Tisch Lindsay: Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill — Instruction to CommitteeCWH In Committee 
Tisch Lindsay: Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill — Instruction to CommitteeCWH In Committee 
[Volume:613;Page:10104] 
LINDSAY TISCH (National—Piako) 
: 
 We had an interesting debate prior to the dinner break. We saw the Government defending a high rate of taxation even though other countries in the world have actually reduced their rates. The OECD group of countries has reduced taxation over the last few years yet this Government has increased the tax rate from 33 percent to 39 percent for those earning over $60000. The Government said when it was planning to do that that only 5 percent of the population would be affected by it. That was on the Government’s credit card pledge which stated that only 5 percent of New Zealanders would be affected by an increase in the taxation rate. It was shown before the dinner break that in fact that rate has gone up to 19 percent. Nineteen percent of New Zealanders now fall into the category of paying the higher rate of tax. If we look at other countries around the world— 
Dail Jones 
: How many percent? 
LINDSAY TISCH 
: It is 19 percent. It has gone from 5 percent to 19 percent—20 percent or thereabouts—which is a fourfold increase. 
When we look at other countries’ tax rates we see they are coming down because it is a disincentive to have high tax rates. Any Government worth its salt will look very closely at investment growth and the incentive to invest. Where there are high tax rates there is a disincentive. Even countries like Russia have moved to a flat tax. It states here that Russia’s flat tax works. Well well! 
Hon Dr Michael Cullen 
: Zero! 
LINDSAY TISCH 
: No no. Russia’s flat tax is 13 percent. What is our corporate tax rate? Our corporate rate is 33 percent which is 10 percent higher than that of Australia. Why would anyone want to invest in New Zealand at a 33 percent corporate tax rate when Australia’s rate is 30 percent? We are seeing already that businesses are going off shore and putting their money in offshore investments because there will be more incentive there. 
In any country—[ 
Interruption 
] I was in the Chamber before dinner and I heard the Minister’s comments then that tax rates do not matter. I can tell him that if he were in business and paying those high tax rates he would be in for a big shock. Tax is the biggest compliance cost that businesses have to face. Numerous surveys have been done that state that the No. 1 compliance cost facing businesses is the higher tax rate. 
As well there are those on wages and salaries. Members may recall that it was National that reduced the tax figure and increased the threshold for tax. Back in the early 1990s when we had the higher tax figure the threshold was $30875. 
Hon Dr Michael Cullen 
: You didn’t change the tax rates in 7 years. 
LINDSAY TISCH 
: It was $30875 and National took it up to $38000. 
Hon Dr Michael Cullen 
: Rubbish! 
LINDSAY TISCH 
: I tell the Minister that the threshold was $30875 and National took the threshold for the 19.5c rate up to $38000. The rate was 19.5c up to $60000 when the rate changed to 33 percent. Under this Government the rate above $60000 has now gone up to 39 percent. 
There is no incentive for sole trader businesses to pay those high taxes. What are they doing? I will tell members what they are doing. Those sole traders are forming companies because as directors of companies they will be treated as employees of that company and will pay the personal tax rate on income up to $60000. Those earning over and above a taxable income of $60000 will pay a corporate rate of 33 percent only. That is a lot less and that is where the incentive comes in. A lot of small businesses and sole traders are forming companies—a company needs only one person—in order to reduce their rate of taxation from that 39 percent rate which is applied to income over $60000 to 33 percent which is the corporate rate. 
Hon Lianne Dalziel 
: Nonsense. What do you mean— 
LINDSAY TISCH 
: That is what is happening. I ask what the member knows about business. When businesses are being restructured one of the things looked at is how to reduce liabilities and those huge compliance costs. The No. 1 problem that businesses are facing is high taxation rates. That is identified in compliance cost surveys.