Donald Rod: Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill — Second Reading 
Donald Rod: Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill — Second Reading 
[Volume:621;Page:16403] 
ROD DONALD (Co-Leader—Green) 
: 
 This legislation has some good features but we have two principal concerns about it which means we cannot support it. It also totally lacks the measures we believe are necessary to put New Zealand’s tax system on to a sustainable basis as well as to provide the appropriate carrots and sticks to achieve an ecologically sustainable and socially just economy. 
Hon David Cunliffe 
: It doesn’t achieve world peace? 
ROD DONALD 
: We could have a go at world peace too if the member would like. I like to set high goals and aspirations. But I will come back to world peace later. 
I would like to explain why we cannot support this bill. The two key reasons are outlined in our minority report. First and foremost the bill will give certain non-residents a tax advantage on profits from the sales of shares in unlisted New Zealand companies but it will not offer that same advantage to New Zealand shareholders. That is not what we are asking for. We do not think that any shareholders should get those tax advantages but the particular measure in this bill undermines our tax base and discriminates against New Zealand resident venture capital investors. 
Hon David Cunliffe 
: There’s no such thing. 
ROD DONALD 
: If Mr Cunliffe does not agree with me I will quote what PricewaterhouseCoopers said to me in an email: “Those resident investors who hold shares on revenue account are liable to tax on any gain on sale of the shares and are therefore prima facie disadvantaged in comparison to those foreign investors who meet the requirements of the new rules.” The member should not believe me; he should talk to the tax experts at PricewaterhouseCoopers. 
We think it is ironic that the Government has introduced this venture capital measure because it claims that New Zealand is not attracting enough venture capital. It also says we need to do it because Australia has that rule. Well excuse me why should we be letting foreign investors make tax-free capital gains in New Zealand especially when the Government is determined to throw our hard-earned taxes at the global sharemarket through its New Zealand Superannuation Fund. It is not amazing that we supposedly have a shortage of venture capital in this country because at the same time the Government is putting at least $2 billion a year into the superannuation fund which in turn tosses most of that at the global sharemarket. 
 The remedy surely is in the Government’s own hands. All it needs to do is to use some of the $2 billion it puts into the Superannuation Fund to set up a venture capital fund in New Zealand. It does not need to give tax incentives to foreign investors. 
Our other concern about this change—and I highlighted it in my minority report—is that it could lead to pressure to remove tax on other capital gains. I am afraid to say that my premonition has been proved correct because only this week Dr Cullen signalled that he plans to remove the capital gains tax that applies to superannuation schemes and actively managed unit trusts. The Green Party supports a level playing field for Kiwis to invest their savings but instead of removing capital gains tax from superannuation funds the Government should investigate introducing a capital gains tax on all realised capital gains. 
The absence of such a tax encourages investors to sink their savings into property instead of productive enterprises. No such perverse incentive currently exists for superannuation funds because they have to pay capital gains tax. I should say “we” because the Green Party does have its own superannuation fund and our members are very happy to pay capital gains tax on any realised capital gains we make. But the point is that superannuation funds do have to pay capital gains tax. However if Dr Cullen removes that tax he will open the floodgates for superannuation funds to shift their investments from equities into property. That would have a disastrous effect both on the property market because it would artificially inflate prices and on the sharemarket because it would cause share values to plummet. 
New Zealand already has a savings crisis. The Reserve Bank reports that our Kiwi savings rate is minus 11 percent. In simple terms we are collectively spending more than we are earning. We will not turn that unsustainable behaviour around by removing a capital gains tax on superannuation funds. As I said before such a step would only encourage more property speculation and more spending because it is clear that people are borrowing against their property values. That is fine when values are high but it becomes a disaster when they drop and investors face a situation of negative equity. 
Hon David Cunliffe 
: Wait and see. 
ROD DONALD 
: Well I tell the member that we want a soft landing surely rather than a crash-landing. The last thing one does is dig up the runway just because the rest of the airfield does not happen to have any tar-seal. That is exactly what Dr Cullen is doing here by removing the capital gains tax on superannuation funds. 
I move to the second issue that we have raised as a concern—and it is very much a related issue—which is the lack of serious incentives to encourage people to save for their retirement. As I said in my minority report the Green Party believes that the 6 percent tax differential between the specified superannuation contribution withholding tax rate of 33 percent and the top PAYE rate of 39 percent should be extended to all salary and wage earners. 
It is an indictment on this Labour Government that it introduced a 6 percent tax incentive for the most well-off wage and salary earners in this country while for a long time it left a penalty in place on middle and low income earners. At least it has now removed that penalty tax by making the superannuation withholding tax a flexible rate that ties in with a person’s top rate of tax. However it still creates the unfairness of low and middle income earners having to pay the same marginal tax rate while those of us on the top income tax rate are paying only 33 percent on our savings. 
So the Green Party will be putting up a Supplementary Order Paper to this bill to amend the rates to 9 percent for incomes up to $9500 15 percent for incomes between $9500 and $38000 and 27 percent for incomes between $38000 and $60000. I would like to thank Treasury officials for drafting that Supplementary Order Paper to make sure it is sufficiently robust to be worthy of passage and I hope that other parties in this House particularly those that encourage people to save for their retirement will support that Supplementary Order Paper. 
However I would like briefly to say that by far our preference would be for the Government to look seriously at the “t’s and e’s” of superannuation. We believe that the logical step forward is to make contributions exempt so that they come out of gross salary and to tax what people withdraw at the time they realise their superannuation savings. That would both create for the Government a tax deferral to a time when it will need it more and give people the upfront incentive to save that they should have right now. 
In talking of incentives I say that the Government is not doing what it needs to do as far as making our economy and its tax base more sustainable. It should be introducing eco-taxes right now. It should be bringing the carbon tax forward from 2007. It should certainly pass the Customs and Excise (Motor Spirits) Amendment Bill that creates the facility to bring in an extra petrol tax and it should not delay bringing that in while waiting for the equilibrium price to drop to $19 a barrel because that will never happen. So I hope Dr Cullen does not delay for too much longer. At the same time the Government does need to bring in an excise tax on diesel. There are other eco-taxes that I will talk about when we get to the other tax bill. 
In closing I would like to observe that United Future wants to give all its MPs a $1155 tax break by shifting tax levels when at the same time its MPs have just received a 3 to 3.5 percent increase in their salary. I do not think that that goes down well with working people in this country. I urge United Future to back the Green Party call for the minimum wage to be lifted to $12 an hour so that the people who really need an extra $50 a week get it and not just members of Parliament who are already doing very well thank you very much.