Clark David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeClark David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second Reading[Sitting date: 20 October 2015. Volume:709;Page:7394. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North): This is a bill that confirms the 2010 tax changes that this Government made which have been driving inequality in our country ever since. We are seeing a situation where the very wealthiest New Zealanders are protected and becoming more privileged and more wealthy and the middle class is being squeezed. The middle class which once used to prosper and used to think that it could work hard and get ahead now is being squeezed by the changes that we are confirming here again in this annual bill.There is a very innocuous—on the surface—little clause in here clause 65 at the beginning of Part 2 “Annual rates of income tax for 2015–16 tax year” that reads: “Income tax imposed by section BB 1 of the Income Tax Act 2007 must for the 2015–16 tax year be paid at the basic rates specified in schedule 1 of that Act.” If people did not know what that meant they could just glaze over it because it is a big fat bill. But that is where we confirm that the changes this Government drove through—to grow that wedge between the very wealthiest and the rest of us—will continue. So that is something we need to observe something we need to acknowledge that we are doing in this House here today.Over there those members want this to continue. They are talking already about driving that wedge deeper in another set of tax packages another set of tax changes that no doubt will be driven towards supporting the interests of the 1 percent and the 99 percent of ordinary hard-working Kiwis will miss out once again. Those tax changes in 2010 saw 40 percent of the value go to the top 10 percent of earners in New Zealand and just 2 percent of the value went to the bottom 20 percent of earners in this country. That little gain for those at the bottom was swallowed up in a GST increase. The Prime Minister we will all remember said “There will be no increase in GST.There will be no increase in GST.” and then in that 2010 tax package—we are not allowed to call it a lie in this House—he changed his mind. He changed his mind and suddenly lifted GST to 15 percent.Sue Moroney: He broke a promise.Dr DAVID CLARK: He certainly broke a promise. I think we can say that. The Prime Minister of New Zealand changed his mind and swallowed up what little benefit that those who were struggling who were working hard could get out of that tax package.And to afford that tax package this Government has borrowed ever since. This Government has continued to borrow billions of dollars. There is now $100 billion in debt that this Government owes and that is debt that we as taxpayers carry with us. That is debt that will affect our children and grandchildren. This is the Government here in this House that has borrowed more than any other Government in New Zealand’s history. That is because it is borrowing to fund the tax changes that are in this bill that we are confirming yet again in this House. That is a reckless Government—that is a reckless Government.Instead the Government could have invested in research and development. It could have supported small business. There have been fewer small businesses created under this Government than under the previous Labour Government. Year on year this Government opposite has failed to create small businesses. It panders to the interests of the very wealthiest New Zealanders and that is costing New Zealand. In many regions in New Zealand the real median wage is lower than when the Government took office. Six years after the global financial crisis has ended many regions in New Zealand have lower real wages than when this Government took office. That is shameful—that is shameful. It is all because the Government has failed to grow value in this economy. The Government has focused on borrowing borrowing borrowing to afford big fat tax breaks for the wealthiest New Zealanders for the very wealthiest New Zealanders.Let us make no mistake. That is part of what we are doing here today. That is a bitter pill to swallow because there are some other changes in this bill that need to be made for the security of our tax system. We will be forced on this side of the House to support them because we support the robustness of the tax system. But let us not forget that we are swallowing that bitter pill here today because the Government wants to borrow and it wants to continue to borrow and to sink New Zealand into a mire of debt to fund the wealthy tax breaks for that 1 percent of New Zealanders at the very top.We all know that inequality is bad for us. It is a bit of a no-brainer. When kids go to school hungry in this country they do not learn well. They are not going to grow up to be as productive as they would be in this society to pay the taxes that support the schools and hospitals and roads that we need to get us ahead as a country. When people are making decisions based on desperation if they have grown up in desperate circumstances they are much more likely to go and be a money trader in New York even if they are passionate about becoming a neurosurgeon. They are worried about looking after their own interests because they know how tough it can be when inequality prevails.You find that when inequality grows so does infrastructure fail to get invested in. So that is when we see the cutting back in funding for hospitals. We see them pushing out forever the hospital rebuild that so desperately needs to happen in Dunedin. It is on the never-never under this Government because it does not support public health like the previous Government did. The Government does not support it at the real rate of health inflation. It is slowly making cuts to the system real cuts that are affecting ordinary New Zealanders’ ability to access health services. And the Government is cutting funding to education. The Government cuts and it cuts and it cuts to afford those tax cuts for the very very wealthiest New Zealanders. That is what we see over there.The Government has failed to grow a high-value economy. Instead it is content to manage decline and content to see low-value jobs and no jobs at all. We have a stubborn unemployment rate and that is because employment is simply not a priority. The Government is too busy confirming tax rates that shovel money towards the very wealthiest New Zealanders at the expense of us all and at the expense of future generations of New Zealanders. We can see around New Zealand that there is plenty of evidence of this struggling. We look at the Government’s own Regional Economic Activity Report that it has just put out. We see that citizens in so many regions of New Zealand are earning below the median wage. I think just about everyone in the South Island is earning below the median wage. There are districts like Otago that would be a billion dollars better off if the citizens there were merely earning the median wage. It is the same with the Bay of Plenty and Waikato. There would probably be a billion dollars more in their economies—certainly a hundred bucks more in people’s pockets per week if they were earning the median wage in those regions of New Zealand.But the Government does not care—it just does not seem to care. It is focused on shovelling money into pet projects and into preserving the status quo and preserving entrenched interests. We need a vibrant economy. On this side of the House we believe in things like research and development tax credits that everyone can access not just the Minister’s favourite few projects not just those few that he would want to be seen with in a photo opportunity. No we believe that all New Zealand businesses should be able to access research and development tax credits. We believe that there should be incentives for innovation in this country. We need a high-value high-wage economy. We on this side of the House are not content to see that situation continue. We are not content to see the lowest homeownership rates in about 60 years I think it is because the Government is mismanaging the economy by making decisions like this. The Government continues to make it more difficult for hard-working middle-class New Zealanders in order to fund the privilege of the very wealthiest 1 percent.Labour will support the changes in the rest of the bill because we see that the tax system needs to be robust. We need to get rid of the loopholes that emerge. Tax systems need pruning and mending and on this side of the House we are always happy to be supportive of those kinds of things of making sure that there is a functional tax system.We may have our concerns about whether the Government will be able to implement it. Government members have been back to this House many times—many times—to withdraw legislation. They put through child support legislation previously which would have seen a big a shift in the way things were done and then they had to come back to the House at the cost of hundreds of thousands of dollars to put through legislation because they simply could not deliver on it. The Government has not fixed up the Inland Revenue Department computer system which should have been fixed up years ago. Several years ago John Key made a Valentine’s Day promise that he would fix it up. He said: “We do not want to be held to ransom by an out-of-date tax system and not be able to make policy changes.” Well we are there—we are there—because of the Government’s lack of activity. Our country is suffering because the Government has not fixed the tax system. We may be back fixing things that we are passing in this legislation today because the Government cannot deliver on them.The Government is neglecting our economy in the interests of a privileged few. We will support the good changes in this bill but we will note that there are changes in here that continue to support the privileged at the expense of the 99 percent of New Zealanders who work hard and pay their taxes as they should.