Carter David: Taxation (Annual Rates GST Trans-tasman Imputation and Miscellaneous provisions) bill — First Reading 
Carter David: Taxation (Annual Rates GST Trans-tasman Imputation and Miscellaneous provisions) bill — First Reading 
[Volume:609;Page:6659] 
Hon DAVID CARTER (NZ National) 
: 
 I rise also to support this legislation going to the select committee and I note the superb timing of the Government. After introducing a flatulence tax earlier in the week and announcing thoughts about a “fat tax” yesterday it is now introducing a further tax bill to which I now have the opportunity to speak. I want to start by referring to the move to adjust the particular tax rate on savings for people who earn income of less than $38000. I congratulate the Minister of Finance the Hon Dr Cullen on finally recognising this problem and on finally doing something about it. I listened earlier to a speech from the New Zealand First representative who also supported this legislation but I remind Dr Cullen and I remind New Zealand First that this is not the first opportunity they have had to adjust the tax rate on savings so that people earning less than $38000 would be taxed at a lower rate than they are currently—which of course is at a rate of 33c in the dollar. 
I am referring of course to the move made by the then - National Government in 1998 when we had legislation accepted into Parliament supported by Labour and New Zealand First in being sent to the select committee and returned from the select committee back to the House while still receiving the support of Dr Cullen and the Labour Party and at that stage of Winston Peters and the New Zealand First Party. But in its final stages as it went through the Committee stage there was a sudden change in point of view by both the Labour Party and New Zealand First. They then determined that it was not a good idea to deliver a lower but more true tax rate to income earners earning less than $38000; they voted against that particular clause at the Committee stage and so that opportunity was lost in 1998. 
So I say to Dr Cullen “Well done for doing it now.” But I say that if he had not changed his mind and if Winston Peters and his then-members of New Zealand First had not also changed their minds this significant benefit could have been delivered to New Zealanders earning less than $38000 5 years ago. So when the New Zealand First member laments the fact that New Zealanders are not saving enough—and I accept that—and when he laments the fact that one of the reasons New Zealanders are not saving enough is that until this legislation is passed they are in effect paying at a tax rate substantially higher than what they will pay on their personal income I say to him that there was an opportunity to correct that 5 years ago. If that opportunity had been accepted rather than being used for blatant politics—as it was at the time—then we would have made considerable progress. As I have said that was a move initiated by Dr Cullen and the Labour members of Parliament at the time and by Winston Peters and the New Zealand First members of Parliament at that time. 
I want now talk to other aspects of the bill. I note that this is a typically complex tax bill the type that Robin Oliver and his merry men manage to present to Parliament whenever they get together. I do regret that I will not have the opportunity of working in the select committee to iron out the many amendments that will be required to make sure we get workable tax legislation back before the House but I wish members of the Finance and Expenditure Committee well with their task. 
The second thing that has not been mentioned by speakers as we debate this bill today—and it certainly was not mentioned by the Minister of Finance when he introduced this legislation to the House—is that this legislation sets again the annual tax rates for another year. Even the Speaker turned a pale shade when we talked about the annual tax rates because the bill cements in place the “envy tax” of 39c that was passed in this House in the year 2000. 
Brian Connell 
: Talk about fiscal drag. 
Hon DAVID CARTER 
: I am going to talk about fiscal drag. 
Brian Connell 
: It’s a real drag. 
Hon DAVID CARTER 
: It is a real drag is it not? Over time we have seen that as the incomes of New Zealanders have moved up—and that is not surprising considering the amount of inflation we have had—people have found they have moved into another income tax bracket. It is that fiscal drag that has contributed significantly to the point made by my colleague Dr the Hon. Lockwood Smith when he said he can find only one country in the world that faces higher taxes than New Zealand and that is the Czech Republic. 
Simon Power 
: That can’t be right. 
Hon DAVID CARTER 
: I think it is right Mr Power and I think that is one of the reasons that this Government faces a real problem with those growth predictions. Many members of the House will remember those wonderful growth predictions that the Prime Minister pinned her hopes on. In fact she wrote a foreword. I think she signed the foreword but maybe she did not write it. 
Simon Power 
: Signs anything you put in front of her! 
Hon DAVID CARTER 
: Yes she signs anything. The prolific signature of the Prime Minister was attached to this promise that we would get our growth targets back into the top half of the OECD by the year 2011. One of the reasons the Government is now embarrassed by that target and has in fact forgotten it ever set that target is that we simply will not reach it when we are passing a tax bill like this that locks in tax rates of this magnitude. 
The very fact that we had a Budget presented in this House not so long ago that talked about surpluses around $4 billion or more causing the Minister of Finance to crow about his success and his acumen as a Minister of Finance belies the truth with regard to these tax rates. It is easy for any Minister of Finance to achieve surpluses of that magnitude if he taxes more than he needs to—and that is what the Government is proposing to do with the annual tax rates being locked in today. 
I say to the Government that if it is serious about lifting New Zealand’s economic performance; if it is serious about closing that significant gap that exists between us and Australia; if it is serious about making sure that the pay packets opened at the end of each week here in New Zealand compared with the pay packets opened at the end of each week in Australia do not show that Australians are $200 better off than New Zealanders; if it is serious about addressing those concerns it needs to rethink these tax rates. 
We have the concept of fiscal drag and the Government just refuses to look particularly at that $38000 threshold past which many New Zealanders have moved over the last 3 years because it likes these big surpluses. It likes the opportunity to spend money on things like the America’s Cup once we have lost it. 
Brian Connell 
: Doesn’t spend much on roading though does it? 
Hon DAVID CARTER 
: My colleague Brian Connell says it does not spend much on roading. He and I know that Transit New Zealand is not proposing any significant projects in Christchurch or other parts of Canterbury for the next 10 years and as that fact becomes more known I doubt whether New Zealanders are going to accept it. 
I want to finish by referring to question time in the House today when the Minister of Finance was questioned on the faith he has in the Budget forecasts it being noted that they are less than mediocre. I want particularly to refer to the Business and Economic Research release earlier this week which stated: “Economic mismanagement has choked out a perfectly sound period of growth and we are in for 2 to 3 years of a stored economy.” There is an opportunity to recognise that that comment has been made by Business and Economic Research there is an opportunity to do something about that comment and there is an opportunity to lock in sustained growth rates but it will not be done if the House has to address this bill coming back from the select committee unless that particular committee has bothered to address the oppressive tax rates we now have in this country.