Foss Craig: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
Foss Craig: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:663;Page:11110] 
CRAIG FOSS (National—Tukituki) 
: 
 Part 1 of the Taxation (Budget Measures) Bill deals with some of the technical issues as the previous speaker Trevor Mallard said. They were probably the only couple of words he got right. From there he departed a bit but he was right in saying that Part 1 is the technical part that addresses the schedules the changes in the income tax rate the changes in the portfolio investment entity rates the changes in company rates and of course changes in GST rates. It also provides the mechanism for amendments to the Income Tax Act 2007 and their wording so that we can have transitional rates because much of these proposals move in halfway through the financial year. 
Part 1 is quite substantial and I look forward to the Greens speaking on it because it proposes an increase in GST. As members opposite have said GST is a tax on consumption. I note that in many speeches in this House the Greens say that they are opposed to consumption so presumably they will be speaking for this part of the bill putting a tax on consumption and perhaps even slowing down consumption. 
Other clauses in this part point to an encouragement in relation to financial assets where portfolio investment entity rates go down from 30 percent to 28 percent. So for once I am looking forward to the contribution of Green members to see whether they would encourage an increased tax on consumption a movement to more financial assets. 
This is a technical part and I have been reading some of the provisions to do with GST. I was trying to figure out how on earth one would write this bill if the GST clauses included exemptions for fresh fruit and veges. In the whole bill there are 50-odd pages dealing with GST. Apparently that absurd suggestion in relation to fresh fruit and veges was an opinion from the Labour caucus but not from the leader I understand—and I am sure other members may correct me on that. We have a world-renowned tax on consumption in New Zealand. In fact this very clean and crisp tax was brought in by the party now in Opposition—some of its current members were either near or in Cabinet at that time; they were definitely in Cabinet when the rate was increased from 10 percent to 12.5 percent without any compensation—so I will be interested to hear their comments about that. There are no exceptions to GST; it is an across-the-board goods and services tax. 
One point seemed to be missed in some of the earlier speeches related to tilting New Zealand’s economy away from consumption towards saving or reducing debt. Of course if people want to go out and spend their entire after-tax income that is fine and 15 percent of that as proposed in this bill would attract GST. But if people pay off their mortgage with their higher after-tax income which would increase their home affordability they will get a better bang for their bucks so their net debt position would improve because of this Budget. If people have positive savings they will attract tax at 28c in the dollar on their portfolio entity investment regime as Part 1 changes those rates. 
To be fair I acknowledge that it was the previous administration that brought in the portfolio investment entity regime in recognition of the imbalances in the New Zealand economy. So I find it curious that members opposite seem to be attacking some of the moves in the bill before us and I will be interested to hear their justifications for that. 
To go back to the GST side of things can you imagine what would have to be in this bill if it included the proposals from the other side? Essentially a cabbage that is dug out of the ground and an apple that is picked off the tree would not attract GST but an apple that has gone through the pack-house and been washed and bagged or a cabbage that has been chopped up would attract GST. Can you imagine the legislation the regulation the holes and the arbitrage you would have under that regime? The administration of it would far outweigh any gain to the Crown or any perceived gain to the consumer because they would have— 
The CHAIRPERSON (Lindsay Tisch) 
: I remind the member that he is continually bringing me into the debate. 
CRAIG FOSS 
: I apologise Mr Chairperson. Someone somewhere would have to pay the impost on that. It would fall on the taxpayer or on small businesses which a previous speaker was so concerned about earlier. The previous speaker contradicted another speaker on his side when he talked about some court cases today totally forgetting the outcome of some cases that are now no longer before the court. The other Opposition speaker who was the Minister of Commerce at the time when all that mischief happened started to justify them so again we have contradictions. 
Clause 36 is one of the highlights of this part because it contains the changes to schedule 2 which includes the basic tax rates of PAYE income payments. Subsections (a) (b) (c) (d) and (e) are identified in that clause and I would like to read them for members opposite because they contain some highlights. In fact they highlight the changes not the transitional rates. 
Clause 36(a) states: “in clause 4 ‘0.21’ is replaced by ‘0.175’;” being the PAYE rate. That is interesting because three-quarters of New Zealand taxpayers will be attracting that rate or less. Three-quarters of New Zealand taxpayers will be facing a rate of only 0.175 or 17.5 percent as they make their PAYE payments. At the next levels “0.33” goes to “0.300” and “0.38” goes down to “0.330” which seems to be causing so much concern to Labour members opposite. There does not seem to be any acknowledgment whatsoever that it was that particular party that took the rate from 33 percent to 38 or 39 percent. It was the first thing Labour members did in regard to tax when they became the Government in 1999. I will be interested to hear their comments on that. If they are opposed to this it implies that with the $7 billion of extra spending announcements they have already made they would have to increase personal tax rates corporate tax rates savings PAYE tax rates or GST rates. I thought they were going to axe the tax but I do not know what they are doing now. I look forward to those members as we talk about the clauses in Part 1 in particular telling us what they would do if this Taxation (Budget Measures) Bill were their bill. 
Hon Clayton Cosgrove 
: No no you’re in Government you’re responsible you explain. 
CRAIG FOSS 
: No I say to the gentleman from the South Island that the Chairperson is not responsible. I look forward to the comments from the Greens in relation to the increase in the consumption tax which I believe aligns with their core philosophy. At least the Greens are consistent in their advocacy of a capital gains tax. If I look at the material from Labour when in Opposition and when in Government there are huge inconsistencies and we heard that in earlier speeches on the Budget itself. I look forward to those speeches and to this bill being robustly debated but overall Part 1 is the real detail and the real thrust of the bill and it is that which is getting the nod from New Zealand as we speak. I will be particularly proud to go on the hustings next year and debate and discuss these points.