Dunne Peter: Taxation (Budget Measures) Bill — First Reading 
Dunne Peter: Taxation (Budget Measures) Bill — First Reading 
[Volume:663;Page:11067] 
Hon PETER DUNNE (Minister of Revenue) 
on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Budget Measures) Bill be now read a first time. 
 The measures contained in this bill represent the most significant package of tax reforms for New Zealand in over two decades. Although the measures themselves are wide ranging their underlying purpose is straightforward. That purpose is to lift the long-term performance of the economy by giving people greater incentives to work to save and to invest by improving the fairness coherence and integrity of the tax system so that people pay their fair share of tax and by encouraging productive investment in New Zealand thereby increasing productivity and raising wages. The effect of the reforms will be to rebalance the tax mix so that it better supports the economic growth saving and investment that New Zealand needs right now rather than the excessive consumption borrowing and overinvestment in housing that we have had in the past. 
To encourage people to work and contribute to a better-performing economy personal income tax rates will be reduced across the board from 1 October this year. The new rates will be 10.5 percent for people earning up to $14000 a year a 16 percent reduction in that rate; 17.5 percent for those who earn between $14100 and $48000 a 17 percent reduction in the rate; 30 percent for people who earn between $48100 and $70000 a 9 percent reduction in the rate; and 33 percent for those earning income over $70000 a year a 13 percent reduction in that rate. Similarly the company tax rate will be lowered from 30 percent to 28 percent from the beginning of the 2011-12 income year which will encourage productive investment in New Zealand. Tax rates and savings are being reduced so that they are in line with the new personal income tax rates thus giving people more income to reinvest towards their retirement. 
The main balancing feature of the changes is a lift in the GST rate from the current—[ 
Interruption 
] 
The ASSISTANT SPEAKER (Eric Roy) 
: I am sorry to interrupt the member. Interjections are acceptable as long as they are rare and reasonable; discussions across the House while a member is introducing a bill or at any other time is inappropriate. 
Hon PETER DUNNE 
: I was saying that the main balancing feature of the changes in this bill is a lift in the GST rate from the current 12.5 percent to 15 percent. That is in keeping with the intention of the tax reforms to shift the current economic balance away from consumption and spending and towards greater productivity and investment in the economy. The Government does however recognise that the increase in GST will impose increased costs and for certain groups such as superannuitants beneficiaries and others receiving Government assistance relief will be necessary. This compensation will be provided in the form of immediate compensation from 1 October. For those receiving Working for Families assistance the bill contains measures that raise the level of support that families will receive as tax credits from 1 October. Those on New Zealand Superannuation or the veterans pension or recipients of Consumer Price Index adjusted Government Superannuation Fund or National Provident Fund payments will also receive an increase in their payments from 1 October. This one-off compensation will be in place until the normal annual inflation adjustment occurs on 1 April next year. 
In weighing up the changes needed to rebalance the tax system the bill also introduces a number of changes to strengthen the tax rules and ensure that everyone pays his or her fair share of tax. With that purpose in mind measures are being introduced to tighten the income tax test for Working for Families entitlements so that investment losses such as those from rental properties cannot be used to inflate a family’s entitlement to Working for Families tax credits. The rules around property investment are also being tightened so that no depreciation deductions will be allowed for buildings with an estimated useful life of 50 years or more from the 2011-12 income year. That change more accurately reflects the way that New Zealand buildings actually change in value over time which on average means that buildings increase rather than decrease in value. Removing this unnecessary tax advantage will reduce the incentives for people to invest in property for tax reasons and will encourage wider investment in more productive parts of the economy. The 20 percent depreciation loading on new plant and equipment has been removed for assets purchased after today. Finally stricter rules will also be applied to foreign-owned companies to reduce the interest deductions they can claim against debt allocated to their New Zealand subsidiaries. 
Together the changes contained in this bill form a balanced package of measures that will reward people for the work they do encourage broader and deeper economic growth and make New Zealand’s tax system stronger and more equitable for all. I therefore commend the bill to the House.