Burns Brendon: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
Burns Brendon: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
[Volume:675;Page:20789] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 It has been interesting to listen to the speeches of a couple of the preceding speakers in this debate on the third reading of the Taxation (Tax Administration and Remedial Matters) Bill and to note comments from Mr Bennett about how this bill serves the best interests of New Zealand. I say to that member opposite that this bill serves the best interests of a tiny percentage of New Zealanders. 
Mr Boscawen from the ACT Party said that we needed to look to Asia where they have low tax rates. Well I say to that member opposite that we sat next to each other at the State luncheon for our retiring Governor-General today and I am happy to pay my taxes to help pay for that lunch. There are no free lunches. If we want to live in a responsible and decent society then paying our taxes is the price we pay for things like that and for a multitude of other things besides. If Mr Boscawen wants to swap the life that we have to go to work in a Chinese sweatshop pay low tax rates and earn $200 a month to produce Adidas T-shirts with All Blacks slogans on them then I say good luck to him—go to Shanghai or wherever. 
If we want to take that thinking to its ultimate analogy we need look no further than at what happened in the United States Congress but a couple of weeks ago where the Tea Party rump of the Republican Party forced a vote that said: “We will not support any tax increases on the billionaires of the United States but Mr President and those in Congress we want you to cut Medicare education spending and pensions.” What does that mean? It means that America has been through a financial downgrade as a result of that decision. That is where countries get to when they get into the mantra that says they should cut the taxes to the wealthy and impose the costs on the rest of society. 
We need only look at the comments in the paper only today from Warren Buffett America’s wealthiest man who said that he wants to pay more taxes and that he should pay more taxes. Or we can look at the commentary from Bernard Hickey last weekend. He said that we need a thriving middle class in New Zealand not a situation that has seen the wealthiest 1 percent increase their share of the wealth from 7 percent to around 14 percent in the last 20 years. That is the sort of direction we are heading in with this bill which does away with gift duty for the very wealthiest in our community. 
Part of the explanation for this bill was that gift duty raised only about $1 million a year and cost half that amount to administer. I say again to the Minister of Revenue that that is disingenuous because this policy was about stopping more avoidance and structuring. The very fact so much money is spent by people on gifting arrangements suggests that people are doing very well out of it. That is what the policy is about. That is why it is there. That is the reason it should stay in place. 
I commend my colleague Lianne Dalziel for her reading of the regulatory impact statement particularly paragraph 57 where the department noted that in fact until October last year there was a greater benefit from gift duty because the tax rates were a little higher. Of course removing that top tax rate has removed the tax advantage so ipso facto we should do away with gift duty. What a lovely logical sequence that is—to set up it for the fall. 
I will also point out to the House what the regulatory impact statement said in respect of some of the impacts—and Lianne Dalziel is right; members of the Labour Party do read the regulatory impact statements on bills like this one. The authors of the regulatory impact statement consulted all of the Government departments relevant to the repeal of gift duty. One of the commentaries came from the Ministry of Social Development which stated that if the change were to happen there could be some ramifications for some of the issues with residential care subsidies—that is if gift duty is repealed people will be able to transfer all their assets into a trust instantly. At the moment people have to stage it. They have do it by transferring $27000 a year. The ministry also notes that it has a provision where it can look at how people might make lump-sum payments. But here we are with the Ministry of Social Development needing to review its administration of financial means assessment if gift duty is repealed. So it is heralded in front of us that the Inland Revenue Department will save $400000 and what a great saving that is but there is one Government department stating that its cost structures are likely to rise as a result. 
The Ministry of Social Development went on to state that staff training would therefore be required around the operational impacts of the changes. There would also need to be complete land-title searches for properties where applicants had lived for a significant amount of time to determine whether the property has been gifted by the applicant. The ministry has noted that this will lead to increased operational costs so there we are. We are saying that we will save some money at the Inland Revenue Department but we are looking at the potential for extra costs at the Ministry of Social Development. And that was without any real analysis of what this change might mean in terms of what the State has to administer in respect of residential care where we have a carefully managed regime to ensure that people pay a fair component of the cost of residential care. Obviously these changes could impact upon that regime. 
The Ministry of Social Development also commented about entitlements to Working for Families tax credits an issue very dear to the Minister who introduced this bill and to the Government which wants to crack down we are told on those who might be rorting Working for Families tax credits where it is not appropriate. The ministry said that there is the potential for applicants to transfer income-earning assets out of their names in order to remove income associated with the asset from their taxable income. Again that is a consequence of this bill. It underlines the very premise that Labour has been talking about—this gift duty is there not for what it brings in but for what it prevents from happening in respect of further rorting of the tax base. 
There was further commentary from the Housing New Zealand Corporation. It was not seen as a big issue by the corporation because most of the people in State housing are not likely to be the beneficiaries of gifting arrangements but none the less there was seen to be some risk around that issue. The corporation said that it would be on the alert for those kinds of outcomes. Child support is another area in which it is believed that the State will have to keep a watchful eye because of the fact that gift duty arrangements will be removed by this bill. 
There are a number of consequences of this legislation and Labour has said explicitly that it is not an appropriate measure to be introducing. We need an equitable tax base most especially at this time. We need arrangements that underscore and underline that everybody pays their fair share. Gift duty has been an arrangement that simply said to people that it is there to try to ensure they do pay their fair share. It has not been a great revenue collector. It was actually pointed to after a former National Government removed estate duty in 1992 as part of a need for an ongoing protective mechanism one that was weakened with last year’s move on top tax rates. 
In summary Labour is saying very clearly that there are good elements to this bill—sensible progressive amendments to tax law that have come through the Finance and Expenditure Committee and that Labour has supported. But when it comes to gift duty we say that it is an important protective mechanism of the tax base that it deserves to stay in place and that it is there to ensure that equity prevails in the tax system. We need to ensure that equity is preserved not only to balance the amount of tax that people pay to ensure that the top end of town pays its share and that tax is paid not just by the lower end of town but also to provide a signal to people that we are all part of one community and one society. When we get signals being sent consistently—consistently— 
Chester Borrows 
: You should remember that. 
BRENDON BURNS 
: The member opposite who just intervened was asking just a few minutes ago: “Well those on the bottom end get assistance so why not the top end?”. The point is the equity of the arrangements. We must have a broad agreement that we are an equitable society. 
All of the international research is saying that New Zealand is in fact a much less equitable society than it was even 10 or 20 years ago. That puts at peril our very socio-economic base. When we chip away at it time and time again with tax measures like this we are putting at risk I think society itself. If people do not feel that they are getting a fair shake at things then there will be consequences from that. We are seeing this change come through at a time when we have seen in other countries some of the consequences where inequity has come to the point where people have taken to the streets. I think we actually have to acknowledge that those risks are there for New Zealand and every time we chip away at our tax base with measures like this—rewarding the top end of town when there is no real case for it—we put ourselves at risk.