Flavell Te Ururoa: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — Second Reading In Committee 
Flavell Te Ururoa: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — Second Reading In Committee 
[Volume:636;Page:7103] 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
Tenatatou katoa. Amidst all of the fanfare that came with the 2006 census figures last week there were a couple of facts that are relevant to the debate today. Fact No. 1 is that for Maori aged 15 years and over the median income is $20900. For all New Zealanders the median income is $24400. That is a tangible difference between Maori and everyone else of $3500. Fact No. 2 is that 10.2 percent of Maori have an annual income of more than $50000 compared with 18 percent of all New Zealanders. 
Some members may be familiar with a gentleman by the name of Henry Ward Beecher a Presbyterian minister who like his sister Harriet advocated for the abolition of slavery and for the right to social justice. One of his sayings was: “In this world it is not what we take up but what we give up that makes us rich.” Looking at the situation described in those census statistics and being mindful of the ever-increasing gaps between rich and poor in this land the Maori Party comes to the Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill wondering what this Government will give up in order to make all New Zealanders rich. 
The Maori Party taxation policy is driven by two key forces: manaakitanga and rangatiratanga. The application of manaakitanga would be evident in acknowledging the mana of others as having importance that is equal to or greater than one’s own through the expression of aroha hospitality generosity and mutual respect. In practising rangatiratanga there is an emphasis on following through on commitments made and integrity and honesty are demonstrated. So it is that manaakitanga and rangatiratanga lead us to address the 1.9 million taxpayers in this nation who are on an income of less than $25000. Those people are paying a massive $3.5 billion in tax while at the same time the Government accumulates surpluses that in the last financial year have totalled an amount of $11 billion. So we look to those people in any initiative that is seemingly designed to enhance the economic position of New Zealanders. 
The central feature of this bill is meant to be a reform of the taxation of income from share investments—New Zealand - based managed funds or direct investment—with the clear purpose of removing inconsistencies. The Maori Party is certainly supportive of any initiative that can act in a way to enhance fairness and consistency in savings policies. We know that the current taxation rules on share investment have needed an overhaul for quite some time. The treatment of individuals and companies has been at best uneven. Direct investment by individuals appears to have been favoured over investment through managed funds. Some investors are overtaxed. So this bill was intended to place the taxation treatment of different types of share investment on an equal footing. The bill is branded as introducing greater fairness into the rules and reducing the distortions that are evident in current taxation policy. Well that is all well and good. But does it do that? 
In order to understand the reform we need to take the widest possible view. To look at only part of the picture will inevitably short-change those New Zealanders who are looking for greater fairness in the way their investment income is taxed. Despite the stated purpose of reducing the taxation distortions on investments the bill introduces an ad hoc capital gains tax regime rather than one that has consistency. The bill also attempts harmonisation between Australia and Aotearoa allowing equity between investors operating in both countries. In effect that means New Zealanders can invest in Australia instead of New Zealand without a taxation penalty. We need to ask what benefit it will be to the nation if people invest elsewhere. The bill suggests that from next year people who invest in New Zealand - based managed funds will see greater fairness in the way their investment income is taxed. The new rules will remove several taxation disadvantages for people who invest through managed funds many of whom are described as ordinary middle-income savers. 
Into that mix let us throw the humble New Zealand pie. We are not talking about the mince and cheese variety. The pie introduced in this bill is a portfolio investment entity which comprises any savings vehicle that elects to go into the regime. The bill removes the current major taxation disadvantages from New Zealand managed funds: the full tax on capital gains and overtaxation of low-rate investors. By treating those funds in a similar way to direct investment by individuals the disadvantages are removed. Investors in actively managed funds who invest offshore would be significantly better off under the fair dividend rate than under the current rules. Alongside that the Finance and Expenditure Committee reported that investors in actively managed funds who invest offshore would be significantly better off under the fair dividend rate that it has recommended than under the current tax rules. We note too that for individual investors and family trusts if the return on investment is less than 5 percent of the opening market value individual investors and family trusts will not be taxed at the fair dividend rate—5 percent—but at a lower rate or they will pay no tax. So we are in the same situation again of some people paying tax and others not. 
We are also concerned about the tax increase on superannuation contributions that faces lower-income earners who are being made to offset the risk of “salary sacrifice” by higher-income earners. It is those people who form the “not” category that we speak of today. Although we support the removal of the different taxation rates from those who invest directly and those who invest through managed funds our primary concern is about those New Zealanders who struggle to put kai on their tables let alone to contribute to a savings culture. Every dollar of a poor person is taxed including the dollars of those persons on benefits. However this bill determines that those on high incomes have the means to benefit from asset value increases which are non-taxable. We have to ask whether that is fair. 
Our other key concern around the whole concept of a savings culture is associated with our concerns around the concept of the genuine progress index. That is the argument that says we need to broaden the tax base so that taxation is also used as a valid means of demonstrating the real costs of pollution and environmental damage. In the context of the capital gains tax for example we know that investors are receiving taxation concessions even though it is not known whether any actual income is being made. If income were calculated on the full cost basis the actual capital gain might be negative but investors have no idea of how much depletion of or damage to the environment is occurring. There is a good chance that capital gains are overstated and a good possibility that there is no capital gain. Thus although a company may be able to claim a positive and growing wealth it is a false claim a false measure of wealth because it has failed to take account of all the costs involved. The notion of gain and wealth masks potential because that is not really accounted for. The market response to that argument is that the market knows and that it takes all of that into account. The genuine reply to that is to ask how the market knows because it is not being measured. 
Finally it is appropriate to refer to the recent study released last week by the World Institute for Development Economics Research. The Helsinki-based institute has estimated that the richest 2 percent of adults own more than half of global wealth while the bottom half of the population own a mere 1 percent. If 2 percent of adults have more than half of the world’s wealth including property and financial assets in their hands I ask whether that is fair. Is it just that in Aotearoa the proportion of all children who are in severe or significant hardship has increased from 18 percent to 26 percent since 2000? Is it socially desirable that the people who suffer the greatest poverty in New Zealand are our children with 38 percent of them in the hardship categories? I remind the House of the statement I made earlier: in this world it is not what we take up but what we give up that makes us rich. What are we prepared to give up in order to enhance wealth creation for all citizens of Aotearoa? 
I advise the Minister that the Maori Party is a little ambivalent with regard to this bill. Our concerns regarding poverty and the big picture lead us to vote against it at this point in time but we are prepared to consider other views further on. Kia ora tatou.