Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — Instruction to Committee In Committee 
Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — Instruction to Committee In Committee 
[Volume:606;Page:4087] 
Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill 
Instruction to Committee 
DAVID BENSON-POPE (Senior Whip—NZ Labour) 
: 
 I move  
That it be an instruction to the Committee of the whole House on the Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill that it take the bill part by part and consider any schedules as one question 
. 
Motion agreed to. 
In Committee 
Clause 1 Title 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 This is the start of the Committee consideration of a very important bill. Clause 1 of course is the title and this bill has been called the Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill. There is always a bit of a debate about whether a bill’s title accurately reflects what is in it. The title of this bill at least makes an attempt to describe what is in it—one has to comment reasonably positively on the fact that it does make an attempt—but is it accurate? I refer to the first part of the title which concerns annual rates. It might have been more appropriate to state what this bill actually does—it confirms very high annual rates. 
If we look at the most recent publication of  
The Economist 
 we will see that although New Zealand may not rank in the top half of the OECD in terms of growth rates it sure as hell does in terms of tax rates on working families. In fact New Zealand ranks sixth in the OECD. This bill is confirming those tax rates so it would be slightly more accurate to call this bill the “Taxation (High Annual Tax Rates) Bill” or the “Taxation (Sixth in the OECD Annual Tax Rates) Bill” because that is what the latest data from the OECD shows. The latest data from the OECD shows that the direct tax burden on a working family in New Zealand is the sixth highest in the developed world. I am surprised that a Labour Government would want to confirm under this legislation those kinds of tax rates on working families. Labour claims to support working families. We are getting used to this Labour Government claiming all sorts of things. There is lots of rhetoric and lots of political spin but no action and everyone is starting to realise that now. People listen to Prime Minister Helen Clark with one ear because they know that what is going on behind the scenes is something totally different. That is why it might be more appropriate for the title of this bill to refer to the high annual tax rates that are being confirmed. 
The next bit of the title is: “Maori Organisations”. What that does not tell us is that a large number of members of this House consider that that the part of the bill covered by that part of the title is introducing a racist piece of tax legislation. Therefore it might be more appropriate to call the bill the “Taxation (High Annual Rates Racist Rates) Bill” because under the “Maori Organisations” bit of the title special tax rates are being conferred on the basis of race. 
Clayton Cosgrove 
: Rubbish! 
Dr the Hon LOCKWOOD SMITH 
: I invite Clayton Cosgrove to take a call and name one person in New Zealand other than a Maori person who can gain any benefit from the special tax rate being imposed under the bit in the title called “Maori Organisations”. If he can name one person in the whole of New Zealand other than a Maori person I will stand and apologise. I give the member that guarantee. If he takes a call and can identify one person other than a Maori person who under the “Maori Organisations” part of this legislation is going to get a favourable tax rate I will stand and apologise to him directly in this Parliament. That is what the bill does and that is why the title is too bland—it refers to taxation and to Maori organisations. In fact a racist tax rate is being imposed here and the title should reflect that. 
Hon George Hawkins 
: I raise a point of order Mr Chairperson. The member keeps referring to racist legislation. That is out of order. 
The CHAIRPERSON (H V Ross Robertson) 
: No. 
Dr the Hon LOCKWOOD SMITH 
: It was not only my view. In fact distinguished consultants such as Chen Palmer and Partners came to the Finance and Expenditure Committee. The Rt Hon Geoffrey Palmer is a former Prime Minister and a former leader of the Labour Party. His consultancy considers that that measure is a racist measure. His consultancy came to the select committee and said that it considered that measure to be inappropriate. In fact they submitted to the select committee—and I can refer members to the day they did it—that what is going on in this legislation is probably contrary to the New Zealand Bill of Rights Act. 
The CHAIRPERSON (H V Ross Robertson) 
: Before I call the next speaker I suggest to members that they should be careful with some of the language they use because it can lead to disorder. 
CRAIG McNAIR (NZ First) 
: 
 I take pleasure in talking to the title on behalf of New Zealand First. As I was looking at the title “Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill” I did think of some different names that could come along with the bill. Some other names could be used in relation to Part 2 which talks precisely about what Lockwood Smith has been talking about—that is different tax rates for Maori organisations. I thought that we could call this bill the “Taxation (Annual Rates Unequal Opportunities for”— 
Dr the Hon Lockwood Smith 
: That’s a more polite version. 
CRAIG McNAIR 
: Yes that is probably a more politically correct version. 
Dr the Hon Lockwood Smith 
: It’s discriminatory. 
CRAIG McNAIR 
: Yes that is a good point. I have put forward a Supplementary Order Paper on this bill and we will be voting on it during the debate on Part 2. Basically New Zealand First would agree with the bill if all New Zealanders had that opportunity not just one type or one race. We believe that other groups should have that available to them as well. 
The CHAIRPERSON (H V Ross Robertson) 
: I just say to the member that the debate on clause 1 is not an opportunity to debate the purpose or the principles of the bill. There will be an opportunity to do that during the debate on Part 1. I know that the member is a new member. If the Committee wants to widen the debate on clause 1 then that is a course that the Committee could take but it has not done so as yet. 
CRAIG McNAIR 
: Thank you for your guidance Mr Chairperson. I was getting right back to my point. If we adopt my Supplementary Order Paper maybe we could give the bill a different title. We could call it the “Taxation (Annual Rates Equal Opportunities Taxpayer Compliance and Miscellaneous Provisions) Bill” or the “Taxation (Annual Rates New Zealanders First Taxpayer Compliance and Miscellaneous Provisions) Bill. We could call the bill the “One Nation (Organisations and Annual Rates) Bill”—or we could use the term “One New Zealand”. We could think of a whole raft of different names for this bill. I am sure the honourable Dr Lockwood Smith would agree with me and I think that other members around the Chamber will see my point and see where I am coming from. They can see where we are going with this whole deal. If members support a Supplementary Order Paper like the one I will be promoting New Zealand First would be happy to support it and we would be able to change the title of the bill. 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: 
 The debate on the title is actually quite a serious debate. I want to pick up on the comments my colleague Dr the Hon Lockwood Smith made about the importance of the title being a fair reflection of the content of the bill. Certainly when members of the public and members of this House are drawn to a bill the title that gives an indication of the bill’s substance and import. I put it to the Committee that as Dr Lockwood Smith said the title of this bill does not provide a fair reflection of what is included in the legislation and I would like to give three examples of that. 
The bill has the quite innocent-sounding phrase “Maori Organisations” in its title. This bill has nothing to do with the setting up of Maori organisations. It has nothing to do with the management of Maori organisations. What it does have a lot to do with is the provision of preferential tax treatment on the basis of the colour of one’s skin and that fact is not reflected in the title. This bill has nothing to do with setting up or establishing Maori organisations and everything to do with providing a tax break based solely on the colour of someone’s skin. It is bad that that could be allowed to happen. Similarly the words “Taxpayer Compliance” which are also in parentheses do not give a fair reflection of what is proposed in the bill. It is added taxpayer compliance that is proposed in this bill. We know that the compliance review team work led by Mr Al Dunn of McDonald’s Restaurants of New Zealand was explicit in its view that quite radical changes were needed to the relationship between the taxpayer and the State when it came to the issue of compliance. This bill does nothing to reduce taxpayer compliance in the system. Just saying “taxpayer compliance” does not reflect the fact as Dr the Hon Lockwood Smith pointed out that there is an added burden on New Zealand taxpayers in this legislation. 
