Taxation (Annual Rates, Trans-Tasman Savings Portability,
KiwiSaver, and Remedial Matters) Bill
Rahui Katene, MP for Te Tai Tonga
Tuesday 8 December 2009; 3.30pm

A key aspect of this Taxation Bill is that it completes another chapter in the story of Trans-Tasman relations.

The relationship between Australia and New Zealand is given another boost with this Bill giving effect to an Agreement signed by Minister of Finance and Australian Treasurer on 16 July 2009.

In the aftermath of the 2025 Taskforce report, and a conservative monthly economic indicator report for November, the Bill gives another push to those who already believe the grass is greener on the other side of the ditch.

The Bill allows those with retirement savings in a KiwiSaver scheme and the Australian equivalent, to consolidate them into one account in their country of residence, exempt from entry or exit taxes.

The Bill also amends the rules for KiwiSaver when permanently emigrating from NZ to Australia.

But as Tapu Misa wrote so convincingly in yesterday’s Herald, it's not the gap between New Zealand and Australia that we should target, it's the gap between rich and poor in New Zealand.

Misa suggests that the gap, between rich and poor New Zealanders, is actually the gap we should be addressing; it is the gap that holds us back.

And yet the 2025 Taskforce had the gall to suggest that to close the wage gap with Australia all we needed to do was to reduce the adult minimum wage to $9 an hour. Such a move would result in a wage cut for half-a-million low-paid workers by $140 a week.

It’s not as if we can comfortably accommodate such regressive policy.

The Gini co-efficient, an internationally recognised measure of income inequality, has risen from 26 in 1981 to 31.7 in 2007. Zero in this scale represents perfect equality while 100 is absolute inequality.

Set against other nations, New Zealand, when measured against the Gini index for inequality, is ranked 6th worst for inequality.

So with the levels of income inequality being as marked as they are, one can understand the enthusiasm being expressed to make a number of amendments to the Income Act 2007, and other related legislation such as the Tax Administration Act 1994 and the Kiwisaver Act 2006.

The thinking is boosting the incomes of mid-high income earners through tax cuts and tax exemptions will create economic benefits which will trickle down to lower income earners.

We call this the trickle down effect.

Just like those infamous buckets of Cuba Mall, the theory is that boosting the incomes will create more room for spending which will create more jobs which will bring about a greater demand for services and which means those at the bottom will be supported to climb out of poverty into a better quality of life.

Except the thing is, what we have experienced in recent years in Aotearoa is more like the trickle up effect which lands us back in this state of growing income inequalities.

There are a couple of immediate steps that this Bill aims to do, to address the inequalities of income for New Zealanders.

One aspect is the Enrolment of under 18 year olds into KiwiSaver. The Bill will enable discretionary entry for those under 18 to be amended to allow those now under 16 to be enrolled by their legal guardians, and those 16-17 to co-sign with legal guardians in order to enrol.

In itself this is a good thing in that it creates an opening and an opportunity for young New Zealanders to respect the savings culture – to invest in one’s own financial wellbeing and future.

Another related aspect of this is the new relationship between KiwiSaver and first home purchase. Basically, the rules excluding individuals with an interest or past interest in a leasehold estate, such as having their name on a rental lease agreement, are amended so they’re eligible for first home withdrawal.

We have been particularly interested in the opportunities for Maori to benefit from any initiatives which can address the lower levels of Maori home ownership.

One of the greatest tragedies of the former Government was in watching the decline of homeownership rates amongst Māori, with the proportion of Māori who own their home having fallen from 61.4 percent in 1991 to 45.2 percent in 2006.

Maori Housing Trends 2008 reported that Māori have been hit by the same challenges as other New Zealanders who have found that property prices and rents have got out of reach in recent years.

So it’s been really exciting that the Maori Party has been able to work alongside the Housing Minister with a whole bunch of initiatives to help Māori first-home buyers, such as streamlining the Resource Management Act and the Building Act to make building cheaper, reducing taxes so there is more take-home pay to service a mortgage, and keeping interest rates under control through better Government spending when interest rates might otherwise rise as the economy recovers.

These are all important steps in our economic recovery, but there are other initiatives in train, including this one related to Kiwisaver.

The Maori Party is also proud of the developments associated with the Housing Innovation Fund particularly in extending the scheme to make it available for new builds and buying a first home on multiple-owned Maori land.

So the opportunity for first home withdrawal is a positive amendment to the tax laws which we hope will pave the way for more Maori to own their own homes.

There are some other interesting amendments in the legislation.

Cure Kids is added to list of charitable donee organisations in schedule 32 of Income Tax Act. This enables donors to obtain a tax deduction on their donations; for Cure Kids (previously Child Health Research Foundation) which was established over thirty years ago to address the lack of research into life-threatening childhood illnesses in New Zealand.

We’re talking about illnesses like asthma, childhood diabetes, childhood heart problems, liver disease, spina bifida - all areas in which Maori and Pasifika children are disproportionately over-represented.

And then there’s amendments to Gift duty exemptions:

The Bill exempts the following gifts from gift duty – gifts to local or central government bodies; gifts to donee organisations; gifts of property made via a court order under the Law Reform (Testamentary Promises) Act 1949 or the Family Protection Act 1955 (will apply retrospectively from 24 May 1999).

All of these measures are perfectly legitimate, valid means of making changes to the tax laws –and as such give us grounds to support this Bill.

But I cannot leave this debate without raising again the need to do better in addressing inequality.

In The Spirit Level, produced this year by Richard Wilkinson and Kate Pickett, the authors suggest that in highly unequal countries, like New Zealand the cost is almost always high rates of social dysfunction.

They draw upon more than thirty years of data to demonstrate that in unequal society there are more people in prison, more violence, more people suffer from ill health, mental illness, or drug and alcohol addiction, there is more adult and childhood obesity, there is increased infant mortality, homicides, teenage births, and educational outcomes and performance are lower.

If anyone is under any illusion that this Tax Bill will address these issues of profound inequaolity, I’d caution against it.

But that does not mean we abdicate all responsibility for change.

We must do something to to address rising food prices and the impact this has on the ability of those in low income households to purchase healthy food by exempting this food from goods and services tax. That is the substance of the next private members bill I will be submitting and I’d appreciate members’ support.

The other wider issue of course is the need for including broader economic measures such as unemployment and income levels, with growth measured using a Genuine Progress Index.

But we will vote this Bill through today, and look forward to the future discussions.

ENDS

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