4. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
What are the most significant ways in which the wealthy avoid tax, and will these loopholes be closed in Budget 2010?
Hon BILL ENGLISH (Minister of Finance) Link to this
The taxation system has been allowed to fall into a state of disrepair. Some areas are under-taxed. There has been a proliferation of tax rates and incomplete measures of income, and this has meant that many hard-working salary earners, such as doctors, scientists, and engineers, are paying a higher rate of tax than wealthy property speculators. We do not think that is fair, and tomorrow the Budget will address those issues.
Hon David Cunliffe Link to this
Will the Budget address the $2.3 billion in tax losses claimed by loss attributing qualifying companies in 2008?
The member will have to wait and see. I am surprised that when that member was in Government, that Government allowed these situations to arise. People were provided with proliferating opportunities to avoid paying higher income tax rates, so why is he crying crocodile tears about fairness now?
Hon David Cunliffe Link to this
If the abuse of trusts costs the Government $300 million in tax revenue, as highlighted by the Tax Working Group, why will the Budget make this loss larger by reducing every top tax ratepayer to the current trust rate?
It is a principle of good taxation policy that if one allows obvious opportunities for people to avoid tax rates, it undermines trust in the whole system. So the question for that member is why he allowed high-income earners to avoid the top tax rate in such straightforward ways. There are legitimate reasons for trusts; we want to make sure that there are no tax reasons for them.
Aaron GilmoreWe will make the taxation system fairer by applying the principles of a broad base and a low rate. In particular, we want to make sure that sources of income for higher-income earners, who are now subject to quite low effective tax rates, are taxed in a manner that is more fair. That means extending the tax base beyond simply the current definition of income.
Hon David Cunliffe Link to this
When the Minister said it was unfair that half of those on the rich list avoided paying the top tax rate, why is he intent on dropping the top tax rate to allow all of those on the rich list to claim the same benefit?
Well, the point of the tax package is to move this economy in favour of saving, investing, exporting, and creating jobs. That is really important, because under the previous Government, the growth of this economy was characterised by consuming too much and borrowing too much, in a country that spent more than it earned. We have to change that.
Stuart NashDoes he agree with the Prime Minister that Kiwis will be envious of the tax cuts in tomorrow’s Budget; if so, why does he not deliver a Budget that fairly distributes tax cuts to all?
The Prime Minister did not say what the member said he did. The Budget is aimed to ensure that New Zealand is competitive with Australia. We know that in a number of areas—in fact, unions are making exactly this claim right now—our doctors, teachers, and engineers need to be paid more so that they will stay in New Zealand. The member should talk to the Council of Trade Unions about it.
I raise a point of order, Mr Speaker. I do not think that any of the unions are making the contention that tax cuts—
Mr SPEAKER
Hon John Key