The third point I want to pick up on is that it is wrong to say that this is an annual rates bill. We know that under this Labour Government tax rates have gone up. This Government has rapaciously collected more tax from hard-working New Zealand families than any other Government in the history of New Zealand. I say that the best way to fix child poverty fix housing fix education and fix health is to leave that money in the pockets of the people who earn it. That is common sense and I cannot understand why United Future members are going to vote for validating higher tax rates. United Future is going to vote for preferential—[ 
Interruption 
] Well it is in the title. It is not right to say “Maori Organisations” in the title. The bill gives a preferential tax break based on the colour of one’s skin. That is in the bill and it has to be clearly reflected in the title. If it was reflected in the title I bet that the United Future members would not be voting for it. I bet they would not be voting for a bill entitled the “Taxation (Separate Tax Rates on the Basis of Your Skin) Bill”. I do not believe that they would. I have been on a platform where United Future MPs have spoken against race-based policies in bills. If the title were correctly amended I cannot believe that the Government’s “coalition partner” United Future would be supporting this sort of a bill. Frankly United Future members have to understand what is in this bill—higher tax rates from the most rapacious tax gatherers in the history of New Zealand the “Labour-Alliance United Christians Government”. The words “Race-based Tax Rates” should be in the title because that is what is in this bill and “Added Taxpayer Compliance” should also be in the title because that is what is included in the 154 pages we are debating today. The National Party says: “Change the bill.” 
Hon PAUL SWAIN (Associate Minister of Revenue) 
: 
 Perhaps a little history lesson for that member might be in order. The first point I want to make is that there have been separate tax rules for Maori authorities since 1939. I wonder how many National Governments have been around since then. Far too many for my liking I should say. 
Darren Hughes 
: Four. 
Hon PAUL SWAIN 
: Only four. [ 
Interruption 
] That is a good point Mr Chairman. I want to address the issues of the title because the member was saying that the bill should be called other things. I think it is important to note that there have been separate tax rules for Maori authorities since 1939. The second point is that the review of this entire area which has led to clause 1 “Title” was started by the previous National Government in 1997—by the Hon Bill Birch. The third point is that during all this time Maori authorities have been double-taxed. No one ever said that that was a racist issue. They were double-taxed and that situation needed to be fixed. But the important thing the Finance and Expenditure Committee has done which justifies the title of the bill is tighten the definition of “Maori authority” which ensures that the new rules are limited to a specific group of organisations that meet the Government’s strict policy criteria for being a Maori authority. Very very good work has been done. I think it is important to know that where we are today was started by the previous National Government. 
PANSY WONG (NZ National) 
: 
 First of all I compliment the Minister on taking a call and I hope that he keeps up this good practice. We have many many more questions that we will put to him and I encourage him to continue to take calls. It is absolutely refreshing that a Labour Minister has taken a call during the Committee stage—except that he did not make much sense to me or to the public but that is beside the point. We encourage him to continue to take calls. 
The Minister tried to tell us that if something has happened for the last 50 or 100 years then it is good enough to continue. That is sad because one of the reasons the title refers to tax rates for Maori organisations is that most taxpayers of Maori ethnic origin are on low incomes. If the Minister is saying that whatever happened in the last 50 years is good enough I think it is very sad to aim so low. As well I would like to take up that point because my very learned colleague the Hon Lockwood Smith a member of the Finance and Expenditure Committee is adamant that there has not always been double taxation on Maori organisations unless those organisations did not distribute their profits after 4 years. It is not true for the Minister to say that that was double taxation because if it were I would want the Minister to take another call to say whether this Government would refund that double taxation. He has to be a bit careful when he makes those assertions. 
In relation to the title I agree with my colleague the Hon Lockwood Smith that new legislation should have a meaningful title to convey to the public its purpose. So I think that the Labour Government should accept an amendment to the title for a start of the “Taxation (Top Half OECD High Tax Rate) Bill”. After all the Labour Government should be happy. It has returned New Zealand to the top half of the OECD—unfortunately not through income levels but through high tax rates. The next time the Hon Dr Michael Cullen stands up in the House he should not apologise for abandoning the target of returning New Zealand to the top half of the OECD; he should claim credit and say that in effect Labour has returned New Zealand to the top half of the OECD but only through high tax rates. To be fair to members of the public and to convey to them what this bill is trying to achieve it should be renamed the “Taxation (Preferential Treatment for Maori Organisations) Bill”. Now I am getting a little bit concerned about why Mr Chairman keeps staring at me. I hope this speech is very narrow and focused— 
The CHAIRPERSON (H V Ross Robertson) 
: The debate is to the title. 
PANSY WONG 
: Yes absolutely! The title should be changed to “Taxation (Preferential Treatment for Maori Organisations) Bill” which is a lot more appropriate. After all if the Labour Government prefers to dish out that preferential treatment then it should be courageous enough to include it specifically in the title so that the public will immediately know that the content of the legislation relates to the treatment of Maori organisations. 
I have an interesting question for the Minister. Today we learnt that the Race Relations Commissioner advised private businesses to take on Maori names for their organisations. Would those businesses qualify for this preferential tax treatment because they have taken on a Maori name for their organisations? It is a matter of being fair to all New Zealanders because I understand that some submitters challenged the definition of a Maori organisation when they made their submissions at the select committee. 
It would also be useful when the title simply states “Taxpayer Compliance” for it to be more specific about what compliance that is. 
GERRARD ECKHOFF (ACT NZ) 
: 
 The title of any bill not the least this one before the Committee at this time has to be instructive. It has to show at first glance exactly what the bill is about. Surely the title has to be informative about its true purpose. I suspect that it should also be reflective of the content of the bill. It should be totally accurate in all the above and indeed should be self-explanatory. But when one of the people in Otago picks up the  
Otago Daily Times 
 sees as happens every day that there are proceedings in the House—and the paper will indicate that this bill is being read in the House—and reads the title I wonder whether he or she will probably just turn the page very very rapidly because it is a totally boring title and is not reflective of what this bill actually does. If for example the title contained the phrase “ 19.5 percent taxation for Maori” I think that the good people of Otago and everybody else in this country would say: “Whoa hang on here! Come back a step. What is this 19.5 percent for Maori?”. Then they would ring David Parker the local constituent MP and demand to know what this title is truly about. But they will turn the page because the title is not instructive in any way shape or form about the true content of this bill. 
When people see that the bill mentions taxation of Maori organisations they will say that that is good fair and reasonable because every organisation in this country should be taxed at the same rate as every other organisation. There is no problem with that whatsoever. But this title does not contain the most vital piece of information that anybody would be looking for when trying to understand what the title is all about. The term “19.5 percent” is missing. I would suggest that when the people of the South Island look at this bill they are going to ask given that most Maori live in the North Island why the Government is giving special treatment to North Islanders yet again. South Island people will say: “The Government already takes 4c tax away from us in our fuel tax and shovels it up to Auckland to assist it with its transport problems.” All of a sudden they see yet another example of the South Island missing out because the Government has decided to give a special group in our society a cheap rate of tax at 19.5 percent. But the tax rate I must hastily add is one that the ACT party totally agrees with. A flat tax rate of 19.5 percent for everybody would be fantastic and see this country really start to move but this title has not given us an explanation about why a tax rate of 19.5 percent cannot apply to everybody. 
