Smith Lockwood: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — Second Reading In Committee 
Smith Lockwood: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — Second Reading In Committee 
[Volume:636;Page:7112] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 Part 1 of this Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill has actually been largely ignored because of the very controversial issues contained in Part 2 in particular. But Part 1 is a very important part of this bill because it confirms the current income tax rates for the 2006-07 year. There are a number of questions that I think should be rightly posed about this to the Minister in the chair the Hon Peter Dunne because when the current tax rates—including the 39 percent tax rate—were introduced by this Labour Government back in 2002 I clearly remember Dr Cullen speaking in this Parliament and telling New Zealanders that this higher tax rate of 39c in the dollar would be imposed on only 5 percent of New Zealand income earners. It would be only the highest income earners who would be paying this high tax rate. So the question I now have for the Minister in the chair is what percentage of New Zealand income earners when we confirm these same tax rates—including the 39 percent tax rate above $60000 income—will be paying that 39 percent marginal tax rate. 
I think it is a relevant issue. Dr Cullen promised that only 5 percent of New Zealanders would pay this rate. It is relevant to the Minister in the chair because we all know he is of the view and has pushed the policy quite strongly that the tax thresholds should be indexed. Now I have two questions on that matter to the Minister. The first question is when will the tax thresholds be indexed. The second question in relation to that is at what point they will be indexed. 
Let me explain what I mean. Will they be indexed at a point where only 5 percent of New Zealand income earners pay that top tax rate? In other words will the threshold be raised until only 5 percent of New Zealand income earners pay the top rate as Dr Cullen promised or will they be indexed at the status quo where—what is the figure—10 percent or 15 percent of New Zealand income earners now pay that top tax rate? So I think there are two issues there that I would be particularly interested in. The first issue is what is the percentage of New Zealand income earners paying that top tax rate. The second issue is when indexation will start and what proportion of New Zealand income earners will lock into that top tax rate. 
There is no question that by confirming these tax rates this Parliament is locking in a very high level of revenue collection—a very high level. Revenue collection by this Labour Government has gone up since it came into office in 1999 I think something like 60-odd percent—a massive increase in tax collection by this Labour Government. Clearly this Labour Government is currently carrying very large fiscal surpluses. So I think the Minister in the chair should tell us exactly when the indexation of the thresholds will start and whether it will lock in the status quo where a very much higher number of New Zealanders will be paying that top tax rate. 
 I think New Zealanders deserve to know whether this Government will seriously address the possibility of a reduction in personal income tax rates for New Zealanders. We are becoming a very highly taxed country. The proportion of our GDP being taken as tax is climbing now. It has declined for many years and it is now climbing again. We all know that that is a negative for our economy. For the percentage of our GDP taken in tax to be climbing again is a negative for economic growth. Given the overall tax policy he is pursuing as Minister of Revenue I would like to hear as well from the Minister what the prospects are not only for indexing thresholds but of us seeing these actual tax rates that Part 1 confirms are the current arrangements—15 percent up to $9500 21 percent up to $38000 33 percent from $38000 to $60000 and 39 percent from $60000 and above—being reduced. These are very specific questions to the Minister.