on this bill.DEPUTY SPEAKER: I thought you might be.Dr DEBORAH RUSSELL: The Taxation (Annual Rates for 2018-19 Modernising Tax Administration and Remedial Matters) Bill is a thick and heavy bill. As so many tax bills are although it contains matters of real policy change which have already been discussed at length in this House it is also a workhorse bill. It is a bill which contains changes which are there just to keep the tax Act in order to keep it functioning well. The Income Tax Act is a long and dense Act but one of the interesting aspects of our tax system in this country is that in large part there is a great deal of agreement about how to run it. We have very few special concessions in the tax Act. We have very few special little rules for special groups of people. It is largely free of the loopholes that exist in other countries where some special rules have been put through to benefit a particular group of people. The attitude of the tax community in this country and indeed the attitude across the House is one of getting the Income Tax Act right to measure income accurately to measure tax liabilities accurately and to make sure that each person contributes their share according to the law. As a workhorse bill this bill contains many provisions which are just there to tidy the Income Tax Act up and to make sure that it keeps on working as it ought. They might not seem like significant changes but they are real changes. So for example I want to turn to a particular change which is to do with changing or adding to the definition of the market interest rate for fringe benefit taxes. Now in the Income Tax Act as it stands market interest is very important because when an employer gives a loan to an employee that could be a fringe benefit if the rate that is charged on the loan is quite a bit lower than the ordinary rates that are available to the ordinary punter on the streets. This is particularly important for say banks and the like. So in the Income Tax Act as it stands the market interest rate is charged at the arm's length rate—so the rates that would be set by an ordinary lender lending to a person who has the characteristics of the person borrowing the loan: the particular income the particular liabilities the particular demographics what kind of interest rate would be charged for that person.That definition of a market interest rate has worked pretty well for a large number of years but in recent years there has been somewhat of a shift in the way that interest rates are set. In particular people have been able to go in and negotiate interest rates. So as it turns out if a person is a good negotiator they might be able to obtain a somewhat lower interest rate.So what we've done in this bill is ensure that that lowest interest rate can be available as the market interest rate that is used for the purpose of the fringe benefit tax legislation. It simply ensures that we are being fair to employers and to employees and we are trying to get the Income Tax Act right. That's one example of what this bill does just in order to get the right rates of income tax.Let me talk about another issue here that's a change that's in the bill. It's just one of the other policy matters that wasn't much discussed during the select committee processes and actually no one really had any issues with it. It turns out that businesses often incur expenditure in order to reduce noise. So they want to mitigate noise problems. The trouble is that often that particular bit of expenditure can't be deducted for tax purposes. It becomes what's known as black hole expenditure and it falls into a sort of no person's land: it can't be deducted and it doesn't really add to anything. That creates a disincentive for businesses to spend the money to reduce noise.So this bill contains a rather clever measure—and I think it's really rather nicely done—saying that in actual fact if we bring noise mitigation expenditure in under pollution provisions under pollution remediation provisions then the businesses can obtain a tax deduction for it. It's a simple little rule change and it's a rather nice one because it ensures that businesses get a perfectly reasonable deduction and it removes a disincentive to engage in reducing noise.So by these two provisions which I've discussed in a little bit of detail what I'm showing is just exactly the nature of the work that goes on year in year out to ensure that our Income Tax Act remains fit for purpose. I commend the officials who work on such matters. I know the hard work that goes into it. I also commend the Ministers who year in year out through Minister after Minister have worked on these sorts of changes and of course the select committees who have worked on them as well.Let me turn to the issues that have been raised at length by the Opposition tonight; that is the issues of the income tax rates. Despite all the great work that is done in this bill the Opposition is going to vote against it because they don't like the tax rates that are set in the annual rates part of this bill. They don't like those tax rates. They claim that we are taking too much out of New Zealanders' back pockets and we are taking too much tax out of the economy. They say that we should have put tax rate changes in effect; we should have chosen to reduce the amount of tax that is collected in this country.I challenge the Opposition on this. Tax is critical for the good functioning of our society. It is through income tax that we fund all of the activities that we enjoy in a civilised society. It is through income tax that we fund our health system. It is through tax that we fund our education system. It is through tax that we build our roads. It is through tax that we fund our welfare system. It is through tax that we pay our police. It is through tax that we have a defence force. The list goes on and on and on. Tax is not just imposed for the fun of it; it is imposed because it funds the society that we want to live in. It is imposed because we need to fund a certain way of living in this society.The interesting thing is we have a large part of agreement in this country. By and large we are committed to health; by and large we are committed to education; by and large we are committed to welfare we are committed to roads and we are committed to defence and police. We argue about the extent of it but not whether we do it at all.But we were described as a lazy do-nothing Government. I say: what about the lazy do-nothing former Government? What about the lazy do-nothing former Government that let the hospital buildings crumble? What about the lazy do-nothing former Government that allowed a huge crisis to build in mental health? What about the lazy do-nothing former Government that failed to build any more State housing? These are all activities that are funded through our taxes. So I say to the Opposition that if the Opposition wants to cut tax rates what else are they going to cut? What else will they cut? Because that's the simple equation: if taxes are cut then necessarily the expenditure must be cut too.We've had many cries from the Opposition for more expenditure on roads but how can we spend money on roads if we do not collect an adequate amount of tax in the first place? That is why cutting tax rates as the Opposition have suggested again and again and again this evening is simply not an appropriate response. Yes we can always think about the amount of tax that we ought to be collecting but at the same time we need to think about what we want to do with those taxes and at the same time we need to think about how we fund our society. That is why this bill as it is written is so important because it has a fundamental commitment in it to funding our Government and to funding the good of a civilised society.On this side of the House we support all the excellent provisions in this bill and we support the tax rates in it because they are the price of a civilised society.