The title also talks about “miscellaneous provisions”. What is a miscellaneous provision at first glance? The public I think are actually very interested in the proceedings of Parliament. They affect peoples’ lives indirectly and of course directly. So people need to know what the “miscellaneous provisions” in the bill are. Yet when the bill is reported in newspapers throughout this country people will be none the wiser. Is a miscellaneous provision something that Mr Gordon Copeland agrees with? He wants to see tax cuts for people with health insurance for example. Is that provision part of this bill? Is it reflected in the title? I cannot see it anywhere. These things are hugely important. 
CLAYTON COSGROVE (NZ Labour—Waimakariri) 
: 
 I rise to support the title of the bill. I think that the title Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill is accurate and does reflect what this bill is all about. 
I want to address in rebuttal a couple of the issues in relation to what other speakers have said directly related to the title. I think that what our Minister said is quite apt. National members forget that in the 1990s the tax rate was 25 percent and non-Maori organisation tax rates and company tax rates were at 33 percent. Forgive me—I am not a mathematician—but I would have thought that there was a gap there. There is a difference in those particular rates. As the Minister said those special tax arrangements have been around since 1939. Dr Lockwood Smith Mr Tony Ryall and a number of others on that side of the House were members of a Government that did nothing to change that situation and that did not object to it. 
As the title reflects this is an equitable and sound measure. Why? Because Maori authorities as mentioned in the title have a different scheme of arrangement from say commercial entities. Maori authorities are communally owned. They have huge constraints on their business activities. Members and beneficiaries of Maori authorities cannot dispose of their assets as the title of this bill reflects in the same way as beneficiaries of private sector entities. 
I am amazed that some members got up and gave redneck racist speeches—which are for the constituency they are trying to appeal to—instead of identifying the accuracy of the title of the bill. Instead of honing in on the title they offered nothing—and they did nothing when they were in Government. I want to reflect on what submitters said about the title and legislation and get it on record because the Institute of Chartered Accountants of New Zealand said that only a limited group of people will qualify for the 19.5 percent tax rate and that Maori authorities face unique issues. Again that is reflected in the part of the title that refers to Maori organisations. KPMG Peat Marwick replied that their clients that is Maori organisations do have the same— 
The CHAIRPERSON (H V Ross Robertson) 
: I say to the member that his comments are becoming completely irrelevant to the title. Would he please bring his points for debate back to speaking to the title? This is a very narrow debate. The purpose and other parts of the bill will be dealt with in Part 1. The member will return to the title please. 
CLAYTON COSGROVE 
: I want members to reflect through this debate on the title that the title accurately reflects the provisions and the intent of this bill. I finish by saying that even Business New Zealand a bastion of belief in National Party policies said that it would be concerned if this bill were subject to abuse but also said it feels that there are equity issues that need to be addressed. Indeed in this title and bill and since 1939 these equity issues are addressed. I commend that. 
LINDSAY TISCH (NZ National—Piako) 
: 
 Maybe the banter could stop so that I can make some important points about the title of this bill. I reiterate as Dr the Hon Lockwood Smith the Hon Tony Ryall and Pansy Wong—who has been on the Commerce Committee is an accountant and has a very good understanding of these issues—have pointed out this bill does cover a number of underlying issues. One might say that that is OK as this title is one of the few that actually state quite a lot. It is quite a long title but it does not cover the underlying issues in the bill. The title refers to taxation annual rates Maori organisations taxpayer compliance and miscellaneous provisions. But that is really just a cover-up because it does not spell out what is in the bill. That is the important point that I will articulate this afternoon. 
One of the important issues here—and this has been mentioned before but it is important that members are fully aware of it—is that the bill gives a preferential tax rate of 19.5c in the dollar to a special group which is Maori. So the title of this bill should be the “Special Maori Taxation Bill” or the “Special Provisions for Maori Taxation Bill”. A number of interpretations can be made of the current title. When I buy a book I want to know what is in it. I do not just want to know what the title is; I want to know what the book is actually about. As previous speakers have said this title is a cover-up for what is really in the bill. This bill gives preferential treatment to one sector of the community. [ 
Interruption 
] That member had a chance to speak but he strayed off the topic. I am referring to the title. We have a provision here whereby a tax rate of 19.5c in the dollar will become the norm. 
When the Minister spoke earlier he said we have had double taxation. I remind the Minister—and I invite him to take a call—that the taxation provision applies only when profits have been retained and have not been distributed at the 4-year peg. That is where double taxation has come in. As my honourable friend has said that is why the title of this bill needs to be changed. 
The other point is that this legislation confers taxation rates on an annual basis. It provides that we will have the highest taxation in the OECD group of countries. This is the only Government that has increased taxation. 
Dr the Hon Lockwood Smith 
: The Czech Republic. 
LINDSAY TISCH 
: My friend mentions the Czech Republic. This bill is about taxation. We are the only country in the OECD group of countries that has increased taxation. 
Hon Tony Ryall 
: Unbelievable. 
LINDSAY TISCH 
: It is unbelievable. It is absolutely draconian. This Government has no idea about what makes the world go round and no idea about business. It has increased the tax rate to 39 percent for those on incomes of $60000. That is why the title of the bill must be changed: it has to reflect the increases in taxation. 
As I said the title is just a cover-up. It does not indicate what is in this bill. What about the corporate tax rate of 33 percent? What does this bill provide? It provides that a Maori authority will have a 19.5 percent tax rate. Does it indicate to my friend Pansy Wong from the Asian community that if she is in business she will receive a preferential tax rate of 19.5 percent? It does not do that. I am in business. Does the bill indicate that I can have a preferential tax rate of 19.5 percent? That is why the title of this bill is so important. In order to reflect the essence of this bill the title should be the “Special Maori Taxation Bill”. 
HELEN DUNCAN (NZ Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 67 
Noes 45 
Motion agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 67 
Noes 45 
Clause 1 agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
Clause 2Commencement 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 This is quite a complex commencement clause. The Minister could assist the Committee a bit in its consideration of some areas of this clause by explaining why there are so many different commencement dates. Let us start with clause 2(1) which states: “This Act comes into force on the date on which it receives the Royal assent except as provided in this section.” That is rather different from usual because bills normally come into effect on the day after the date on which they receive the royal assent. Maybe the Minister can explain why this particular bill does not come into effect the day after the date on which it receives the royal assent. I am not sure why that would be. 
I will now go on to clause 2(1B). Interestingly that contains a reference to the special provision the Government has put in for the superyachts that I guess came to New Zealand for the America’s Cup. They would have come to New Zealand at about the middle of last year so I suppose it makes sense that the commencement date for that provision is 28 May last year. It is a retrospective provision which confers a benefit on those superyachts and luxury pleasure craft. I guess that is a priority for this Labour Government. We have serious child poverty in New Zealand but this Labour Government wants to enact retrospective legislation that excuses from taxation the superyachts and pleasure craft that came here for the America’s Cup. I guess that is why that provision has a retrospective commencement date. That is a demonstration of Labour’s priorities: New Zealand has children living in poverty but the Government is giving tax away in respect of the superyachts. That would appear to be why that provision has a commencement date of 28 May 2002. 
