3. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
Further to his reply to Oral Question No 6 yesterday that “tax is paid on some capital gains in New Zealand”, what exemptions exist to the current taxation of capital gains income?
Hon BILL ENGLISH (Minister of Finance) Link to this
As the member may know, our tax system does not work, in this respect, by exemptions. Some capital gain is classified in the Income Tax Act as “income”, and is therefore taxed at income rates. One very important exception exists, though: KiwiSaver funds do not currently pay tax on their capital gains from trading New Zealand or Australian shares. This exemption helps boost KiwiSaver returns and provides a level playing field for local investment. However, a new, more widespread capital gains tax applied to the sale of all shares would mean the end of this exemption. KiwiSaver funds would have to pay capital gains tax, lowering their investment returns.
Hon David Cunliffe Link to this
Given that the Prime Minister says: “it is not true that New Zealanders are not taxed on capital gains that they might incur.”, how much is raised annually from the intention test, and how much capital gains income goes untaxed?
With respect to the intentions test, over the last couple of Budgets the Government has given quite a bit more money to the Inland Revenue Department to pursue those people who are, in fact, trading in property but claiming that they are not trading in property. If they are not trading, then they will not be paying taxes on their capital gains. The Inland Revenue Department advises that it has been quite successful in extracting considerably more tax from those property speculators.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. I respectfully submit that the Minister has not addressed the question, which was trying to get him to quantify how much tax was raised from a particular aspect—
Mr SPEAKERI have heard sufficient. If the member really wanted those figures—and he is perfectly entitled to seek those figures—he would need to put them down in the primary question. To expect a Minister to give him those figures, given the base of the primary question today, is unreasonable. If the member wants those figures, then the primary question should have been different.
Hon David Cunliffe Link to this
Was the Minister’s statement that a comprehensive capital gains tax is “the right thing to do” not an admission that the current system offers a tax advantage to property that distorts investment decisions and hurts the economy?
As I explained to the member yesterday, many tax theorists advance a comprehensive capital gains tax as a way of raising more revenue. As I have explained to the member, the Government took a series of measures with respect to property, including the one referred to in the last question—that is, more resources for the Inland Revenue Department to pursue those people who have been avoiding taxation on the trading of property—and also a number of measures in Budget 2010, which I understand are collecting about $800 million this year from the property investment sector. We have taken moderate measures to increase the effective tax rate on property in order to assist the rebalancing of the economy.
Hon David Cunliffe Link to this
Given that the Minister is on record as supporting a comprehensive capital gains tax, and given that the Minister could not tell the House earlier in this question what the exemptions are to the capital gains tax that he and the Prime Minister say currently exists, in what respect is the capital gains tax he believes is currently in place not comprehensive?
As I have pointed out to the member, the Income Tax Act does not work by having a capital gains tax and then making exemptions from it. What it does is classify some forms of capital income as income that should be taxed. The rest of the tax law has been determined by a series of court decisions, which try to determine the difference between ordinary income and capital income. One exception, as I pointed out, is that KiwiSaver funds do not pay capital gains tax on Australian or New Zealand - traded shares. I think that under the member’s proposition, they would.
Hon David Cunliffe Link to this
In the simplest possible terms, does he stand by his statement that a comprehensive capital gains tax is a good thing? If so, does he believe that New Zealand currently has a comprehensive capital gains tax, and in what respect; if not, why not?
As I pointed out in the comments he is referring to, a number of people have advocated a comprehensive capital gains tax. I understand that the member is not advocating a comprehensive capital gains tax; he is advocating one full of holes, exemptions, exceptions, and multiple rates. That would be a nightmare for compliance.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. I have used, as you can see, several additional supplementary questions, in effect, to get—
I invite the Hon David Cunliffe, please, to view the tape of the last supplementary question he asked, and to reflect on the first two statements he made in the supplementary question he asked. He made all sorts of allegations about the Minister’s view of capital gains tax and other matters. Having done that, the Minister had absolutely open licence to say almost anything he liked about the policies of the member’s party, because the member in asking his question made allegations about the Minister’s policies. I just ask him to look at the question he asked, because there is no way I can assist him when he asks that kind of question.
Aaron GilmoreI have seen a couple of interesting reports. The first was a Government policy released by the then Minister of Finance in the last Government, which this Government has maintained: “Capital gains on New Zealand and Australian shares held via a vehicle like a managed fund will no longer be taxed. … It is … important for encouraging people to save through KiwiSaver.” That was a policy position taken by Dr Michael Cullen, and remains a current policy. The second report was by Labour’s finance spokesman, David Cunliffe, who told the New Zealand Shareholders Association that under Labour’s proposed policy KiwiSaver funds would tend to be taxed on the capital gains. So I think it is now Labour’s policy that capital gains on Australian and New Zealand - traded funds will be taxed, and that will punish 1.7—
Order! Unlike the previous question, that was a question from a colleague from the member’s own party. He reported accurately the report he had received, but he erred in expressing his view about KiwiSavers being punished. That was beyond the provisions of the Standing Orders.
