Tisch Lindsay: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading 
Tisch Lindsay: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading 
[Volume:626;Page:21444] 
LINDSAY TISCH (National—Piako) 
: 
 This is an interesting bill which National will be supporting. But there are some points that I think are important and that I wish to bring to the House’s attention. The first one concerns the thin capitalisation rules for foreign-owned banks. Banks in terms of their debt restructuring have been able to claim the interest as a deduction and of course foreign banks have not been contributing to the overall well-being and economy of this country. Page 3 of the commentary on the bill—and I do not intend to read it out—summarises quite clearly a position that has arisen over time. Just to highlight the point the changes as the Government announced in September are expected to result in those banks paying around $360 million a year more in New Zealand tax. That is a significant amount and it is one of the reasons— 
Pansy Wong 
: What’s Labour going to do with it? 
LINDSAY TISCH 
: My colleague Pansy Wong who is a chartered accountant and understands these issues has asked a very good question. What will the Government do with that $360 million of extra tax? 
Pansy Wong 
: Low-quality education. 
LINDSAY TISCH 
: Well it will squander it on some scheme or other as it is very good at doing. 
Pansy Wong 
: Hip-hop tours. 
LINDSAY TISCH 
: There will be hip-hop tours and it will be giving money for twilight golf. That money will be squandered in a number of other areas with absolutely no accountability. However the provision is a very good one. We are actually supporting it in terms of the capitalisation rules. 
The other areas I wish to comment on are the company tax rates and the personal tax rates. When we have very high personal tax rates those who are paying the higher tax look for a way to minimise the risk—to minimise the amount of tax they pay. That is human nature and we see that happening with the personal tax rates up at 39 percent for those earning over $60000. I remember Labour’s pledge in 1999 that only 5 percent of people would be paying the higher rates and now of course about 20 percent of people are paying those higher rates. It is the same with company tax. Paying tax is a disincentive to invest. We put tax on tobacco and alcohol because it is a disincentive. This Government has taken the line that it will tax people more and that becomes for people a disincentive to invest to grow their business and to do the things they like to do. The National Party is a party that would rather see money going into people’s pockets—let them choose what they will do with it. 
It really is interesting to note what sole traders whose taxable income is over the $60000 figure are doing. Instead of paying tax at 39 percent they are forming companies because the company tax rate is 33 percent. So sole traders and partnerships but mainly people on their own—sole traders sole proprietors—are asking why they should pay 39 percent on their taxable income when if they form a company they can actually take out as personal drawings wages salaries or whatever they want to call it up to $60000 of taxable income and pay tax at only 33 percent. And if the taxable income of their business is over $60000 they will not actually pay it at 39 percent because as a company they will have to pay only the company rate of 33 percent on the difference. That is common practice with small businesses. They are doing that as a means of having the money in their pockets and of beating the system and it should not be that way. If we had a fair tax system across the country then we would not find businesses trying to do exactly what I am saying is happening—and I know it is happening because there are numerous examples of exactly that rationalisation and restructuring. The law allows it to happen. Financial planners and management consultants who deal with the restructuring of businesses are saying: “Why pay 39 percent when you can actually pay 33 percent if you form a company?”. 
The point I am making here is that although National is supporting this bill there are certainly areas that the Government should be very mindful of. The Government could make it a lot easier on itself if it had a fair and equitable system where taxes are there for a purpose—not a system where money is taken with one hand and redistributed with the other. That is how socialist Governments work. They grab the money from one side redistribute it on the other side and make more people dependent. That is the welfare system. That is the socialist view. Well we now see as a result of the Budget the other day that New Zealanders have seen through this. They want money in their pockets. They do not want a Government that thinks it knows best how to spend their money that takes their money and redistributes it at a later stage. 
Pansy Wong 
: But Labour’s promising tax cuts. 
LINDSAY TISCH 
: Oh yes Labour will promise tax cuts but we know how the Government has operated over the years. It has increased taxes and in 3 years’ time it will give people a reduction amounting to a measly 67c per week. Well what an absolute insult to hard-working New Zealanders! It is an absolute insult to think that hard-working New Zealanders will get only 67c per week. This is a Government that says it will look after people. The figures are quite astounding actually. If we look at the extra taxes people will be paying between now and 2008 when there will be a reduction we can see that they have more than contributed and a measly 67c per week reduction is absolutely outrageous. There is no justification for it and I tell members that the Government will pay for that because New Zealanders are seeing through it. They do not have a tax structure that reflects investment. There is no incentive and no initiative for people. There is nothing to reward the hard-working and enterprising New Zealanders who are out there making a dollar and of course are having to pay it over to this Government. That is the second point I wanted to mention. 
The third point is about the provision that states that accountants are to have the same status as lawyers. That is fine. We have two accountants— 
Pansy Wong 
: Only two? 
LINDSAY TISCH 
: Only two chartered accountants. There is Mr Gordon Copeland—he was a chartered accountant—and there is my colleague Pansy Wong who has crystallised and articulated very well the argument about taxation. It is always good to have on our team a chartered accountant of her qualifications and experience. She said that accountants will have the same status as lawyers. It is in the provisions and that is something we also welcome. This Government will have much to answer for in a very short time. New Zealand voters will see through the facade the Government keeps putting up. We will see that very very shortly and the Government will pay the price. In the meantime the small changes that are reflected in this taxation bill—namely in the thin capitalisation rules for foreign-owned banks—are changes we are supporting as well as the other provisions. We will be voting for those. 
Debate interrupted.