If we then go on to clause 2(2) we see that clause 45 is to come into force not last year but on 15 January 2004. It does not come into effect until almost a whole year from now. One has to explore what clause 45 is all about. Clause 45 does confer benefit. It establishes the new PAYE intermediaries system and that will be helpful to some taxpayers. One fully accepts that but one has to ask the Minister in the chair about its commencement date and it would be helpful if he could answer the question. It would be helpful if the Minister tried to address these commencement dates seriously and actually listened to us instead of talking to the Chair. I am trying to find out why 15 January 2004 is the commencement date for the new PAYE intermediaries. It would seem to me that the start of a financial year would make more sense than that. One could accept that maybe that provision should not come into effect immediately because a whole new system has to be set up. But why is the commencement date for that 15 January 2004? That is not the start of a tax year so it would seem to me that that would add compliance costs. Maybe the Minister could explain the reason for that date. Maybe it has been chosen because 15 January may be the start of the work year. If that is the argument in favour of that date maybe it will add complexity because it does not have anything to do with any tax year. But maybe that is the reason for it. 
I am interested in the clauses that commence on 1 April 2003 because that is just 3 weeks away. We go into an adjournment next week and that does not leave this Parliament much time to pass this bill. If those clauses are to come into effect on 1 April 2003 there is not a lot of time to get this legislation through Parliament. Interestingly those clauses that are to come into effect on 1 April 2003 will enable the Government to take all the tax where a taxpayer has a dispute with the Inland Revenue Department. At the moment a taxpayer can hang on to 50 percent of the tax where there is a dispute but clauses 101 to 103 which come into effect on 1 April this year will enable the Inland Revenue Department to take all the tax that is in dispute. Of course the amount of interest paid on it is way below commercial rates. It is interesting that the Government is being pretty tough on taxpayers by having that provision start on 1 April 2003 although I do accept that that is the start of the new financial year. It means that this Government will have to get off its butt and get this legislation through Parliament because 1 April 2003 is not far away. 
Then there are a number of other clauses that come into force on 1 July 2003. Again it would be helpful if the Minister could advise us why that date has been chosen. I do accept that for some businesses 30 June is the end of the financial year. But we could do with an explanation as to why the Minister has chosen 15 January for the commencement of some provisions and also 1 April—which is the start of the normal financial year—and 1 July for other provisions. 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: 
 We are now speaking to clause 2 “Commencement”. I just observe that on Saturday I will be going to the opening of the new Catholic secondary school in Tauranga. I think the people there will be very disappointed to hear that Mr Copeland and the united Christians have voted for this bill. When I tell them that the commencement date will provide for the first racially based tax concession in New Zealand’s history I do not think that that will go down very well with the many hundreds of people who will be there to hear me inform them that that is what the united Christians stand for. Why is that Minister proposing to compound the error of that special provision by allowing it to come into force before other provisions in the bill that will benefit the community as a whole? Why is he compounding his error by allowing that provision—clause 65—to come into force before the provisions that benefit the whole of the country? That is a very important point. 
The National Party is saying up and down this country that it does not think that there should be tax concessions based on race. The one standard of citizenship that the Hon Bill English our leader—the next Prime Minister—has talked about should be reflected in taxation. It is clear that New Zealanders are yearning for a Government that will put the ethos of the “spa pool liberals” in Cabinet to one side. National will not pursue race-based policies. I want to hear the Government justify why a trust whose beneficiaries are Pakeha cannot distribute funds to those beneficiaries at a tax rate of 19.5c in the dollar. Why do my kids have to pay 33c in the dollar in their tax payments as children and yet my neighbours’ kids if they are Maori can have their trust distribution taxed at 19.5c in the dollar? They can go to the same school and travel on the same bus as my kids but because their parents or they are beneficiaries of one Maori trust or another they will be treated differently and that is wrong. 
I am opposed to any commencement date that will allow that to happen. So I have moved an amendment to delay the introduction of this bill until 1 July 2006 when the next National-led Government will repeal those provisions. We will repeal those provisions. I tell the Government that everywhere I go Bill English is getting a big tick for raising the issues that I am raising in this debate. The Government knows that because its focus groups tell it what our focus groups tell us. This is an issue for which the time has come and Bill English is the leader who has the credibility and the presence to be able to advance that argument more than any other leader in this House. That is what New Zealanders say. 
Why do my kids have to pay a higher taxation rate if they receive a distribution from a trust than some kids down the road who just happen to be Maori? Why should that happen? [ 
Interruption 
] I say to Mr Duynhoven that that is not right. Why should Mr Duynhoven’s children have to pay 33c in the dollar but someone else’s children pay 19.5c in the dollar? It is just not fair. There is the argument that for all the beneficiaries of Maori trusts their effective tax rate is 19.5 percent. How patronising it is to Maori to say that they are all on the lowest tax rate so that is what we will make the tax rate. That is atrocious; that is patronising. What about saying to people that they will be treated the same as others? That is how they would get ahead—not with this sort of patronising nonsense. 
PHIL HEATLEY (NZ National—Whangarei) 
: 
 I can only continue Tony Ryall’s sound arguments put to this House regarding the commencement dates and the particular issue he raises that not only is there a more favourable treatment for Maori in terms of the tax rates—whereby we have 19.5 percent for Tony Ryall’s neighbours’ children if they are Maori— 
Darren Hughes 
: What clause is it? 
PHIL HEATLEY 
: Clause 68. In fact if Labour members had read the bill they would find that clause 68 changes the tax rate so that not only will Maori children receive a more favourable tax rate than Tony Ryall’s children who live just next door but that that favourable tax rate will come into force on a commencement date earlier than for Tony Ryall’s children. In other words it is not just more favourable treatment it is more timely treatment. I focus on that because we are talking about the commencement dates. 
I was interested to see that those provisions—we are talking about clause 2 but clause 68 talks about that tax rate—come into force on the day that this bill receives the royal assent. Whereas other conditions such as clause 45—a considerable number of Labour members have not read the bill but if they turn to clause 45 they will see a graph in the bill that Ministers have approved. Did members notice that there is a graph in the bill that Ministers have approved—as opposed to graphs that Ministers do not approve—that explains the payroll and employee information from employer to the pay intermediary to the employee. Of course the Inland Revenue Department is kept in the loop. 
Legislation addressing issues like that will not come into effect until 15 January 2004. Yet that is an essential part of the bill of the running of this country and particularly of businesses. Why will those provisions not come into effect when this legislation receives royal assent? That is the question that I put forward. Tony Ryall has put that question forward as will other members on this side. 
I notice a whole lot of new provisions in the Supplementary Order Paper. The commencement dates of those provisions are put back much further than the provision of the favourable treatment in terms of tax for Maori. That has been expanded from the original bill; where there were 9 clauses to come into force on 1 April 2003 there are now 16 clauses that were to come into force at the same time that Maori receive more favourable treatment under New Zealand’s tax law that have been put back. 
I just put it to the House that members can argue all they like that Maori should receive more favourable tax treatment but will they also argue that they should have more timely legislation that they should receive that treatment in a more timely manner? The level playing field is fast disintegrating and that is indicated in this bill. Clauses 133 to 136 137—part 2 of that—138 and 142: 1 July 2003. They are put back even more—another few months apart from that which addresses the more favourable tax treatment of Maori. If members investigate those parts of the bill clause 133 for example which for members who have not read it addresses interpretation—that concerns me. 
