Sharples: Income Tax Bill; First Reading
Income Tax Bill; First Reading
Dr Pita Sharples, Co-leader, Maori Party
Thursday 23 November 2006
This Bill is the final instalment of an income tax legislation tidy-up project. It is a mammoth Bill, indeed volumes of parts and clauses, transitional provisions, binding rulings and accrual determinations.
Let me say from the outset, that the Maori Party places great emphasis on policy advancements in the area of income tax.
Our motivation is clear - we want to raise the standard of living of all individuals in this country, especially those on lower incomes.
We know that 1.9 million taxpayers in the 2004-05
financial year earned $25,000 or less. It is evident that
the fruits of economic growth so frequently lauded in this
House, have not resulted in the equitable distribution of
We question the fairness of tax rules which allow the wealthy to receive income free of tax, while those on low incomes pay tax on every dollar they get.
We believe that tax reductions should be driven by improved efficiencies and savings in the public sector.
Our long term aspiration is to review all Government systems and expenditures, including outgoings for and on behalf of the Mäori partner to the Treaty, for efficiencies and savings that can be identified.
Madam Speaker, these are the goals and indicators that the Maori Party would look to a healthy income tax infrastructure to provide.
And yet what do we have here?
The Bill is merely a redraft of the existing
policy. In effect, the rewrite project illustrates the
futility of concentrating on the somewhat trivial details
when the wider tax context and the thinking that drives it
is in crisis.
It's an opportunity lost.
The explanation for the changes is that the rewrite project will be completed, by re-enacting Parts A-E, consolidating amendments made to those Parts since commencement of the Income Tax Act 2004, and then rewriting Parts F-O in the same style as Parts A-E.
Well I suppose that all means something to Mr Dunne and this Labour led Government.
what does it mean? What does the Bill actually do?
The Maori Party, of course, supports the move to make the legislation clear. If taxpayers can understand their obligations by them being set out in plain language and within a consistent structure, it is much more likely that they will be income tax compliant.
But the basic problem is, that the touch-up job that is being applied today, happens without any changes to the essential policy content.
Where are the proposals to raise the maximum level of income that a person may earn before tax kicks in – thereby ensuring that beneficiaries and low income earners do not pay tax?
Not in this Bill.
Where are the strategies to reduce personal tax rates across the board?
Not in this Bill.
Admittedly, some minor policy changes have been made.
They are changes made in the interests of clarify or simplicity, and changes approved by the Rewrite Advisory Panel in consultation with tax professional groups.
There’s also a rather bizarre bit of legalese which is included as a cautionary note in this Bill.
It states that if, in the initial years of the Act’s operation, it is found that the Act produces a different result from that which would have been produced under the current Act, the Government will promote a remedial amendment to correct the position from the date of the commencement of the new legislation.
Now I’m trying to work this out.
Is this a guarantor’s clause for the Government, that if all turns to custard, they can write it off as a United Future mistake, and claw back brownie points with the voters?
Madam Speaker, the Maori Party will not be supporting this Bill.
We have been looking at the policy context around income tax in quite a different way than simply a cosmetic exercise to dot the i’s and cross the t’s.
We have been asking questions around the very ‘myth of the benefits of growth’.
In current philosophies, the tax argument appears to be confined on the one hand to
- the cutting of taxes for more investment and therefore more growth or
- on the other hand– to maintain taxes for social services.
But the key question is - what of the very basic relationship between tax and who gets rich and who stays poor?
In whose interest does the current tax policy really work? Where does the money come from for the growth and who really benefits from it?
If we look at tax with quite a different set of eyes, say under the framework of a Genuine Progress Index, we may find that those who are being rewarded by tax incentives are actually those who are exploiting natural resources. Is that really progress?
How odes this Bill fits with the Government’s newly acquired concern for the environment – its new green image - if those tax incentives for environmental exploitation remain.
As I have already said, an opportunity for change is lost.
As this House should be aware by now, the policy framework of the Maori Party is informed by our commitment to the awareness of whakapapa. We believe that everything has a whakapapa, everything has a genealogical base.
This Tax Bill today has a whakapapa and perhaps we should consider its parentage and its origins: the crossing of welfare state tax collection to fund particular policy objectives, with the enterprise state tax reductions and the introduction of user pays.
But what has been the results?
Significantly lower tax for high income earners, but actual tax increases for Joe Average and the poor. By 1992, the changes made to tax policies meant that high income earners paid 17% less tax, middle income earners 8% more, while those with the lowest incomes paid a staggering 35% more tax.
Jumping forward to the present day, those who have a student loan to pay off, would likely pay in excess of 40% of their income in some form of tax - income tax, GST, student loan repayments, and now Kiwisaver contributions for their retirement.
This partnering has not been fruitful for a great number of people.
We have also scrutinised the Bill to see whether this framework will produce the desired results of a creative community where the benefits, including financial wealth creation potential through technological creativity, are retained in the ownership of our citizens.
We are thinking of the long-term vision, not the tidy-up of today.
We seek tax incentives which will encourage entrepreneurship and make more surplus finance available for new business formation and for reinvestment.
Madam Speaker, the Maori Party is motivated by the desire of tangata whenua to attain growing and sustainable prosperity, measured by a genuine progress index.
We are looking for long-term, visionary approaches which maximise the wealth evident in our cultural capital, our enterprise and entrepreneurship, and our greatest resource, our people. This Income Tax Bill does nothing to shift our sights forward, and because of that we will not be voting in its favour.