Clark David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — Third Reading 
Text is incorporated into the Bound Volume 
Clark David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — Third Reading 
[Sitting date: 25 October 2012. Volume:685;Page:6237. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 This bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill is one that the Labour Party will support. We are always keen to see the loopholes in the tax system plugged. We are supportive of this tinkering—it is not a bad kind of tinkering generally—but we would prefer that actually the Government was taking the big choices making the big changes that are necessary to get our economy back on track. 
Look the Government has a problem. It has a hole to fill. It knows that the tax take has dropped by 4 percent. Its own department the Inland Revenue Department tells it that 1.5 percent of that can be attributed to the global financial crisis and that 2.5 percent of that can be attributed to policy changes. The Government described its 2010 tax package as broadly fiscally neutral but that has proven not to be the case. This Government is looking to fill that revenue hole and some of the changes we see in this bill are an attempt to do just that but the bill will not change the fundamental outlook for our economy. It is a missed opportunity—another missed opportunity—by a National Government that has no plan. 
We need pro-growth tax policy in this country. We need research and development tax credits. We need a capital gains tax that neutralises the investment signal and encourages money to go toward the productive sector. This is a Government that has abandoned our exporters. Aside from refusing to implement pro-growth tax policy it is also refusing to give the Reserve Bank the mandate to act in the interests of jobs and employers. It is more interested in interest rates and the profits at the big end of town. 
This Government has also failed in the area of KiwiSaver although this is one area in the bill where the Government is to be commended. Having previously dropped the rates of contribution from 4 percent to 2 percent in this bill the Government now puts them up from 2 percent to 3 percent. It is a U-turn. It is a small one but it is one in the right direction. But again it must be said that the Government is tinkering. 
When this Government does want to make those big changes how is it going to do that? This is a hypothetical question and if it was a Minister in the House at question time he or she would probably refuse to answer this question on the basis that it is hypothetical. We do not see any plan for the changes that are needed to get our economy back on track. All we see is New Zealanders leaving at a rate of a thousand a week for Australia. 
However we know that even if the Government wanted to make the big changes and wanted to put them through in a bill like this it could not. The Prime Minister said in February this year on St Valentine’s Day—he made a promise to New Zealanders on St Valentine’s Day—that tax policy was being held back because the Government computer systems “can’t actually support radical changes from Government.” That is why we are being asked here to make these tinkering changes. The Prime Minister said that at that stage he did not want to make any radical changes and so on but he has admitted that if the Government wanted to make the big changes that the economy needs it could not make them. I will quote the Prime Minister further. He said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” That is what Mr Key said. That was 8 months ago. We still have not heard how he is going to fix the tax system which is failing us as a country. 
Voluntary compliance is dropping in New Zealand. That is part of the reason the tax take is down. These little gap-pluggers and minor changes that the Government is putting through are in the right direction broadly—we will be supporting them—but they are not going to get our economy back on track. 
We need a plan from the Government as to how it is going to address the inadequacies of a tax computer system that was designed 20 years ago—before Facebook before Google and in fact before the internet as most of us know it. This is a computer system that is out of date. It is held together by sellotape people who have worked at the Inland Revenue Department say. A huge amount of its resource goes into maintaining a computer system that cannot cope with the kinds of changes we need in our economy to get it back on track and the Government is not addressing this issue. We are seeing more and more privacy breaches in the Inland Revenue Department which is one of the symptoms of a department under pressure. This is a pattern across Government. Of course we have seen it in ACC and Work and Income. It is a systemic problem that the Government is not addressing. It means that we are getting this kind of legislation that we have got here in front of us. It makes small changes that are in the right direction but that are not going to fundamentally give us the kind of economy that we need. 
I want to talk about KiwiSaver which is directly in the bill in Part 3. Part 3 talks about how that rate is going to go from 2 percent to 3 percent. But let us remember that in 2008 National cut the minimum contribution rates for employees and employers to 2 percent as I have just said and then it discontinued the employer tax credit. It also capped the employer superannuation contribution. It discontinued the fee subsidy of $40. At the same time it repealed the Employment Relations Act. 
The National Government is not really in favour of this increase. It is reluctantly waking up to the fact that we have a savings issue. It is beginning to address it but it is not addressing it in a way that is going to see substantive change. We would not even be having to do this if it had not cut the rate in the first place. That is the most important thing to note. This is extra work for the Parliament that would not have had to happen if the Government had not cut that contribution rate for employees and employers in the first place. 
This is a bill that illustrates more about what the Government is not doing than about what it is doing. The Labour Party has a plan. The Labour Party has a clear plan and has enunciated it. We need pro-growth tax reform. We need reform of our monetary policy so that the Reserve Bank has the powers that it needs to support our exporters. We need savings. We need procurement policies. Labour in Government has policies that would be transformative of the New Zealand economy and would ensure that the industries in our country are well supported but here all we see is more red tape for business and it is consistent with other areas. Here we see a few tinkering solutions to small tax issues. 
We also see in this bill a write-off for software development. This is one of the positive things and I do want to compliment the Government on the small positive steps that are in this legislation because it is good to encourage the little steps forward that are in the right direction. We see in the bill software development write-offs. This is a sensible move—this is a sensible move. It will make sure that the risk is taken out of software development so that we get more innovation in our country and we have more successful industry in that regard. I am not sure whether it will be something that Kim Dotcom can access. That might be a question for the Minister to answer at the end of this—whether Kim Dotcom can access the software development write-offs whether that is a possibility. 
We know that what is really needed is a change in the way our tax system is structured. We could have called this bill a lot of things. We could have called it the “Tinkering While Wages Plummet Bill”. We could have called it the “National Flip-Flops on KiwiSaver Bill”. We could have called it the “Can’t Make Big Changes Because Computer Systems Aren’t Up To It Bill”. We could have made it the “Fifty-three Percent of Children of Sole Parents are in Poverty Bill” because the economy is not growing and tax settings are not right. We could call it the “Confirming the 2010 Tax Switch Rates Which Saw 44 Percent of the Value of the Tax Cuts Go To the Top 10 Percent of Earners While Just 2 Percent of the Value of the Tax Cuts Went To the Bottom 20 Percent Bill”. We could call it the “Confirming the GST Rise That Bit into Low Earners Bill”. 
We have seen the median wage drop further. We know that those tax changes that were made in 2010 have made our economy so much less fair. We have seen those who are already wealthy prosper further and those who are struggling struggle more. That is what this bill is asking us to confirm. We know that that is something that we on this side will have to swallow as a bitter pill because the other measures in the bill are reasonable if somewhat moderate but could do better. 
When 90 of the 100 wealthiest New Zealanders are not on the top tax rate we know something is wrong. We need pro-growth tax reform and we need a capital gains tax that makes sure that all New Zealanders are paying their fair share. That is what New Zealand needs. New Zealand needs big changes to help our economy grow. We need savings policies we need monetary policy reform we need procurement policies and we need pro-growth tax reform.