English Bill: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — First Reading 
English Bill: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — First Reading 
[Volume:631;Page:3442] 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 Dr Cullen made at least one mistake in his speech when he said a number of solutions to those problems had been proposed in the last 2 or 3 years. In fact Parliament has been wrestling with some of these issues for at least 10 years. This bill has come forward as part of the Government’s confidence motion around the Budget; therefore it must have the support of New Zealand First. I am pleased that party has become more thoughtful than it was last time in 1998 when it was got at by the savings industry which opposed proposals put forward then to deal with the overtaxation of lower-income earners. 
Hon Peter Dunne 
: TOLIS. 
Hon BILL ENGLISH 
: That was the name of one proposal—Taxation of Life Insurance and Superannuation Fund Savings. In fact the savings industry became really wound up about it and Winston Peters at the last moment pulled the plug on that legislation. Fortunately he is now out of the country and not in a position to pull the plug on this legislation; or it could just be that he is not getting the same support from the savings industry that he used to get so he is not taking any notice of what it says any more. I hope he is not listening to the Guinness Peat Group instead—I will come back to that. 
The savings industry’s problem at that time was compliance costs. In fact the real problem was a whole generation of bad savings products which were too complicated lacking in transparency and ripping off savers with fees that could not be justified if they were ever found out. I am pleased that that industry has become slightly more mature in its approach and more understanding that the needs of customers are more important than its need to hide the ridiculously high fees it has charged for shonky products for a whole generation. That has been one of the problems with savings in New Zealand. Everyone can remember the magic graphs that insurance salesmen used to have whereby one would put in money for 5 years and could get back what had been put in at the end of those 5 years—there was something called a “surrender value”. Those days fortunately have come to an end. 
I hope someone will get up and explain the decision about the Guinness Peat Group because although the savings industry in general has accepted this bill that group did not. It is absolutely remarkable that a Minister of Finance would oversee a decision-making process in which the shareholders in one company get a 5-year holiday. I am sure the Finance and Expenditure Committee will be interested in the logic behind that decision. Occasionally one-off decisions are made about taxation. I can recall providing during a brief but glorious stint as Minister of Revenue—which no one else can remember except me—the taxation underwriting for  
The 
Lord of the Rings 
. A specific exemption was given which meant the taxpayer underwrote it to the extent of $300 million. Of course the gracious Helen Clark has claimed all the credit for that although she had nothing to do with it—nothing whatsoever. 
Darren Hughes 
: She’s good! 
Hon BILL ENGLISH 
: That is right. So a one-off decision is not unusual. That decision was transparent and the reasons why it had happened were explained in the House. I want the Minister or one of his little followers to get up and tell us what is behind the Guinness Peat Group decision. 
I do not want to question the integrity of these particular Ministers because I think they are straight. But this is a context whereby the Minister of Communications is trading political favours with Vodafone a large multinational that he has the responsibility of regulating. He asked the company a political favour when he was right in the middle of making decisions that could cost it millions of dollars and it does him the favour. Now of course he is obliged to look as though he is not returning the favour which effectively makes the decision. The decision is made; the decisions will go against Vodafone on mobile termination rates because it now absolutely has to or the Minister will be guilty of corruption. It is about as simple as that. In that environment the Guinness Peat Group decision needs to be explained. 
I take Dr Cullen’s point that the select committee will look at the balance of compromises in this bill—because it does contain a balance of compromises. National certainly supports the idea that people with a marginal tax rate of 19c on their earned income should not be taxed at 33c on their savings income. That has long been an anomaly and for all the reasons Dr Cullen gave it is a bad thing. The question though is whether the compromises are correctly balanced. 
This is where we come to the issue of the abolition of the “grey list” and Dr Cullen trying to dress up that revenue grab as some venture into the new world of the Indian stock exchange and that we are all hanging out to invest in these fast-developing countries. Some New Zealanders are and some will because they have a different risk premium from the average. But I think that is a pretty feeble excuse for trying to find the money to balance up what he gives away with moving to a fairer regime for some taxpayers. I hope the select committee will look into whether that balance is right. 
The other issue is the threshold around the $50000. As my colleague pointed out if one goes to the Retirement Commissioner’s website one will find that $50000 worth of savings does not represent a significant income at all. The fact that half of New Zealanders over 65 have nothing like that level of savings is a tragedy and a shame for them and for the country. But that threshold may well be far too low. We may well find that quite large numbers of New Zealanders on middle to average incomes—maybe even on high incomes—have most of their savings tied up in their houses and only a relatively small amount in cash savings that can go into these kinds of investment vehicles and that that threshold may be far too low. National of course is opposed to capital gains taxes. Knowing that the Government will pass this bill because new Zealand First has finally grown up and taken legislation seriously our members on the select committee will almost certainly argue for a much higher threshold if we cannot get rid of the capital gains tax altogether. 
There is another matter covered by this bill that should not go without remark even though the whole Budget debate has focused on it. It is that the bill confirms the tax rates for this next year. I want to draw attention to an issue my colleague John Key brought up in the House yesterday: Dr Cullen’s unwillingness to be honest with New Zealanders about his intentions for personal tax rates. In 2005 he made a decision at the urging of United Future which used its leverage—for once usefully—to index income tax thresholds. Then after the election Dr Cullen gave the impression he would have to give that away because the Government had abolished the carbon tax which I see in the Budget is about $360 million. That is quite a chunk of money. Then I picked up the Fiscal Strategy Report of the Budget and saw on page 44 that the Government’s decision to index income tax thresholds will stop wage earners from rising up through the income tax rates. It states in the Budget that the Government has made a decision to index income tax thresholds. 
But Dr Cullen will not say whether the Fiscal Strategy Report is wrong and that the Government has not made a decision or in fact that it has made a decision. It is in the forecast—one can put anything one likes in the forecast—but the Budget states that the Government has decided. So why can he not just go out and say that yes he is raising thresholds and that that is a tax cut he can afford to give? Well he cannot say that and the reason he cannot say it is that he spends all of his time in the House saying we cannot afford tax cuts. So which is true? How come New Zealand’s Minister of Finance cannot publicly repeat a statement in a Budget document that he signed himself? 
That is why the House particularly the Opposition notes with regret that this bill will confirm the tax rates. Of course Dr Cullen could afford to index the income tax thresholds this year; he could have afforded to do it last year. He could have afforded quite significant tax cuts even if they were not as big as National’s. That is what should be in here because that would lower the marginal tax rates of a whole lot of New Zealanders. The National Party’s package had 80 percent of New Zealand taxpayers on a marginal tax rate of 19.5c. Well that is Asian; that is really getting competitive. That is really giving people the incentive to get ahead. But unfortunately this bill passes up the opportunity to make some real change in tax thresholds and the opportunity to introduce even Dr Cullen’s “chewing gum” tax cuts.