Hon PAUL SWAIN (Associate Minister of Finance) 
: 
 I will answer very quickly the questions asked by Dr the Hon Lockwood Smith and keep them in the same order as in the bill. First as he rightly said the superyacht one was the date of the announcement by the Government. Second the accreditation period to register as PAYE intermediaries is to apply from the pay periods after 1 April 2004 which is the tax date. Third fixing up the area of previous legislation: that is the date to which the previous legislation applies. Fourth as he rightly points out that is the beginning of the tax year; fifth the issues related to GST and telecommunications: those were the agreed dates with the industry. 
CRAIG McNAIR (NZ First) 
: 
 I want to speak just briefly to the commencement clause. I heard Tony Ryall say in his speech that he was putting up an amendment to it. New Zealand First wants to get in behind that amendment and support it but probably not for quite the same reasons Tony Ryall gave. Tony Ryall obviously lives in a little bit of a fantasy land in thinking that Bill English will be the Prime Minister in 3 years’ time. Bill English just does not have enough charisma; he is just not going to get there. However I come back to the commencement clause. Tony Ryall asked members opposite a very good question about one of the issues he was talking about. I do not think many members here caught the question because he was not trying to be too loud but I caught it. He asked why other ethnic groups do not get the benefit of this 19.5 percent tax rate and Mahara Okeroa said: “Because you’re Maoris.” Darren Hughes knows because he heard it. People on that side of the Chamber heard it. Mahara Okeroa said that the reason other ethnic groups do not get a 19.5 percent tax rate is that they are Maori. I thought that was pretty honest but I guess he answered that question very well. 
Sitting beside me is Edwin Perry who is one of New Zealand First’s Maori members. He is the chairman of a trust involving about 4000 acres and 80 beneficiaries. Those people are behind what New Zealand First is saying here. They say that they want this measure and that is fine but they want it to apply to all New Zealanders. They do not want special or preferential treatment. That is the message Edwin Perry has been getting and he is the chairman of a Maori trust. One has to ask oneself a question when a member from the Labour Party Mahara Okeroa says bluntly that the reason is that they are Maori— 
The CHAIRPERSON (Ann Hartley) 
: I ask the member to come back to the commencement date. 
CRAIG McNAIR 
: Thank you for your guidance Madam Chair. I have given New Zealand First’s reason for supporting Tony Ryall’s amendment. It is definitely not for the reasons he gave in relation to Bill English taking off his shirt and trying to become the Prime Minister in a few years’ time. We will support his amendment and oppose the commencement date. 
GERRARD ECKHOFF (ACT NZ) 
: 
 Many would ask whether the commencement date of a bill is important and worth the bother of debating. I think it is. Commencement dates are very important for a very obvious reason. If we ask people what the significant dates are in their lives they will often say—[ 
Interruption 
] If that member over there would stop squawking she might actually learn something. If we ask people what the important dates in their lives are one that they will say is important is Christmas Day 25 December. Everybody reels that off. Others say that Anzac Day is a hugely important date. They also say that Waitangi Day is important although in increasingly fewer numbers. Nevertheless 6 February is an important day. Those are the dates when the commencement of a special celebration took place. So commencement dates are very important. I suspect that the commencement dates in this bill will also rank alongside some would say infamy because they are the dates we will introduce in legislation that give a special tax rate to Maori. That is why the commencement of this process is so terribly important. 
At this time in this Parliament a select committee is sitting on a question of fairness amongst other things in the scampi inquiry—essentially it is on a question of fairness. I ask the Committee this question: is the commencement date in this legislation fair? The answer—and I always get a good answer when I ask myself a sensible question like this—is “Absolutely not.” It is not fair to commence legislation that gives one section of our society a special dispensation. It would be marvellous if the commencement date for a 19.5 percent tax rate were next week or on the particular date that this legislation will be enacted. That would be something that would be welcomed by any sensible thinking person in this country. Every member on this side of the Chamber I suspect including members of the United Future party would say that the commencement of a fair and reasonable tax rate for everybody in this country is appropriate. 
If we are to have this factionalism this sectionalism then I would stand and say that I think it is appropriate we should have a commencement date for special tax rates for high-country farmers. Now that would be a hugely popular measure amongst 350 of us but I suspect that the rest of our community would say that a commencement date for special treatment for a small grouping of people like that would be inappropriate—and I guess that in a quiet moment I would have to agree with that—because I do not agree and I am sure the majority of people in this Chamber would not agree that we should at any time or any stage of our deliberations on this bill look at commencing legislation that is going to give separate special treatment. 
What is the word for that separate development? It used to be a South African word. I am sure it will spring to mind shortly. I think we all know what that word is. But that is the problem that will occur if we have a commencement of special treatment for a special group. Maori are a special group—I give them that. There is no question about that just as I say that high-country farmers are a special group just as people who live in Tauranga for example might be a special group. But we cannot isolate them and we cannot say that those people deserve special treatment and should have an enactment that gives them an advantage over the rest of our society. So that is why the commencement of this legislation should be held over and I support Mr Tony Ryall’s contention that when the next election occurs—and I am sure it will be a centre-right Government by then—we can revisit this question of a 19.5 percent tax rate for everybody. 
HELEN DUNCAN (NZ Labour) 
: 
 I move  
That the question be now put 
. 
LINDSAY TISCH (NZ National—Piako) 
: 
 The commencement date of legislation is very important but when I look at the commencement dates that are mentioned here on page 6 of the Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill I note that a number of dates are retrospective. On Supplementary Order Paper 60 which has been lodged in the name of the Hon Dr Michael Cullen I note there under the commencement date sections 5B and 65(14B)— 
Dr the Hon Lockwood Smith 
: That’s retrospective. 
LINDSAY TISCH 
: Yes they are treated as coming into force on 28 May 2002. That is retrospective. That is last year. So here we have commencement dates that are retrospective. Now this party does not stand for retrospective legislation. 
David Benson-Pope 
: What do you stand for? 
LINDSAY TISCH 
: We are standing for lower taxes. That is what we stand for and we are not going to support retrospective legislation that comes into effect on 25 May 2002. Further down Supplementary Order Paper clause 2(4) states that sections 58B and 165 to 171 are treated as coming into force on 17 October 2002. Once again we have retrospective legislation. Here we have commencement dates that have already happened as far as this bill goes because they are retrospective. 
My colleague the Hon Dr Lockwood Smith talked about section 100 which members will find in clause 2(5). That clause in particular states that those sections come in on 1 April of this year and I just draw the House’s attention to that section 100 in the Supplementary Order Paper. Members will notice that it is the same in the bill but it is reflected here in the Supplementary Order Paper. What does clause 100 say? This is significant in terms of a commencement date. It is very significant because clause 100 is the obligation to pay tax where competent objection has been lodged. It states here: “the Commissioner may require a taxpayer to pay all tax in dispute if the Commissioner considers that there is a significant risk that the tax in dispute will not be paid should the taxpayer not succeed in objection proceedings.” 
This is a very important part of the bill and we will be discussing clause 100 in detail when we get into Part 3 of the bill. But this now includes a provision that on 1 April which is not far away this will come into effect. We are opposed to that in particular because it takes away the rights of those people who may be in dispute with the Inland Revenue Department and having some issues they have to address. We feel that natural justice should prevail and we will not support that sort of clause being included. 
