Copeland Gordon: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — First Reading 
Copeland Gordon: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — First Reading 
[Volume:626;Page:21223] 
GORDON COPELAND (United Future) 
: 
 One of the things that Part 1 of the Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill does is to fix the annual rate of income tax. We do that every year in these kinds of bills which go under different names. Every year since the year 2000 we have used the same wording which is that the tax brackets will remain unchanged. They have remained unchanged since this Government came into power in 1999 and lifted the top tax rate from 33c to 39c in the dollar cutting it in at $60000 per annum. Members will remember that when we debated the equivalent bill last year I tabled an amendment during the Committee stage and said that it was time to adjust those tax brackets for the 13 percent inflation that had occurred since 2000. My amendment incidentally would have adjusted them with effect from 1 April 2005. In other words they would be applying right now as we speak which would have made those 63.7 percent of New Zealanders who want to see tax cuts and whom Kenneth Wang referred to very happy indeed. 
I can tell the House today that if United Future has a say in the next Government we will be shifting the tax brackets. In other words depending on what happens after the election one should not assume that this clause will go through as it stands although we will be supporting the first reading of the bill. Our policy is that on 1 April 2006—not 1 April 2008—we will shift the tax brackets by $5000 from $38000 to $43000 and from $60000 to $65000. Why? Because New Zealanders want it it is fair and it is just. By contrast of course as every person without exception in the country now knows the Minister of Finance Dr Michael Cullen decided wisely to pick up on bracket creep in order to bring to an end the rort of bracket creep that has been going on in this country since almost time immemorial. It certainly hit the headlines when Rob Muldoon allowed it to continue even though inflation was in double digits. Michael Cullen decided to break the logjam and I compliment him on that. Then taking everyone’s breath away he said that it would not take effect until 2008 and then for 6.12 percent only. It saddens me that the Minister of Finance having broken the logjam and created a piece of history by being the first Minister of Finance in the history of this country to admit it was time to bring fiscal drag to an end spoilt it by making it far too little far too late. 
There are some other good things about the bill that we willingly support. The first one relates to the changes to be made for depreciation rules. The principle of depreciation is that the cost of an asset should be matched against the revenue it produces across its useful life for tax purposes. This new policy does that and does it by way of realignment and therefore it is something I wholeheartedly support. However a little increase is buried away in the low-value asset threshold. That is the threshold below which one does not actually have to record an asset in the books for depreciation. Being all heart the Government has decided after many many years—I think about 25 years—to increase that amount from 200 bucks to 500 bucks. Big deal! United Future would increase that amount to at least $1000 if not $1500. 
The bill also introduces a new tax simplification system for small and medium sized businesses. They will now pay their provisional tax in tandem with their GST and it will therefore fluctuate with the seasons of the year. I know that will be very very welcome to many small businesses as Clayton Cosgrove eloquently outlined and in particular by those who have a seasonal cash flow such as farmers real estate agents and many other businesses that go with the seasons. I welcome that and I am sure small to medium sized enterprises will welcome it very much. But I say to the House that by contrast United Future’s policy is to give a tax holiday to new small-business start-ups for the first 2 years of their life for the very simple and sound reason that many new business start-ups in New Zealand do not survive the first 2 years because of having to pay provisional tax. They simply do not have the cash flow to both grow their business and pay tax at one and the same time. We would give them a 2-year tax holiday so that we could see more new businesses start up in this country giving our economy a greater dynamism and helping it to grow it. 
Likewise our policy would be to pay a 1 percent commission to all of those who collect GST for the Government on the first $200000 of GST collected and paid to the Government every year. It is really quite outrageous when one thinks about it. The collection and payment of GST by a business does absolutely nothing whatever for that business. Businesses are in reality unpaid agents of the Crown for collecting taxation. Even in the days of the Roman Empire tax collection agents got a commission. I think it is an idea whose time has come and it will be part of United Future’s policy as well. 
I welcome the changes relating to fringe benefit tax. I think that overall they will be good for business and be very worthwhile. Something that has not been mentioned by any of the speakers in the debate so far is the new information reporting requirements for foreign trusts. I think it will come as an absolute surprise to the great majority of Kiwis to know that we have foreign trusts registered in this country that handle billions—not millions—of dollars a year. In fact we are one of the international havens for foreign trusts. Looking after the funds of foreigners who choose to invest their funds in trusts registered here is really what keeps a lot of the lawyers and accountants in our country going. They register in New Zealand because they see this country as being a good safe haven. So it is something that really benefits our economy immensely. But those trusts will now have to start recording and keeping information which can if need be be accessed by the Inland Revenue Department and that is a big change. We need to have that provision because of the opportunities for tax avoidance. We also need it as part of the international war on terrorism to make sure that funds flowing through any country that are owned by foreigners are not being laundered or used to fund terrorism. I think that that is also a good move. 
The Government has decided to bring in new rules about the “selling” and “buying” of assets—securities lending transactions they are called. Again that is a good anti-avoidance thing to do. Also the bill increases the child rebate—the point at which the child has to start paying tax. Let me inform the House today that that would be completely unnecessary if United Future were to be in Government or working with a party in Government because our policy is very straightforward. It is that we would exempt from tax entirely the first $3000 earned by any New Zealander. Kids would not have to pay tax on the first $3000 they earn even if the earnings come from interest or dividends. Students would not have to pay tax on the money they earn in order to try to subsidise their way through university—up to the first $3000—either. In fact every single taxpayer in New Zealand would not have to pay one cent of tax on the first $3000 they earned. That is a very sensible policy and it should be adopted. In that respect the difference between ourselves and the Greens as I have mentioned is that we would link that to an adjustment to the tax brackets at the high levels. We would also have income-splitting for couples raising kids and implement a lot of other very good common-sense ideas that would reduce the tax burden on Kiwis by about $2.5 billion—a very worthwhile objective. 
Let me briefly say that the rant we heard from New Zealand First in terms of the possible sell-down of 40 percent of State-owned enterprises to New Zealand investors was no more than that—a lot of hot air completely lacking in any intellectual rigour analysis or substance. But I have to say that that does not surprise me at all because it is probably a description of most of the policy initiatives that come from that party led by “Winston Le Pen”.