Clark David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Third ReadingText is incorporated into the Bound VolumeClark David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Third Reading[Sitting date: 20 February 2014. Volume:696;Page:16197. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North): I applaud the Minister of Revenue for coming into the House to deliver the third reading—sorry I mean for remaining here to hear my words of wisdom in response. The Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill which we are debating will be supported by Labour but with significant reservations. We have debated these on the way through.Significant among them is the fact that this bill solidifies the tax changes that were made in 2010 that have seen inequalities in New Zealand grow to their highest levelsince we have kept reliable records. Those changes of course have to be affirmed every year for our tax rates—that is part of the Government’s business; it has to reaffirm the tax rates—but as this bill passes through we note that we are not comfortable with the divide that is growing between rich and poor primarily because of the opportunities that are being stripped from those at the bottom and those in the middle. It is at their expense that those at the top have had the biggest benefit from the tax swindle in 2010. We know that a full 44 percent of the value of those 2010 tax changes went to the top 10 percent of earners in New Zealand and that the bottom 20 percent got just 2 percent of the value of those tax changes which of course was immediately swallowed up in the GST increase that John Key said he would not make but then made as soon as the election was over and he had the opportunity.The people in the middle are the people who are getting squeezed but who did not used to get squeezed and that is middle New Zealand. We are hearing more and more from those people as they see the opportunities for their children dwindling. Children who can get away are getting away and I note that over 200000 New Zealanders have left for Australia under this Government’s watch despite its promise that you would not lose your loved ones.This is a Government that is out of ideas and even those few ideas that it did have do not seem to be working. So we have a situation in New Zealand where the inequalities are growing bigger and bigger and bigger and that is proven by all of the statistics available to us—the Gini coefficients and other measures relied upon by economists throughout the world. We also know that changes could be made. We could be having a more productive economy through having a progressive tax system that is actually aimed at growing the economy. A pro-growth tax reform package could have been put into this bill but it was not. Right now we know that there are loopholes for those who wish to invest in the speculative sector—in property—and we have people there who pay very little tax but who have a high degree of capital invested in that speculative sector.When a pro-growth tax reform is achieved and it will be achieved under a future Labour-led Government we will have more money going into businesses in the productive sector. We expect that that will halt the decline that is inexorable under this Government for manufacturing in the non-primary sector. That Government does not seem to care. Government members have all got their heads down now because they know that the statistics are not in their favour. They know that what little vision they had has not been realised. They know that median wages are still below what they were when they took office and the recession was kicking in. That is a Government that has failed to deliver on its promises. It has talked about ambition but it has not delivered.Some of the other things in this bill are uncontroversial. The fact that the mineral development taxation regime is being looked at—to firm up expectations and to be clearer about when taxes will apply and at which stages in the mineral development process—is appropriate. It will hopefully make things clearer so that there can be investment in the responsible development of our resources.In the bill we note that there are some changes that will be difficult for New Zealanders to swallow in terms of the way in which foreign superannuation will be treated. We know that two siblings going on separate overseas experiences on their OEs—one to Australia and one to the UK—who return at the same point in time having earned comparable amounts will have their superannuation treated differently when they return to New Zealand as the Australian scheme will be treated far more fairly than the British one. That will be a point that many many many New Zealanders will be uncomfortable with.Some of the changes to the foreign superannuation provisions were needed because there is a lot of lack of clarity in the law. That will certainly make it simpler for people to understand how it will apply. That said the way in which people can transfer their funds from the UK is somewhat more complex and we have certainly had many submissions in the select committee process calling at the very least for a thorough education programme so that people know how to comply with the law whilst preserving the savings that they have made abroad for their retirement.One of the more controversial things in this bill comes to us late in the piece. The Minister announced a few days before Christmas that this bill would also contain a remedial matter as it is known in the kind of uncontroversial-sounding language that is used and that it would be the winding back of the child support legislation that was put through Parliament not very long beforehand. The child support legislation aims to change the formula for calculating the amount that is owed to the primary carer of a child by the other parent. We know that there are families in New Zealand that have very difficult circumstances when they separate—there are many many blended families amongst our communities—and that it is difficult for those families to work out their financial arrangements. The very sad thing about this is that it was entirely preventable. Families around the country will have been preparing—taking legal and financial advice—for the changing law and now we know as of a few days before Christmas that the law change will not be implemented. The Government has decided to back out of that law change in order to retain the current law for a bit longer. So those families who took out extensions on mortgages rearranged the education of their children or made various other arrangements that involved them committing to financial arrangements will now have to seek further financial advice as to their situation in the interim before the bill that makes the law change to the new calculation regime is finally enacted.We also know that that new regime will be far more complex that the Inland Revenue Department is voting itself a whole lot more money to train its own staff how to use it and that the regime will be challenging for families and parents to use. This additional complexity this delay in the implementation was entirely avoidable but it is the doing of a Government that really has not got its head round the fact that the computer system that collects our taxes is now 24 years old. The Government was told 5 years ago when it took office that the system was on its last legs but it has done nothing—nothing—to fix it. There would not be many people at home watching this broadcast who rely on computer software that was designed and implemented in 1992 but that is the situation in our tax department in New Zealand. We have a computer system that was built before Google. We have a computer system that was in place 10 years before Facebook was even a concept for people.This is a Government that has had the responsibility for upgrading the system. We are not the only country in the Western World that has a tax system after all. It should not be rocket science. The National Government was told 5 years ago when it came into office that the system urgently—urgently—needed fixing but this Government has done nothing. Two years ago Prime Minister John Key said that tax policy was being held back because of this computer system. He said that the systems “can’t actually support radical changes from Government.” He also said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” That is where we are today. It is over 2 years on from John Key’s statement saying that this was a priority for this Government. This is indicative of the way this Government goes about its business. It says that things are a priority but it is doing nothing. It is not repairing those most fundamental problems that need to be addressed.That is why New Zealanders find that they are experiencing a lack of opportunity and lack of hope for their children. Not only are the changes that we do have ideologically driven to drive the gap between those who have and those who have not ever wider but even those productive changes like implementing pro-growth tax reform could not actually be put in place because this Government has neglected the most basic structures of government. But the system was not entirely neglected I would say because the one thing we do know is that it has spent $50 million in the past 2 years—$50 million and growing—on international consultants to tell it what we already know: that there is a problem. It has now agreed in principle to spend more money—Hon Ruth Dyson: How much?Dr DAVID CLARK: It has already spent $50 million on international consultants and now it has agreed in principle to spend more money developing business cases to fix a problem that we already know exists.