We will not support the commencement date where we have legislation that gives favourable treatment to any one sector. We know what this bill is about. It is about a 19.5 percent tax rate for a certain sector of the community. That is what it states. It is very interesting that the people over there want to object but if they actually read the bill they would know what it says. We will not support any commencement date that gives favourable treatment to one sector. 
As I said in the debate on the title the bill is misnamed. It should be the “Special Maori Taxation Bill”; so any commencement date that confers special privileges on any sector will not be supported by National. We will not support tax breaks on a racial basis so any commencement date that confers that will not be accepted here. We will not support a commencement date where we have much higher compliance costs. That is the name of this bill. When we go back to the name of the bill it talks about it being a taxpayer compliance and miscellaneous provisions bill so even in the title we will see huge compliance costs and we will not be supporting this commencement. 
DARREN HUGHES (NZ Labour—Otaki) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
Noes 45 
Motion agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 67 
Noes 45 
Amendment agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
A party vote was called for on the question  
That clause 2 as amended be agreed to. 
Ayes 67 
Noes 45 
Clause 2 as amended agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
Part 1 Annual Rates of Income Tax for 2002-03 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 Part 1 of this Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill consists of only one clause but it is a huge clause. This clause confirms the current tax rates on the people of New Zealand. What we now know about the tax rates being imposed by this legislation is that they will confirm New Zealand in the top half of the OECD but not for our economic growth—no we are down near the bottom of the OECD for our economic growth.  
The Economist 
 published on 1 March this year 2003 confirms that New Zealand ranks sixth in the OECD—top half of the OECD—for the level of income tax direct tax we impose on industrial workers with a family. The tax burden on the average working family in New Zealand is the sixth highest in the OECD. 
What is more the rate of increase since Labour has been in office according to OECD data released just 2 weeks ago shows us that this Labour Government has clawed from the average working family in New Zealand the biggest increase in tax that has occurred in any other country in the OECD—except the Czech Republic. What a great record; what pride this Labour Government must have! The Hon Paul Swain in the chair must feel delighted that he has clawed from the average working family in New Zealand the biggest increase in tax of any country in the OECD—other than the Czech Republic. Part 1 confirms that next year that process will continue; that the Government will continue to claw more money from average working families. 
I want the Minister to address this particular issue. Labour claims to care about low-income people. I want him to face this fact: Part 1 will confirm that low-income working people with say one two or three children earning between $10000 and $15000 a year will pay an effective marginal tax rate of 100 percent. 
Opposition Members 
: What! 
Dr the Hon LOCKWOOD SMITH 
: I repeat this for the benefit of the Minister in the chair: working families earning between $10000 and $15000 a year will pay an effective marginal tax rate of 100 percent. For every dollar they earn above $10000 a year the Government takes the lot. Part 1 confirms that fact. I want the Minister in the chair to stand and tell the Committee why he is exempting the wealthy people on superyachts from paying any income tax at all while for poor families earning between $10000 and $15000 a year for every extra dollar they earn the Government takes 100 percent and if we add on GST it is more than 100 percent. 
That is frankly disgusting. It is disgusting to exempt workers on superyachts from paying any tax and to tax our poorest families 100 percent. It is not just on those poorest families either. Take middle-income families. Take a family with four children earning between $40000 and $55000—there are a lot of working families with four kids in that tax bracket—Part 1 confirms their effective marginal tax rate is 63 percent. If they earn an extra dollar above $40000 the Government takes from a family with four children 63c of that extra dollar. Add GST and if they are spending all they earn which they probably will be on $40000 with four kids—they will not be saving any money so they will be spending it all—and the Government takes 75 percent of every extra dollar they earn above $40000 for a family with four children. That is disgusting. I want the Minister to justify what he is doing to working people in this country. 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: 
 I want to support my colleague Dr the Hon Lockwood Smith. We are talking on the Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill which is a long-titled bill. Amongst its many provisions is one that provides a concessionary taxation rate for people on the basis of the colour on their skin. That provision is not in Part 1 which we are discussing. Part 1 does not provide a taxation benefit depending on whether one is Maori; this part confirms the current tax rates. 
I think it is worth repeating to those who are listening to this debate the very very enlightening figures that the National Party’s spokesperson on revenue Dr the Hon Lockwood Smith talked about. He said that  
The Economist  
provided information not 2 weeks ago that proved that New Zealand is in the top half of the OECD—not by 2011 but now—when it comes to the level of income tax on workers with a family. In fact that information shows that New Zealand has the sixth-largest taxation burden on working families in the entire Western World. Further Dr Smith went on to tell the Committee that New Zealand has had the biggest single increase in the taxation burden on working people. The tax burden has increased more on working people here than in any other country in the Western World except the Czech Republic. So that means that New Zealand’s working families are carrying more of a tax burden than working families in any country—just in the last few years under Labour—other than the Czech Republic. I presume that in the case of the Czech Republic that has a lot to do with industrialisation yet that certainly would not have anything to do with it here in New Zealand. That is just outrageous. 
I am not prepared to vote to confirm the current tax rates. This Government is on track to collect several billion dollars more from working New Zealanders than it needs. Government members do not need to collect several billion dollars more from them and I will not vote to give it to the Government. This Government cannot be trusted with our money. It is to close down the private prison in Auckland that costs $43000 per prisoner and to have a public prison that will cost $72000 per prisoner. That is a waste of our money and I will not give this Government one extra dollar. This Government does not realise that by closing down that private prison it will now have to staff the prison as per the collective employment agreement. That means the number of staff in the prison will go from 120 to 480. Cabinet did not work that out when it made that decision. It means more of our hard-working taxpayers’ money will be wasted and I will not give the Labour Party one more dollar of that. 
During Dr Smith’s speech he talked about the fact that a low-income family earning between $10000 and $15000 a year with one child faced an effective marginal taxation rate of 100 percent. That means that for every dollar the family earns over $15000 it loses a lot of the social welfare and inland revenue add-ons. Basically it is a substitution: the family loses $1 off the add-ons for every dollar that it earns. During Dr Smith’s debate the senior Government whip Mr Benson-Pope from Dunedin said that that was too low and asked the Minister whether we could do better than that. In fact he went on to suggest the effective marginal taxation rate should be $1.05 for every dollar. He said the effective marginal taxation rate should be 105 percent. I want to explain to Mr Benson-Pope who is on $120000 a year as the senior Government whip that when one is earning $15000 a year a 100 percent effective taxation rate is an awful lot of money. He may have forgotten what it is like for those people now that he is on $125000 a year but I say that when one is on $15000 a year every dollar counts. I am not prepared to vote extra money to that Labour Government when its senior whip says an effective marginal taxation rate of 100 percent is not high enough. That is appalling. 
Dr Smith also went on to say that a working family on about $40000 a year with four kids faces an effective marginal taxation rate of 75c in the dollar. 
David Benson-Pope 
: You are so concerned— 
Hon TONY RYALL 
: That member says that we are concerned. We cut taxation for those people but he has not done so. 
CRAIG McNAIR (NZ First) 
: 
 It is very interesting to be talking to this bill. It is an undeniable fact and I am sure that people from different parties will agree with me that the higher one’s taxes are the more that stifles growth. That is a fact. Would the member agree with me? 
