JOHN BOSCAWEN (ACT) : Once again it is an honour and a privilege to speak in support of the Taxation (Urgent Measures and Annual Rates) Bill. One of the great challenges that confronts this country is the requirement to get our rate of productivity growth up. One of the key issues that was in the supply and confidence agreement between the ACT Party and the National Party was to set an aspiration to raise New Zealand’s living standards up to the level of Australia’s by 2025. That is some 16 years away, but that is no easy task, and it is likely to require increases in productivity of over 3 percent per annum. A key aspect of achieving those productivity gains is to have a taxation system that encourages hard work, thrift, and responsibility.
It has been very interesting to listen to this debate over the last couple of days, because the Hon Dr Cullen asked the question earlier today, why do people move to Australia? He quoted as an example the 9 percent superannuation contribution to employees’ superannuation savings by their employers. I put it to Dr Cullen that the reason people move to Australia is that the standard of living there is far superior to the standard of living in New Zealand.
Hon Dr Michael Cullen: Oh!
JOHN BOSCAWEN: I tell Dr Cullen that it is far superior to that here. The incomes in Australia are 25 percent or more higher than those in New Zealand, and one of the reasons that has contributed to that is that Government spending, under the last 9 years of the Labour Government here, has been in excess of the per capita inflation-adjusted base by over $18 billion—$1,000 per household per month; $12,000 per household per year. I tell Dr Cullen that that has resulted in the tax rates in New Zealand cutting in at the highest top marginal rate of 60c in the dollar.
Dr Cullen talked about the winners under this legislation being those on hundreds of thousands of dollars of income a year. My point to Dr Cullen is that the winners under this legislation are the 80 percent of New Zealanders who will be paying no more than 20 percent as their top marginal rate of tax from 1 April 2011.
Debate interrupted.
Debate resumed.
JOHN BOSCAWEN (ACT) : I started my address last night at 3 minutes to midnight, and I was commenting on some of the questions and issues raised by the Opposition.
The previous Minister of Finance, the Hon Dr Michael Cullen, asked the House why so many people were leaving for Australia. I commented that in Australia living standards are much higher and after-tax wages are also much higher.
The Hon David Cunliffe suggested to Craig Foss that the reduction in the top marginal tax rates was some sort of utu; that reducing the top tax rate from 39c to 37c was some sort of utu or revenge. I say to Mr Cunliffe that, no, it was not. It was the previous Government’s McLeod report on taxation that called for the top tax rate to be dropped from 39c to 33c. This is the first of many moves that I hope the National Government will make to reduce the top tax rate from 39c to 33c—and it needs to go lower.
I also noted the sarcasm in the comments of Moana Mackey and the Hon Jim Anderton on research and development incentives. The Hon Mr Anderton said that there was no mention of agriculture or exports in the Speech from the Throne. That member seems to forget that he voted for what was probably one of the biggest taxes on agriculture that this Parliament has ever passed, in the form of the emissions trading scheme. I am very proud to be part of a Government and a party that have ensured that there will be a full review of the emissions trading scheme. If Mr Anderton wants to vote for that select committee review, he will have an opportunity to do so later.
I turn now to the question of tax rates and tax brackets. The argument has been made that these tax changes are somehow an attack on the poor. Well, over the last 9 years we have had a significant increase in Government expenditure; an increase in Government expenditure, per capita and inflation adjusted, of in excess of $1,000 per month, or $12,000 per year. This tax bill simply restores the tax thresholds of people on low incomes who pay that lower tax rate of 21c; it simply restores the position of 9 years ago. In respect of higher tax payers, it does not. There is more work to be done.
The key issue of this tax bill is to provide an incentive for people who want to work hard, get on with their lives, earn higher incomes, and contribute to their families’ well-being and the productivity of this country. One of the great problems we have with our tax system is that we have perverse incentives for people to split their income and to enter into schemes that reduce their taxable incomes. When we have a high marginal tax rate of 39c, we are incentivising people not to work, and to enter into schemes that can help reduce their taxable incomes.
My colleague the Hon Sir Roger Douglas was a very proud Minister of Finance in the fourth Labour Government. Comments yesterday from the Opposition referred to the effect that these tax rates will have on those on lower incomes. Well, those folk on lower incomes generally fall into three categories, and that is what Mr Douglas tried to explain to the House. They are either beneficiaries, which I will come to very shortly, or they are the children and spouses of those on higher incomes who split their incomes, or those who have assets of high value and live off the income from their assets. The position with beneficiaries is that benefits paid to beneficiaries are based on after-tax income. We could actually drop the tax rate from 39c in the dollar to 1c and it would not make a single iota of difference to the net income paid to beneficiaries, because beneficiary income levels are based on net income, not gross income. Mr Douglas is very proud that he was the Minister of Finance who put that reform into place.
I will finish as I started in the first reading of this debate by commenting on the Speech from the Throne. The Speech from the Throne highlighted that this country needs to lift its productivity levels and its income levels. What will be fundamental to making those changes over the period of this Government will be a tax system that encourages and incentivises those people who want to get on with their lives, improve their incomes, and improve the lifestyles of their families.