Norman Russel: Taxation (Urgent Measures and Annual Rates) Bill — First Reading Second ReadingText is incorporated into the Bound VolumeNorman Russel: Taxation (Urgent Measures and Annual Rates) Bill — First Reading Second Reading[Sitting date: 09 December 2008. Volume:651;Page:90. Text is incorporated into the Bound Volume.]Dr RUSSEL NORMAN (Co-Leader—Green): The Green Party believes that we in this country need to look at who we are taxing and why. Does our tax system really provide the incentive framework to encourage a civilised fair and sustainable society? Taxes are used both ways—they are revenue for important Government activities but they also create economic signals that encourage some activities and discourage others. We in the Green Party generally believe in taxing the bad things like pollution and waste but not the good things like people’s efforts at work. We also believe in progressive taxation. Those who can afford to pay should pay. We believe that that is a fundamental principle in a decent society.The Green Party will be opposing this bill because we believe it makes our current tax system worse not better and I would like to explain a bit about the background to the Green Party’s approach to tax policy. We would like to shift some tax off wages and enterprise and make up the difference by taxing pollution and waste. New Zealand needs a tax shift. We need to tax incomes less and tax polluters more. This bill is not about an ecological tax shift sadly.We urgently need for example a resource levy on commercial water-use. If we want to use resources more efficiently then resource levies make sense. This would reward those commercial water-users who use water well and put the heat on those who waste water. It would set up the right kind of incentive to use the resource efficiently and in fact increase productivity in the way we use natural resources—a word that was used often in the Speech from the Throne this morning. We think we have to use these kinds of tax signals to create market mechanisms to achieve environmental goals and economic goals.Tax shifting takes taxes off incomes which we support but it puts them on to resource use. There has been a big growth in commercial water-use over the last decade and there should be a resource levy around that. About three-quarters of fresh water is used for irrigation for intensive agriculture and about 10 percent is used by large industrial users. As a general rule no price is paid for that. We are not proposing that there should be the privatising of water or tradable water rights but there should be a charge. That is the kind of tax shifting that the Green Party subscribes to. If we want to use a public resource for commercial profit then the public should be paid a rental on that.A resource levy is not an extra tax. It is fiscally neutral and we believe in a fiscally responsible approach to tax. It is not an approach to tax that cuts the money available to health and education; nor does it lead to more Government borrowing as it seems National’s and Labour’s tax cuts inevitably will. We believe that a fiscally neutral approach is actually much more responsible. That is our approach to tax shifting.Contrary to what is often said New Zealand is not a high-tax country. It has tax rates that are below the OECD average and there is not a huge pressing need right now when we look at the international tax situation to immediately cut New Zealand’s tax rates. There is a lot of talk in the regulatory impact assessment about the international situation but internationally New Zealand does not do too badly in terms of taxes.I would also like to say that tax gets a bad rap. Nobody likes paying taxes yet if we are honest we will say we all need and want the things that taxes pay for: decent hospitals public schools and the ability to look after the environment. These are the building blocks of a civilised fair society. There is no shame in taxes. “Tax” should not always be seen as a bad word. Even though nobody wants to pay taxes we all want what they deliver. In fact we wonder whether the people of New Zealand really value a tax cut ahead of improving our schools cutting our hospital waiting lists and cleaning up our environment. We challenge any party that advocates a tax cut for the rich to first prove that our public services are adequately funded and provide a fair go for all Kiwis. The Green Party did not bribe its way back into Parliament off the back of tax cuts that our nation cannot afford.Kiwis pay their tax in the expectation that it will be used to deliver a decent society. People out there want a society in which there is safe housing for all those who need it but it costs money. We cannot keep making spending promises without telling people where we are going to get the money from. People want a society where their kids and other people’s kids get a chance at a decent education and where rivers are cleaned up so they are safe for swimming in. When people get sick they want a hospital with enough resources to provide them with a bed if they need it doctors nurses and all the rest of the staff and even bureaucrats—those evil bureaucrats who book the appointments answer phones and give doctors and nurses time so they can actually treat patients. That is why people pay taxes.In general cutting taxes means having less for spending. This Government has already announced a pretty expensive programme of spending and it seems it is being added to all the time. We have to assume either that there will be cuts somewhere else aimed perhaps at those who are least able to speak in their own defence such as the poor the old the young or—or perhaps and/or—that our national debt will increase very significantly. That of course means that future generations will have to pay interest on whatever money we borrow today for our tax cuts. So if we borrow to pay for tax cuts today the next generation will have to pay taxes to pay the interest on the debt we build up to pay for our tax cuts.It is also true that many of our social services need more funding. Look at residential aged-care. Surely one of the marks of a civilised society is how we look after ourvulnerable elderly when they can no longer fight so well for their own rights. I do not know that we can say we are a truly civilised nation unless we fund aged care properly. The horror stories that come out of our rest homes are too tragic and too unacceptable and should make one pause before suggesting that the first thing this country needs is a tax cut.Do our vulnerable families need less support? Do those kids who get moved from crowded damp household to crowded damp household—sometimes deadly households—often having to change schools and having their education disrupted need less support than the rest of us? I think that actually they need more. I think they deserve more. The challenge to this Parliament is to actually deliver more and that costs money. Kids with asthma and glue ear from damp houses never get a chance to participate in the greatness this country has to offer.When it comes to KiwiSaver the Green Party has supported a policy that supports an increased level of savings both to control inflation and to improve our balance of payments account and also to strengthen investment in local communities. It was for that reason that we supported KiwiSaver. We had some doubts about KiwiSaver. KiwiSaver is far from perfect. We were dubious to some extent as to whether it would really increase overall savings or simply move some private savings into KiwiSaver which would happen anyway. We were worried about the impact of KiwiSaver on Government savings due to the cost of funding the scheme. We were also worried that basically we were using taxes to subsidise inequality in retirement income between those who could save and those who could not afford to save and therefore never got any of the tax benefits.None the less in spite of our reservations about KiwiSaver it seemed a sensible approach to try to increase savings. We did want a 2 percent rate as an option and actually we are pleased that the 2 percent rate is coming in. We are also pleased that the Government has ensured that low-income earners get the full $20 a week. But overall the problem with the bill is that it reduces incentives to save. So we do have tax shifting. We move taxes off income and put them on to savings. I am not sure that this is really a very wise long-term strategy for a nation with a chronic account deficit.I also question whether this is really the best way to deliver an economic stimulus package. These tax cuts will either be spent or be saved. If they are spent a good proportion of them will be spent on imported goods—that is we will borrow money from overseas in order to stimulate someone else’s economy because we will be purchasing their goods. If the tax cuts are saved they will not have a stimulatory effect on the economy. It is not a very good way to stimulate.Infrastructure spending makes a much better stimulus package especially if it is infrastructure that can be built using local goods and services. Housing and home insulation are a much better option if we want to have an infrastructure spending programme to stimulate the economy. They can be sourced locally so we do not effectively stimulate someone else’s economy. Sustainable infrastructure is a much better stimulus package. Public transport sewerage schemes trees on eroding land—there is so much more we could do.I would like to mention that the Buy Kiwi Made campaign would make a significant impact on protecting Kiwis’ jobs. I would also like to touch on the regulatory impact assessment which according to the bill itself is completely inadequate. The Government has made a great deal about regulatory impact assessments so there is a tremendous hypocrisy in the fact that the first bill this Government introduces states that it has an inadequate regulatory impact assessment because of inadequate time.I hope that the Government will bring up in much more detail the regulatory impact assessment as the bill goes through the House over the next day or so so that it canstand by its election promise to make sure that all regulation it introduces has a proper impact assessment.