Brian Connell 
: Basic construct! 
CRAIG McNAIR 
: That is right; yes that is very true. That is in honour of the Minister of Maori Affairs. If we are to look at the basic construct as the Minister of Maori Affairs would say as far as tax weighing down the growth of a country is concerned we have to look at a few facts. So let us do that. We see that New Zealand’s average gross domestic product (GDP) volume growth since 1985 was 2 percent. If we compare that with the growth rate of other nations we find that every year for the last 16 years we have been falling behind. So the predicted growth that is being described as robust by this Government continues to lag behind the predicted growth in other OECD countries and is far below both our potential and our requirements. When we compare our performance with that of other countries of similar populations but with fewer resources the picture is even gloomier. That all comes back to what I was talking about as far as the annual rates of income tax for 2002-03 are concerned. 
New Zealand First has always been and still is on a campaign to think outside the square a little more. We need to think more creatively with regard to taxation and what is going on in terms of economic growth in New Zealand and how to expand growth. One of the ways that we can expand growth is by providing taxation incentives to exporters. We just need to look at a few figures with regard to that. New Zealand’s exports total US$3600 per man woman and child. The figure for Ireland is US$19300—over 530 percent more. Our beautiful country has many resources and things to export but Singapore’s exports are US$34700 per person—10 times more than New Zealand’s. 
Gordon Copeland 
: I raise a point of order Madam Speaker. I am reluctant to interrupt the speaker but I really fail to see the connection between the export levels of various countries and the rates of taxation. 
Madam DEPUTY SPEAKER 
: That is a valid point. One clause is about income tax. 
CRAIG McNAIR 
: That is exactly what I am saying and Gordon Copeland has to agree with me—I heard him talking in his maiden speech about how taxes weigh down an economy. If one can reduce the taxes then one can create more growth. That can be done in many ways. I am talking about tax incentives; that is one way of increasing growth. The National Party members agree with me. I have heard Dr Lockwood Smith many a time saying that the amount of income tax— 
Madam DEPUTY SPEAKER 
: It is about the basic rates of income tax. 
CRAIG McNAIR 
: The higher the basic construct of the income tax rates the harder it will be for a country to grow. That is all I have to say about that. 
I also feel that higher annual rates of income tax will put a heavy weight on families. United Future members are supporting the Labour Government. 
Dr Muriel Newman 
: No are they supporting the Labour Government? 
CRAIG McNAIR 
: That is what I hear through the grapevine. Those members are strong advocates of the family. 
JILL PETTIS (Junior Whip—NZ Labour) 
: 
 I move  
That the question be now put 
. 
Dr MURIEL NEWMAN (ACT NZ) 
: 
 I rise on behalf of the ACT party to speak on this bill which introduces race-based tax laws. We absolutely oppose every part of the bill. 
Part 1 is the part that concerns our income tax rates and it tells me and every other New Zealander that Labour has turned its back on working New Zealanders. Traditionally working New Zealanders used to vote for the Labour Party. My family voted for Labour until 1996 because we were a poor family and we thought that Labour stood up for poor families and poor workers. This bill confirms that that has absolutely changed and Labour has now turned its back on its traditional voting bloc. Under Labour working families are worse off than they have ever been. They are 2.4 percent worse off than they were before Labour came into power. That means that the average family is working harder and going backwards. I say to the Minister sitting in the chair that he should take a call and try to explain why it is that after New Zealand has had the best economic conditions in decades working families have slipped backwards. I would like to hear the Minister’s answer to that. 
Low-income working New Zealanders pay the highest taxation rate in the world. Those people being taxed at 19.5c in the dollar in New Zealand would be paying 3.5c in the dollar in Britain. Their income tax would be 3.5 percent of their income there whereas here it is 19.5 percent. That is too high. We should be seeing right now a bill to lower taxes for workers. If this bill lowered taxes for workers ACT would be supporting it. Instead it is a bill that lowers taxes for Maori. I tell members why that is. The reason is that Labour has a strategy of trying to buy support from Maori Pacific Islanders people on welfare and superannuitants—not from workers who are out of the door. Labour has figured out that if it looks after that lot it will have over a million voters and it will stay in power. That is absolutely shameful. We need a Government that provides incentives for hard work and that rewards people who go out of their way to try to better their families. We should be doing that through lower taxes for those families and giving the money back to families to use in their best interests not giving it to a Government to buy votes. 
This Government is very lucky. Firstly it had a low exchange rate—as a result of Labour getting into power all confidence left New Zealand and the exchange rate plunged—which has meant that exporters have done well. There has been a windfall gain in earnings which the Government did not expect. Secondly the Government stuffed up the immigration numbers. An extra 33000 people came into the country who had not been planned for which has driven the economy. So there have been two different events driving the economy. But that is not sustainable. One just has to watch the world news to know that New Zealand’s economy will get crunched along with all the other economies. 
This Government has not put the economy on a sound footing. To do that it should lower taxes and reduce compliance costs on small business and get on with the process of welfare reform. Instead of being soft on welfare so that more people go on to it the Government should be helping those people who are on welfare to get themselves off it and into jobs so that they can be independent of the State. John Tamihere brought some of those things up in the House and what happened? Labour bashed him gagged him and silenced him. We want to know whether Labour members listened to Mr Tamihere. I suspect they did not. ACT has been saying those things since we came into Parliament and it is shameful that Labour has not realised that that is a plan for growth. Lower taxes are the key to getting this economy on a sound footing so it can weather any storm that comes up. 
Part 1 of this bill tells us that the Government is ignoring common sense and experience from around the world. Every other sound economy has lower taxes than ours not higher taxes. What Labour is doing is absolutely shameful and for Labour to be turning its back on working families is even worse. Those people used to vote for Labour but now they have to vote for other parties in Parliament instead. 
MAHARA OKEROA (NZ Labour—Te Tai Tonga) 
: 
 I move  
That the question be now put 
. 
BRIAN CONNELL (NZ National—Rakaia) 
: 
 National does not accept what has been proposed in Part 1 clause 3 “Rates of income tax for 2002-03 income year”. Despite the golden weather of the last couple of years New Zealand stands at the edge of a cliff economically speaking. We are simply not earning enough to support our level of expenditure. We are languishing in the bottom half of the OECD and the Pinocchios Clark and Cullen deny that they have even had a discussion about setting a target to turn that around. Treasury is predicting growth of around 2 percent for the next decade. The level of Government expenditure as a percentage of gross domestic product is just far too high and compliance and red tape are killing business. 
If we are not able to grow our economy we must reduce our expenditure. [ 
Interruption 
] Surely the member who is yelling out understands the connection between the levels of expenditure revenue and taxation. 
Hon David Carter 
: And therefore rates. 
BRIAN CONNELL 
: And rates. Every housewife in the country understands the basic budgeting concept that if one cannot earn enough then one must stop spending. But the Government ignores that basic premise. It wants to keep dishing out money to unwitting folk so it keeps paying for them. The damage that does to this country is absolutely sickening. To grow our economy in a sustainable way we must reduce taxation not increase it as that stimulates investment which in turn brings about jobs and prosperity. 
