Flavell - Taxation Bill
Taxation (Annual Rates, Business Taxation, KiwiSaver and Remedial Matters) Bill
Thursday 17 May 2007; First Reading
Te Ururoa Flavell, Member of Parliament for Waiariki
Mr Speaker, the Maori Party comes to the House, confident of course that the grand total of three hours that we have had to consider the Taxation (Annual Rates, Business Taxation, KiwiSaver and Remedial Matters) Bill has been sufficient to analyse the mere 258 pages of this Bill.
All jokes aside, this is a big wash up Bill– which includes, amongst other ‘remedial matters’ :
- tax credits for research and development;
- tax credits for employers of up to $20 per employees;
- tax incentives for giving to charitable organizations and a whole host of amendments to Income tax rates.
Research and Development
The initiatives of R and D; and on skills training are going to be good for business, and we hope the proposals will do something to address the state of emergency that the manufacturing sector has reported over recent weeks.
It introduces tax credit for science and technology based research and development conducted predominantly in New Zealand by New Zealand businesses.
Of course it’s probably too late to prevent our icon industry, Fisher & Paykel from moving its manufacturing operations to Thailand.
It is unfortunate that Thailand pulled out all the stops – offering tax breaks, helping with training, and other incentives, while this Government just waved its premier washing machine and clothes dryer manufacturing business, offshore.
We said at the time, that this Government must do something to address a manufacturing strategy, a strategy which will benefit those low income workers that will be unlikely to be able to support the 4% contribution required for Kiwisaver.
And we remind the House that the manufacturing sector is a major employer of Maori workers, with some 32,900 Maori employed in 2005; and another 23,200 Pasifika workers.
Of course the jury will be out about whether the announcements are too late –too late to stop Dynamic Controls, Click Clack, G L Bowron and possibly Sleepyhead from being able to stay in a land of milk and honey but not much money.
We have all heard the warning signals about the exorbitant costs of retaining large scale facilities and employees in Aotearoa, and we will be watching with interest to see that these incentives will make a much needed difference.
We also know that there is a huge demand for research and development – which begs the question as to whether the $88 million injection announced today will respond to that.
And we have to wonder whether setting an entry point of $20,000 is just too high a threshold to really enable companies to enter into the scheme.
Tax Credits for Employers
With the tax credits to employers, it begs the question of why not do away with all the red tape and introduce tax cuts to those on low incomes.
Whilst we support the intention of Kiwisaver to address our relatively low personal savings rates as a nation, we cannot avoid the fact that hardship is increasing and the level of social deprivation in Aotearoa is deplorable.
It was only a few weeks ago that the OECD Economic Survey of New Zealand, reported that living standards have remained some 16% below the OCED median for some years.
I would remind the House that New Zealand suffers from what economists Dr Susan St John and Dr Steve Poletti describe as an “intractable child poverty problem”.
I was interested to read the release from the Auckland Chamber of Commerce this afternoon in response to the Budget, in which Chief Executive Michael Barnett said, and I quote,
“But to my mind our problems are urgent: we need to get beyond gradualism. If we are going to be an exceptional country and transform our economy, we need to do exceptional things that are transformational”
It could be said that the investment in R and D; the compulsory employer contributions and the personal tax breaks of about $20 a week, are a step in getting the economy back in balance – but what about greater society?
How do we, as a Parliament address the ever-growing gap between rich and poor?
The social cost of being unexceptional is too high.
The issues of economic insecurity that Mr Jones referred to earlier tonight, will still remain, long after urgency has been wound up and we return to our homes.
I want to just refer to the initiative to set a five percent deduction limit on donations made by companies and Maori authorities.
Like many multi-faceted Bills, there are good changes alongside not-so-good changes, and this initiative is a good one which responds to our culture of giving, that sense of manaakitanga that some 1.3 million people in Aotearoa represent through their dedicated commitment to community and voluntary sector.
The Bill introduces amendments to substantially increase the tax relief for donations of money made by individuals, companies and Maori authorities to charitable organisations, including removing the Maori authority net deduction limit of 5% of entity’s net income.
Changes to Income Tax
Finally, I refer to the confusing picture of changing names.
Current names New Names
Family assistance Working for Families tax credits
Family support Family tax credit
In-work payment In-Work tax credit
Parental tax credit parental tax credit (unchanged)
Family tax credit Minimum family tax credit
There are some basic questions that we haven’t been able to answer from our quick skim of the 258 pages.
- Why has there been no consultation about the decision to change the names from family support to family tax credit?
- The name change adds another complicating layer of confusion to an area that is already confusing. Ask anyone on the street what Family Support is and they’d have be a pretty good idea that it applies to every child, regardless of whether the parent(s) are in paid work. Whereas the old family Tax Credit previously referred to payments for children whose parents were in work - but will now be the term for family support. Family tax credit now becomes the Minimum family tax credit. If that’s confusing to anyone in this House, spare a thought for New Zealanders at home tonight.
- An obvious outcome of the confusion is that families will find it more confusing to apply for and more difficult to get. Evidence already shows that this will be disastrous for Maori communities. Whenever complications have been introduced, we're more likely to miss out because we simply don't know we should be getting it.
- We wonder too, will the name change be a justification for yet another round of expensive advertisements regarding the name change?
- Another important outcome of the confusion is that by using a name (family tax credit) that meant one thing to now mean another, is that the field gets to be very difficult to analyse and write about with any ease or coherence.
These are all questions that can’t be answered tonight, Mr Speaker, and no doubt they’re just the very start…..
It is in light of such great uncertainties and unknowns that we will be abstaining at this first reading.