Willis NicolaNICOLA WILLIS (National): I rise to oppose the Taxation (Income Tax Rate and Other Amendments) Bill. We here on the National side oppose it in principle because we believe that you can't tax your way out of a recession and that in fact this is entirely the wrong time to be adding new taxes and new costs to those working hard in our economy.I want to in this contribution put on the record for Hansard the shambles of a process by which this bill has come to the House. Because we all know the back story here—it's been canvassed by other members—whereby Labour campaigned on raising the top tax rate and as has been the case in the past the tax experts came out the economists came out everyone came out and said Well we'd like to warn you Labour that if you do that and you open up a massive gap between the trust tax rate and the top personal rate then you are very likely to see some avoidance behaviour." This was not new or revolutionary advice; this was very typical advice. And Labour said "Oh no no no nothing to see here. Let's all move on." And then lo and behold post the election drafting the bill Labour decides that actually it turns out all those experts were absolutely right. There is a significant risk here that people are going to try and avoid this tax by funnelling income through trusts. So what does the Government do at that point? Does the Government say "Well we've made a commitment in the election that we are not going to introduce any new additional taxes and we must honour our commitment"? Hon Stuart Nash: Penny and Hooper.NICOLA WILLIS: Because of course that would be the position of integrity wouldn't it Mr Nash? That would be the position of honesty of doing what you say you will of campaigning on a promise and keeping to it. No no. That was not the response that Labour decided to have. Instead what Labour did was they said "Hey here is an opportunity for us to potentially introduce a sneaky additional tax. But we can't do it straight away we better trump up a bit more of a case. So let's create some new powers." Is it that surprising that Labour would create new powers for the commissioner? "Let's create some new powers for the commissioner to keep an eye on it and let's make sure those powers are really strong and allow the commissioner to obtain information to watch what's happening in trusts and to ensure that this information can be used to formulate policy in the future."Now the problem with all of this is that this is all being done in a rush; we are debating this under urgency. So it appears that the Minister of Revenue didn't really stop to think what the implications of introducing these significant new powers might be. That was until he put on his other hat as the Attorney-General. So at which point the Attorney-General assesses this bill against our New Zealand Bill of Rights Act and says "Does it have any problems?" Oh yes there are significant problems with this bill because what it does is it actually creates a search and surveillance concern and a freedom of expression concern—such that the Attorney-General has issued a section 7 report saying that it is inconsistent with the New Zealand Bill of Rights Act. So we have in this House a bill being debated that causes major concerns when it comes to the rights New Zealanders expect to be protected.So what does the Attorney-General do then when he comes to this conclusion that the bill is causing these major breaches? Does he perhaps have a word with his friendlier self the Minister of Revenue and say "Well you know perhaps you need to amend that perhaps you need to come up with something else?" No no. Instead what the Attorney-General does is suggest a clause that could be used to mitigate against this and does absolutely nothing more. So we have this spectacle of a bill being introduced under urgency in this House that most members in the Chamber only saw a few hours ago that the Attorney-General is advising should be amended but that hasn't come to this House with any of the amendments. I just want to say that that is a shambles of a process. And the new members opposite should be aware that this is not standard practice by a decent Government that knows how to get legislation through. This is shambolic and it speaks to a degree of confusion in the head of one Hon David Parker that I find concerning and somewhat bedazzling. Why you couldn't just talk to your better self when you were putting this report together I do not know.ASSISTANT SPEAKER (Hon Jacqui Dean): Order! Leave the Speaker out of the debate.NICOLA WILLIS: So having put these process issues on the record let me turn now to three key areas where National has concern. The first that we have telegraphed consistently is that we are concerned that this bill will erode the integrity of our tax system. It will do that by encouraging taxpayers to find ways to avoid tax; this is a risk that occurs when there are large differentials between different rates. This will have a high differential—not only with the trust tax rate but with the corporate tax rate—in fact an 11-point differential between those two rates. When you see those big differentials opening up the incentives are clear. The incentives are to find a way to somehow funnel income through the lower tax option. We are concerned that by further increasing these differentials we will see a further erosion of the integrity of our tax system. And that is absolutely backed up by the advice of the IRD who in the papers tabled in this House acknowledged that that is a major issue that does draw into question actually how much revenue this tax will earn at all what behaviours we can expect to see and what impact it will have. So that is what the official advice is telling us. Our second concern that I have canvassed is around these new powers for the commissioner and what they mean in practice and how they will be mitigated in order to comply with our New Zealand Bill of Rights. But the third area is actually how well this bill measures up with its own objectives with the measures that in fact it sets for itself—because it does a very poor job on both. The first purpose that is stated for this bill is to increase revenue and as some of the members have canvassed it is really important here to think about these big numbers in a broader context because it's estimated that this bill may raise $550 million but you need to think about that number in the context of the debt that New Zealand is currently acquiring which is a much much bigger figure: $140 billion by 2024. When you consider the scale of this revenue this tiny bug versus the enormous debt you know very quickly that this has absolutely nothing to do Jamie Strange with paying down New Zealand's debt or creating revenue. That's a complete furphy of an argument. Grant Robertson may have hoodwinked you in caucus about that one but there's no substance to back it up when you look at the actual numbers. So then you turn to the second purpose and I also want to point out on that revenue point that the advice in these papers is very clear that officials are very concerned about what those revenue numbers will actually be given all the behavioural issues that may be occurring.But the second issue you have is that the bill says that one of its purposes is to have a distribution impact. So this is Jamie Strange's point: that somehow this is going to create a new dawn of fairness in New Zealand. Again we do need to look at the objective numbers here because what the analysis from Treasury says is that this will have a tiny negligible impact on inequality. Absolutely tiny. There is that wonky way that Treasury measure this: it's called the—I'm going to mispronounce this—the Gini coefficient and what the analysis shows is that that number reduces from 0.493 to 0.491 a 0.2 percent reduction. It is absolutely tiny and again what this does is it shows you that the high level argument "Oh it's going to raise a lot of revenue to help pay down debt it's going to make New Zealand fairer."—none of those arguments are backed up by the numbers.The members opposite may not care when big rhetorical statements are not matched by numbers of substance. But we on this side of the House will continue to ask the Government to be clear—that if you're going to do a bill that is going to create all sorts of compliance issues it's going to create all sorts of potential breaches to the New Zealand Bill of Rights Act you'd better be clear that it will actually deliver on the grand purposes you have set for it.So National opposes this bill. You can't tax your way out of a recession. This is a shambles of a process and this bill won't achieve the purposes it sets out for itself."