Hon Trevor Mallard Link to this
I raise a point of order, Mr Speaker. Again, I invite you to review the tape of that one and see whether you called the Minister to order three or four times while he studiously avoided looking at you.
Hon Trevor Mallard Link to this
I raise a point of order, Mr Speaker. I invite you to reflect on that and see whether you should address points of order raised or provide a commentary that sounds more like an Australian cricket commentary.
I accept the member’s view, but if the member wants me to take his points of order seriously, he needs to behave—most times—seriously. It is a very simple matter: the matter the member raised is a matter for the Speaker to decide. It is for the Speaker to decide whether the Minister did not respond quickly enough to my being on my feet. I admonished the Minister for going into an area that the supplementary question did not allow for, and, as far as I am concerned, that is the end of the matter. All I say to the member is to just reflect on his own behaviour if he is going to criticise the behaviour of other members in this House.
Hon Trevor Mallard Link to this
I raise a point of order, Mr Speaker. I invite you to consider whether it is appropriate for the Speaker to express prejudice before—
The member will resume his seat right away. I have to deal with the behaviour of members in this House all of the time. I have been, I think, quite generous to the shadow Leader of the House and some of his behaviour in this place. I noted last night that in the Committee the member was told to leave the Chamber, and he argued with the Chairman. The shadow Leader of the House argued with the Chairman instead of leaving when he was told to leave. Members need to think about their own behaviour if they are to be taken seriously in this place. Had the point of order been a serious point of order, I would have acted on it immediately.
If you are going to reflect, as the member requested, I think you should reflect on the latitude that that member seems to get in this House. As you pointed out, yesterday he was asked to leave the Chamber by a—
I do not think we should take this matter any further. I have dealt with it as Speaker, and that is the end of the matter. I have made it very clear to the members of the House that I do not view bad behaviour favourably. When the Hon Trevor Mallard raised a point of order claiming that another member had behaved poorly, I suggested, because I did not believe that the offence was so bad, that the member reflect on his own behaviour. It seems that quite a few members of the House actually share my view, it would be fair to say. But that is the end of the matter.
I just want to see behaviour in this House improve a little. In recent times it has become poor, and we are not seen well in the public eye when we allow that to happen. If members doubt the behaviour of certain members, I tell them to look at the television replays—look at the tapes. I do it all the time, and at times it is not good. At times I just have to make it clear to members that they should pick up their game, because the public does not like seeing its Parliament behaving badly. If I have offended the member, I apologise for offending the member, but the behaviour has not been very good.
Hon Clayton Cosgrove Link to this
I am about to advise you of it, Mr Speaker. I would like some clarification. Without wishing to relitigate the exchange we have had, I think the issue is simply this: no one is challenging your right to make a ruling—that is absolutely correct, and we would support you making a ruling—but what follows or prefaces that ruling, inevitably, is a commentary. You may see that as your right and privilege as an evolving Speaker’s role, but the difficulty is that that commentary often becomes a narrative well outside what could be seen to be judicious and impartial. It is your right to make a ruling. You are the referee, but you are not in the game, I put to you, Mr Speaker.
As someone who has recently been on the other end of decisions of the Speaker, I think it is fair to say that we need to reassert a standard that has been held in this House for 20 years, which is that the impartiality of the Speaker is not questioned. Questioning the Speaker’s impartiality has never been a custom of this House, but the Opposition is starting to get into that. I sometimes disagree strongly with the Speaker, and have had cause to do so recently, but questioning the impartiality of the Speaker takes us down a road that leads to disorder, and it should not be occurring. We can disagree with the Speaker, but not question his impartiality.
Hon Rick BarkerI do not take many points of order, but that point of order was very provocative. I sat on the other side of the House, where that member is now, and heard member after member of National questioning the partiality of the Rt Hon Jonathan Hunt and the partiality of the Hon Margaret Wilson. I was galled by it then, and I am even more galled by the member saying that they did not do it. I just wanted to lay that on the record. I accept that the member is correct in that we should not question the impartiality—
I think the House has expressed a view. All I say to all members is that if I have offended a member, I apologise for that, but we have to improve the behaviour. If members think that some of the behaviour that we have seen in recent times is acceptable, then I am sorry, but I disagree. The only way I can make it clear to members that the behaviour is becoming unacceptable is to invite members to look at the tapes to see what the public sees, and to see why we lose respect. That is all I am asking. If comments offend members at times, be assured that it is not without a lot of provocation, because I have been very tolerant of some members’ behaviour. I just want to see the behaviour improve a little.
Hon Clayton Cosgrove Link to this
I raise a point of order, Mr Speaker. Without again wanting to revisit the matter, I think you have missed the point, with respect.
I apologise. The member will resume his seat. We are not going to waste more time on this. I have not missed the point, at all; I heard what the member said. The member thinks I make too many comments, and maybe I do. I accept that. But it is a way of indicating to a member when their behaviour to me is becoming unacceptable to the House. It is not that I have missed the member’s point; I heard it. Maybe there is some merit in what the member has said, but I can assure the member that the public sees my performance as being absolutely impartial. I get a lot of feedback from the public and they see it as that. In fact, I could say I was criticised somewhat yesterday for not being impartial, but that is enough on that matter.