Within 5 years we would plan to put all exports on the same footing of 20 percent. New Zealand First, if it were in a position to do so, would put the appropriate machinery and legislation in place to ensure that the system was honest and was kept honest. For example, if company A has net income from exporting of $10 million this year, and if it achieves $12 million next year, then the tax rate on the additional $2 million would be 20 percent.
I remember hearing the evidence and deliberating on the bill. He was on the committee with me, along with others. Welcome to courses by real estate investor master, Dolf will let you in on real estate secrets, strategies and so much more.Rodney Hide: I remember that member’s questions very well—very insightful.CRAIG McNAIR: That is good. Category: Real Estate Tags: Dolf De Roos, Dolf De Roos - The Great Real Estate Investment Adventure, The Great Real Estate.
I reiterate that New Zealand First wants to treat all New Zealanders equally, and we are preparing an amendment to give effect to this view.Dr DON BRASH (NZ National) : There is much in this Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill that is plain common sense. In the meantime we cannot support the bill, because of its unfair and race-based system, and we will beAbstaining from the vote on the second reading. It is our intention in the Committee stage to put an amendment that all sections of the New Zealand community that are able to take advantage of the proposal relating to basic rates of tax at 19.5 percent should be treated in the same way. We expressed a minority view in the report back, because of our concern.
It did not need to do that for revenue that is very clear. For reasons that had nothing to do with the need for revenue, but a great deal to do with political envy, this Government raised the top tax rate for people from 33 percent to 39 percent. Between 19 we had a top personal tax rate of 33 percent and a company tax rate of 33 percent, and within the limits of a progressive tax system that minimised the compliance costs of the taxation system. It is running a large Budget surplus—larger than it expected yet it still proposes to maintain the current income tax rates. I think that is a huge opportunity missed by this Government. But I have to say that for us there are two fundamental flaws in the bill, and for this reason we certainly will not be supporting it—indeed, we oppose it quite vigorously.The first and most significant problem is that the bill confirms the existing income tax rates.
That was done in conjunction with the closure of all the tax rorts, tax loopholes, and tax shelters that had been prevalent prior to that time—the deer farms, the movies, the musicals and, dare I say it, the kiwifruit orchards—which were owned for the purposes of reducing income tax.Not many high-income New Zealanders actually paid 66c in the dollar. What nobody really focused on was that that reduction in tax from 66 to 33 percent, which I must say was absolutely sensible in terms of good tax policy—Rodney Hide: That was a good Labour Government.Dr DON BRASH: It was a good Labour Government, as Mr Hide points out. It is a myth, because what we saw in the 1980s was a reduction in the top tax rate from 66 to 33 percent, and people said it was clear the top taxpayers were paying less. In fact, it was done in the mistaken view that the tax system in recent years has been rigged so that high-income taxpayers paid a lot less tax.That is one of the great myths of the tax system in New Zealand.
That person is paying $27 in income tax per year, or a little under that, by the time we take into account the family tax credit and the other family tax allowances that have been in place for some years. But let us look at the situation of someone earning $25,000 a year, with a non-earning spouse and two children under the age of 13—the kind of people many parties in Parliament,Including United Future, want to help. That is the widespread belief. When we add the 39 percent income tax to 12.5 percent GST, that is about 46 or 47 percent tax on additional income above about US$30,000.The other fallacy is that, because the actual rates do not go up very steeply in New Zealand, the tax system is not very progressive. This Government is going back on that sensible framework, and encouraging New Zealanders to try to find loopholes and shelters, and any way of dodging the tax, which at 39 percent means that people earning more than about US$30,000 a year, a modest level of income by international standards, are paying nearly half their additional income in tax.
The person on $25,000 a year is much more likely to be using Government-funded services of health and education than the person earning $100,000 a year. To make matters more progressive still, Government expenditure typically is spent in ways that are quite progressive in the same sense. So the income tax system, in conjunction with the family tax credit and similar arrangements, is already a very steeply progressive tax system.
We have a situation now where Australia’s company tax rate is significantly lower than our company tax rate. I would argue that the Government should go further and reduce both. This bill locks those high deadweight costs into the system, despite the fact that the Government’s fiscal position would make it quite straightforward for it to at least move back to a situation where the top personal tax rate and the company tax rate were the same. We know that high tax rates have high deadweight costs. It means that the people who are most likely to invest, most likely to acquire skill, and most likely to take entrepreneurial risks, are the people whom this tax system clobbers most heavily.
That is our first reason for being concerned about this bill and wanting to oppose it.The second reason we oppose it is the one that Mr McNair alluded to—the preferential treatment for Māori organisations. We will not make it, and one of the reasons we will not make it is that this Government’s ideologically driven policies are intent on increasing the tax rates on people on quite modest levels of income by international standards. Why have we backed off that? I think it is because the Government recognises that its policies will not move New Zealand to the top half of the OECD in two or three decades—not one decade, but two or three decades. We are missing a golden opportunity by keeping tax rates at their present level.There has been a lot of discussion in the last week or two about the Prime Minister having to back off her promise to take New Zealand to the top half of the OECD within one decade.
That would have been fair and it would have been racially neutral. It would have been fair, as my colleague Mr Carter points out. It is a tax rate for companies that is a withholding tax for the beneficial owners of companies, which the recipients of the dividends, or the income flow from those Māori organisations, could have treated as a credit against their tax liability, and if their personal tax rate was lower than 33 percent, it could have—Dr DON BRASH: Absolutely. There is no reason at all that we could not have applied the same system to Māori organisations as is applied now to companies—a 33 percent tax rate, or something lower, if the Government was not so miserable. There was a perfectly sensible precedent that could have been used to ease that problem, and it is called the company tax system. There was clearly a level of taxation that was totally inappropriate.
We have enough potential problems in race relations in New Zealand already, without creating the widespread public perception, based on a reality, that a preference is being given to Māori organisations. This bill locks into place a tax system that gives a preference to one particular racial group. That is a very important principle. This party, the National Party, stands for one standard of citizenship.
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