It is a basic construct that if we want to share wealth—and I do not mean just to distribute it—we first have to create that wealth. It might surprise members to learn that only 47 percent of the people in this country are actually earning a living. Yet this Government is hell-bent on tapping them for more and more not just through income tax but through indirect taxes the compliance costs of legislation like the Health and Safety in Employment Act and the Holidays Act which are eroding profits and as people from Rakaia know petrol taxes. 
David Benson-Pope 
: We’re on Part 1. 
BRIAN CONNELL 
: The Government whip is yelling out again. When he does that it makes one think that we cannot bring on the legislation dealing with dangerous dogs quickly enough because I would support him being muzzled. 
This Government’s problem is that it has no vision and no coherent growth strategy. Its only answer is to push up taxes and to take more from those who already contribute far too much. If we want our children and their children to call New Zealand their home then we must address that problem. I have lived and worked in economies where if the growth rate got to 4 percent people became pessimistic. Yet we are being conditioned to think that 4 percent is the best that we can do. Well I say “Humbug!” to Michael Cullen and his cronies. If they had not lived in academia for most of their lives they would know how to make a buck rather than just how to spend somebody else’s. 
The Government wants to keep putting up taxes in order to support its welfare expenditure. It might surprise members of the Committee to know that since the 1970s the number of beneficiaries has risen to such an extent that the whole working-age population of beneficiaries would not fit into the city of Christchurch. We have seen a twelvefold increase in the number of beneficiaries yet our population has not even doubled. Every working-age beneficiary in this country at the moment has only four people supporting him or her. We need to address that issue not by putting taxes up but by lowering taxes so that we can stimulate growth. 
DAVE HEREORA (NZ Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
Noes 45 
Motion agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
The CHAIRPERSON (Ann Hartley) 
: The amendment in the name of the Hon Tony Ryall to clause 3 is ruled out of order under Standing Order 316. 
A party vote was called for on the question  
That Part 1 be agreed to. 
Ayes 67 
Noes 45 
Part 1 agreed to. 
Labour 52; Green Party 7; United Future 8. 
New Zealand National 27; New Zealand First 13; ACT New Zealand 5. 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 I raise a point of order Madam Chairperson. I have delayed raising this point of order until now because I did not want in any way to be questioning your decision to accept the closure. I would like you to reflect on a very important issue. A senior colleague left the Chamber in disgust having waited for some time to speak on probably the most important debate— 
The CHAIRPERSON (Ann Hartley) 
: The member will be seated. The member is relitigating the— 
Dr the Hon LOCKWOOD SMITH 
: I am not. 
The CHAIRPERSON (Ann Hartley) 
: I have put the closure. It is my decision and there is no debate on it. It is a matter for me to decide and I have decided. The matter cannot be relitigated. I warn the member about relitigating. 
Dr the Hon LOCKWOOD SMITH 
: I raise a point of order Madam Chairperson. 
The CHAIRPERSON (Ann Hartley) 
: I warn the member that it had better be a new point of order. 
Dr the Hon LOCKWOOD SMITH 
: My point of order relates to the general issue of the acceptance of closures. I have made it very clear— 
The CHAIRPERSON (Ann Hartley) 
: I am sorry; the member will be seated. There is a clear Standing Order on closures and it is the Chairperson’s call. I have addressed that and I have called the closure correctly. The member cannot relitigate the closure issue. I warn the member that raising points of order that have been ruled on and that I have dealt with is in itself disorderly. 
Dr the Hon LOCKWOOD SMITH 
: I raise a point of order Madam Chairperson. I have been a member of this Parliament for 19 years. There is no member of this Parliament who has served as a Cabinet Minister longer than I have. I do not raise a point of order for no good reason. I accept absolutely that it is the Chair’s perfect right to accept a closure. I am not disputing that in any way at all and obviously a Chair has to weigh up certain reasons for accepting a closure. My plea however is that where debates are of huge moment to the whole of New Zealand—and I do not want to refer to the specific issue here; let me just leave it as a general case—the Chair considers that fact when weighing up whether to accept a closure. That is my point of order and I trust it is not out of order. 
The CHAIRPERSON (Ann Hartley) 
: I have taken those matters into consideration. That is how the decision was made. 
Part 2Amendments to Income Tax Act 1994 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 Part 2 is probably the most offensive part of this legislation. Part 1 which we have just debated is bad enough because it locks into place tax rates on our lowest-income people that result in 100 percent of effective marginal tax rates. But Part 2 does something even worse. Clause 68 sets a favourable tax rate for a proportion of our population based purely on race. Members of the Opposition of many ethnic backgrounds find that offensive. For certain organisations defined as Maori organisations clause 68 prescribes a new tax rate of 19.5 percent. We would have no objection to certain organisations receiving a tax rate of 19.5 percent if a general condition applied—that is if 90 percent of the beneficiaries of an organisation were people on a 19.5 percent personal tax rate. No one could object to that because the ultimate rate being paid by the beneficiaries is 19.5 percent and such an organisation should qualify for that. But that is not what Part 2 does. It picks out only those organisations that are Maori. 
Let me challenge the Minister in the chair to identify just one New Zealand person who under Part 2 could receive the benefits of a 19.5 percent tax rate but is not a Maori person. If the Minister can name one I would be prepared to apologise profusely but as I read clause 68 and the various other clauses in Part 2 the only people who can benefit from that 19.5 percent tax rate are Maori. That is why it is a racist tax measure and why Chen Palmer and Partners argued before the select committee that it was contrary to the New Zealand Bill of Rights Act. If I remember correctly when we tried to get information from the Attorney-General she would not tell us what her advice was on the matter. 
When we have the consultancy of a former Prime Minister and a former leader of the Labour Party telling us that this provision is contrary to the New Zealand Bill of Rights Act we have an issue. What is more we know that the Federation of Maori Authorities has written to the Minister of Finance wanting the decision of the select committee not to allow this special beneficial tax rate to be extended to wholly-owned subsidiaries to be changed so that wholly-owned subsidiaries can get the benefit. That shows that this 19.5 percent tax rate confers a very real competitive advantage on Maori businesses alone. If there are two businesses side by side and one is owned by Pacific Islanders—whose beneficiaries sadly are overrepresented among our low-income people—the Pacific Island business where 90 percent of the shareholders are Pacific Islanders will not benefit from this special tax rate. Only a Maori business will get it. 
National considers that does not confer one standard of citizenship in this country. It is objectionable to most New Zealand people and that is why we are implacably opposed to that provision. We accept there is a problem with the status quo. We accept that under certain circumstances some Maori organisations could be doubled taxed. If they retained their earnings for 4 years before distributing they could be doubled taxed. That is not right either. We accept that change is necessary. That is why we initiated a process to examine this issue but to come up with an answer that confers a privilege—a competitive advantage—based purely on race is simply not acceptable. That is why I challenge the Minister to name one person other than a Maori who under Part 2 could receive the benefits of a 19.5 percent tax rate. If he can do so I will apologise. 
GORDON COPELAND (United Future) 
: 
 I would like to respond just briefly to the frequent challenge that the Hon Lockwood Smith has made to the Minister in the chair Mr Swain and also I think in an earlier speech to United Future. He said he will apologise if we can name under clause 68 one person who is not Maori who will receive a tax rate of 19.5c in the dollar. I would like to ask whether the member is confident that no one of Chinese ancestry— 
Progress reported.