Foss Craig: Income Tax Bill — Second Reading 
Foss Craig: Income Tax Bill — Second Reading 
[Volume:641;Page:11228] 
CRAIG FOSS (National—Tukituki) 
: 
 The Income Tax Bill has been at least 10 years in the making and today we are debating its second reading. After 10 years of formulation I find it a bit amusing that the commentary on the bill states that some issues were not addressed because of “time constraints”. The Rewrite Advisory Panel has done a fantastic job and I join previous speakers in congratulating and thanking all concerned. I would particularly like to thank the Minister of Revenue Peter Dunne who in many areas provides a balance to the more socialistic tendencies of the current Minister of Finance. I thank him again for the way this bill has been put through with generally all-party agreement. I would particularly like to thank the Rt Hon Sir Ivor Richardson our expert adviser Ms Therese Turner and officials some of whom are here today. I thank them again and put on the record my comments on the intellectual “grunt” if you like of the people who sit around our committee in particular; the Finance and Expenditure Committee would be pretty lost without them and I thank them. 
This bill is 3331 pages long. I think it is backed by all parties. I would be interested to see whether the Greens back this bill not because of the tax implications but because of the sheer number of trees that have been ripped down to produce it. But the legislation gets rid of a whole lot of other bills so I do not know which way the Greens have gone—I look forward to the answer on that one. 
Nandor Tanczos 
: So we need a virtual Parliament! 
CRAIG FOSS 
: We almost do actually. I am also interested in what the previous speaker Hone Harawira from the Maori Party said. That he was pretty much looking for a flat and transparent tax rate is how I interpreted much of what he was saying. 
I would like to contrast the consultation process that this bill has gone through with what is currently going on. The Rt Hon Sir Ivor Richardson commented about the tax policy accord of 1992 where all major fundamental changes to tax policy were put out there consulted on and various papers were produced. Yes that process took a long time but there was buy-in from the public from various stakeholders and there was pretty much a seamless transition. I contrast that process with what we have had recently. Much of the legislation has been rushed and those are not just my words; those words were expressed at the Finance and Expenditure Committee yesterday by many submitters. There has been no consultation the drafting of bills has been rushed and ill-thought-out and companies businesses and stakeholders have been ambushed. 
One of the largest organisations representing businesses in New Zealand put out a very very hard press release yesterday stating that various tax policies have ambushed businesses in New Zealand. I point out that that has happened not just to businesses but to New Zealand as a whole. Some of the bills that have been pushed through include those relating to KiwiSaver and the specified superannuation contribution withholding tax which was announced and pushed through this House under urgency. 
Members opposite constantly talk about consultation and democracy etc. I ask members to look at the Electoral Finance Act to find an example of where the Government thinks things should go. With the legislation relating to the specified superannuation contribution withholding tax a huge and fundamental change was pushed through under urgency. The mortgage diversion scheme associated with the KiwiSaver Bill was pushed through under urgency. Changes to the fair dividend rate regime were whipped out there—a pretend consultation—so a fundamental change to our tax framework was rushed through. What do we have today? We have endless Supplementary Order Papers endless amendments endless clarifications and various bills coming through to try to fix the initial KiwiSaver legislation the fair dividend rate legislation and other legislation that has been affected by the fair dividend rate and portfolio investment entity regimes etc. 
I would also like to contrast the way in which this bill has come about with Dr Cullen essentially breaking the superannuation accord. He has tried to confuse changes to the KiwiSaver legislation in order to dilute and dirty what is a solid cross-party accord that superannuation—“65 at 65”—is here to stay. In fact under the current agreement 66 percent of the average wage will be available at age 65. It will be interesting to see what happens with that in the lead-up to the next election. 
I will give members some staggering staggering numbers relating to the Income Tax Bill. There has been a $20 billion increase in tax revenue since this Labour Government came in in 1999. That is $20 billion. The Government is now taking in over $52 billion per annum—$1 billion per week. That figure was $32 billion when the current regime came in. It is hard to translate those figures because they are up there in the galaxy somewhere but members can think of it in this way: $384 million extra is taken out from this economy in the form of tax every week—that is $384 million. Members should think about the waiting lists the schools and the infrastructure. It is absolutely crazy because the Government cannot even spend it all. It is running such a large surplus and Dr Cullen is all over the place trying to explain it. 
Combined with that problem we have fiscal drag. Fiscal drag is when inflation drags people’s wages up into higher tax brackets. Well fiscal drag accounts for about $1 billion extra every year. That is $1 billion due just to inflation and extra income tax per annum. It is no wonder that normal ordinary working Kiwis are having to go into debt. It is no wonder that Kiwis are having to eat into the equity of their own houses. 
Dr Cullen is blaming everyone but himself for the current corner he has painted himself into. It is a pretty simple equation. The Government overtaxes and overspends but it spends on the same amount of stuff that it used to so there is unproductive spend that turns into inflation interest rates go up wages go up inflation goes up GST goes up—because everything is more expensive—and the tax take goes up. And so the cycle continues. Dr Cullen knows this. In fact in recent Cabinet papers produced prior to the delivery of recent Budgets he actually warned his colleagues against asking for extra spend because extra spend—he did not even mention the words “productive spend”—would create higher interest rates for longer. That is exactly what we have now. Dr Cullen warned his colleagues about that and went on to spend about $4 billion more over the coming cycle. 
There is a further whack that the poor New Zealand worker has to face. Not only has the tax take gone up by $20 billion per annum but interest rates are pretty much double what they were when the current Minister of Finance came in. The figures are now in double digits. So not only is tax whacked off people’s gross salary but also they are dragged into a higher tax bracket because of inflation and their residual income so suddenly they are paying 4.5 or 5 percent— 
Hon David Cunliffe 
: I raise a point of order Mr Speaker. I seek the leave of the House for the member to repeat the point that he made. If I heard correctly he said that interest rates were now double that— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: That is not a point of order. 
CRAIG FOSS 
: I am happy to clarify that. The official cash rate equivalent when Dr Cullen became Minister of Finance was at about 4.5 percent; it is now 8.25 percent. That figure for members’ information has almost doubled. That reflects in a near doubling of floating mortgage interest rates. In fact the Bank of New Zealand calculated that $3 billion would be paid in extra interest payments in 2008 and that was paid in 2006. So that is Dr Cullen’s mortgage levy which has arrived thick and fast at the doorstep of New Zealand mortgage payers. 
I would like to address the way in which Dr Cullen is running the country. It is a bit like the lawnmower guy. A guy comes around and says he will mow a person’s lawn for him or her and that he will do so every fortnight. Then a couple of weeks later he comes around again and says that the person’s lawn needs a bit of fertiliser. So the person buys some fertiliser and pays the same guy to put some fertiliser on the lawn which he is mowing every fortnight. The lawns go so well that he comes back to the person and says that he now needs to mow the lawn every week that the person basically needs to pay twice as much and that he still needs to fertilise the lawn every week to keep it growing. Dr Cullen is spreading a lot of fertiliser around the lawns of New Zealand. Dr Cullen has painted himself into a corner with higher interest rates the higher currency and the high rates of persistent core inflation which he is mostly a part of. The public is starting to make its judgment on him and it is not good.