Seymour David; Parker DavidDAVID SEYMOUR (Leader—ACT): Thank you Madam Chair. Further to that I appreciate the Minister's answer about the amount of revenue that might be forgone compared with the estimates because of avoidance activity and because of the uncertainties around Penny and Hooper and the jurisprudence of whether or not people will be able to use particular vehicles to avoid tax and we accept that the Minister is being quite candid that he can't be very precise about how much avoidance activity might go on and therefore how much revenue might actually be raised which in fairness is the whole purpose of the policy. But I'd like to ask if he's got any advice or any wisdom on another question which is around not so much people earning income and then structuring their affairs to avoid declaring it in a way that qualifies it to be I guess rated as or declared as income tax but actual behavioural change in the sense that people don't actually carry out productive activity at all given the reduced return for that activity. In other words does he have an estimate for the dead-weight loss? Traditionally economists have tried to estimate what is the true cost of raising a dollar of revenue allowing for the dead-weight loss that comes from people simply not undertaking activities that they might have were there to be a lower tax rate—for example when firms are trying to compete and we hope soon that we'll be able to be competing for skilled labour across the world and people will be able to move around again. The Minister will be interested to know the UK is going to be rolling out a vaccine next week but the world is changing very quickly. I didn't believe the Minister when he said at the University of Otago several months ago that there might be a vaccine in the first quarter of 2021. It turns out he was not only correct; he was a little bit late in what seemed to be a bold estimate at the time. Now we hope that we'll get people moving around the world and firms will be competing for skilled labour for executives who might be affected by this tax rate. Has he had any estimates on what might be the impact on the ability of New Zealand firms to attract skilled people who are weighing up what the incomes are in New Zealand what the tax rate is and so on? So I guess—just to conclude the questions—does he have any advice on it and does he understand what the effect might be on the propensity of people to work and the propensity of people to migrate to New Zealand because it really matters that we're able to get people to work save and invest and also come to this country. There's at least a prima facie case that increasing the top marginal tax rate will discourage people from doing that and that there are wider dead-weight losses to the economy from having a higher tax rate. If the Minister can tell us whether he's had any advice about those questions and what that advice was I would be very grateful. Hon DAVID PARKER (Minister of Revenue): Referring to the last point first I thought Julie Anne Genter covered those issues well in her contribution in the second reading debate. She didn't think there was going to be much change in the behaviour of international people coming to New Zealand caused by this rate difference because people make choices for lots of other reasons including the sort of country that they want to live in. In respect of countries such as Australia and Great Britain of course their marginal tax rates are higher than is proposed here at similar income levels that are proposed here for 39c in the dollar. People in the United Kingdom and Australia are paying 45c in the dollar; so I don't think the member needs to have concern that people won't want to move to New Zealand from those countries on the basis of this change. In respect of the dead-weight cost and whether this will demotivate people to work if the member really is concerned about that far more people sit in the band below this rate than above it who pay an effective overall tax rate on income that is higher than the people even now at a 39c in the dollar income tax rate will pay overall as a percentage of their income when GST is taken into account because savings in respect of higher-income people do not incur GST whereas middle-income people pay a higher proportion of their income in GST at 15c in the dollar in addition to their income tax whereas this 6c increase in income tax on incomes over $180000 is often saved avoiding GST at the rate of 15c in the dollar. I don't say avoiding" in any pejorative sense but the effective tax rate of a lot of people that are in this higher tax bracket will still be lower than the effective tax rate paid on the taxable income of people at lower incomes."