Help for families, workers only safe under Labour
Hon Trevor Mallard
Associate Minister of Finance
18 September 2008 Speech Notes
Help for families and workers only safe under Labour
Associate Finance Minister Trevor Mallard's speech to the New Zealand Payroll Practitioners Association conference, Bruce Mason Centre, North Shore City.
Thank you for the invitation to speak to you today.
I want to first quickly talk to you specifically about payroll issues and then I'll discuss the upcoming election.
As you know there have been recent changes made to the Employment Relations Act in regard to KiwiSaver and how employers pay their KiwiSaver and non-KiwiSaver employees. These changes were needed to address a situation where some employers are paying employees in KiwiSaver less than employees who are not in KiwiSaver.
In effect, the employees were taking a pay cut, which the employers were using to pay their KiwiSaver contribution.
This is despite the fact the government reimburses employers with a $20 per week tax credit, which covers their contribution to employees earning up to $104,000 a year in the first year (2008/09). In the worst cases, the employees end up paying their employer’s contribution, while the employer pockets the tax credit from the government. This is patently unfair and unethical.
The government initially decided to leave the issue of contributions to normal good faith bargaining between employers, employees and unions. However, some employers have taken advantage of this situation, so we decided to amend the Act.
The changes will mean that the employer contribution to an employee’s KiwiSaver account needs to be on top of their take home pay.
It is good to hear that there is a constructive and collaborative working relationship between IRD and payroll software developers, when new government initiatives come into play – particularly in the areas of reducing compliance costs for employers and making it easier for employers to comply with their tax obligations.
These were important considerations when we were designing the payroll giving scheme.
The scheme has been the focus of the presentation to you from the IRD and with changes imminent I would like to mention briefly the reasons why the government is implementing payroll giving in New Zealand.
You may recall, Budget 2007 outlined a programme of initiatives aimed at laying a stronger foundation for charitable giving in New Zealand.
The programme recognises the importance of charitable giving to our social, cultural, environmental and economic wellbeing in New Zealand, and the important role charitable organisations play in delivering the services we need to make a positive difference in our communities.
The first step saw the removal of limits on the current tax relief on charitable donations made by individuals, companies and Māori authorities. These changes applied from 1 April this year.
In particular, individuals can now claim a tax rebate equal to one-third of their total donations – although qualifying donations will continue to be capped at the level of the individual’s taxable income.
However, we recognise that charitable giving is not just about removing limits. It’s about making it easier for people to give.
The government had received a number of suggestions from the charitable sector and the business community on this aspect of charitable giving.
Payroll giving was the clear answer. It is well accepted in other countries – such as Australia – for its simplicity, convenience and effectiveness in promoting charitable giving.
It also has the potential to increase donation levels and establish partnerships between the government, employers and charitable organisations.
There was concern about the potential compliance cost burden on employers.
For that reason – and in recognition of the need to keep the scheme as simple as possible – the payroll giving scheme will be voluntary for employers and employees. It will also be available only to employees whose employers file their employer monthly schedules electronically.
If an employee is not able to participate in payroll giving for whatever reason, they still have the option of claiming any tax relief on their charitable donations through the tax credit claim process at the end of the year.
The proposed change is going through the select committee process now and will apply from next April.
The government considers that the proposed payroll giving scheme should enable employers, employees, and charitable and other non-profit organisations to establish schemes that best meet their individual circumstances, and should allow them to manage the associated costs.
Let me now just touch on the upcoming election which Helen Clark has announced will take place on November 8. Labour will be asking New Zealanders to cast a positive vote for a future they can trust – under a government that has no secret hidden agendas.
As Helen has said, Labour takes pride in what it has achieved with and for New Zealanders.
We have rolled out cheaper doctors’ fees across New Zealand so that families no longer have to think twice about taking their children to the doctor. Prescription charges are also lower.
Our Working for Families support, delivered through the tax system, is helping 370,000 families with the costs of bringing up children and has lifted more than 130,000 children out of poverty.
We introduced twenty hours free early childhood education - saving many families more than $70 a week per child.
In tertiary education, interest free loans have been critical for our students.
For older New Zealanders, there has been the lift in the rate of New Zealand Superannuation along with increased rates rebates and now a range of entitlements through the Gold Card.
The shared equity scheme joins Welcome Home Loans as a new initiative to help New Zealanders in to their first homes.
We’ve massively increased investment in schools, hospitals, road and rail and public transport, and broadband roll out.
We’ve been determined to keep our country clean and green. The emissions trading scheme, the biofuels obligation, the renewable energy and energy efficiency initiatives, put New Zealand in a leadership role on these issues.
In the workplace, as well as the introduction of KiwiSaver, we have introduced four weeks annual leave, we have lifted the minimum wage continually, and we have introduced and then extended paid parental leave. And our intention is to do more on that front.
It is worth emphasising that National has attacked every one of these major Labour policies aimed at making life better for New Zealanders.
They attacked Working for Families, interest free student loans, 20 hours free early childhood education, cheaper doctors fees, KiwiSaver, the New Zealand Superannuation Fund, the rescue of Air New Zealand and the purchase of KiwiRail, and our affordable housing initiatives. Any flip flop on these issues can not be taken seriously.
National can’t be trusted and will turn back
the clock. They have now let slip that their agenda
• Selling Kiwibank and other state assets
• Borrowing recklessly for tax cuts
• Privatising ACC
• Imposing expensive tolls on our roading system
• Weakening workers’ rights
• Undermining cheaper doctors’ fees
• Scrapping much of Labour’s new tax incentive for business R & D and all of the major investment we are making in the future of our major pastoral and food export sector.
And no doubt there is more being kept hidden and under wraps.
Under Helen Clark's leadership, our government has continually rolled out big and new policies to take New Zealand families and our country ahead.
And we have much more to do. We have delivered so far, and you can trust us to deliver again.