Friday 18 May 2007 Taxation (KiwiSaver and Company Tax Rate Amendments) Bill; Second Reading Tariana Turia, Co-leader, Maori Party

It was Plato that once said, "the excessive increase of anything often causes a reaction in the opposite direction".

And so it is that yesterday, the Minister of Finance introduced a reduction in the headline rate of corporate tax from 33% to 30%; while in the same breath, announcing that there will be compulsory employer contributions to Kiwisaver phased in over the next four years.

This Bill provides for the tax rate changes and the KiwiSaver enhancements announced in the Budget. The idea is that the company tax rate reductions will increase productivity and improve international competitiveness - meaning that overseas companies will want to come over here and do business.

That might be well and good, but it does make me think about the likely impacts on our own local businesses and business people. We've already experienced the fall out of New Zealand companies shutting up shop and moving overseas, businesses down-sizing and falling wages. There's also the not insignificant matter of some 300,000 New Zealand children living in poverty.

What about the basics like being able to afford to heat the home, buy clothing, pay for transport, participating in sport?

What about the ability to eat a decent meal unhampered by missing or decayed teeth?

Mr Speaker, we support a reduction in company tax rate as part of our taxation policy; so we're hardly going to oppose the notion of it.

We believe that larger corporations should be encouraged to be grow, to increase employment of rising quality and that a decline in their tax rate from 33 percent to 30 percent will help to effect that.

But the wider issue is that the tax relief is not going to go to those who need it most urgently -and that's beneficiaries and people on low incomes. We looked to the 2007 Budget with one clear aspiration -and that is that all people should have sufficient income to be able to participate in society and in their communities.

We expected there to be initiatives to support meaningful fulltime work and to benefit from a realistic minimum wage. We have talked before in this House about the need to raise the maximum level of income that a person may earn before they are taxed to $25,000. We have yet to see a system which redistributes wealth equitably.

And yet, we continue to note that the Kiwisaver scheme is not accessible to all, namely those beneficiaries and those on low incomes. In the enhanced Kiwisaver scheme, it is expected that fifty percent of New Zealanders aged 18 to 65 years will be actively contributing to Kiwisaver or a complying superannuation fund.

Mr Speaker, the economy should not be a game of two halves. If 50% of New Zealanders are benefiting from Kiwisaver, it doesn't take a calculator to realise that 50% of them aren't. One half of New Zealanders are getting a pretty good deal and I include ourselves in getting a good deal. Those opting into the scheme or a complying super fund will receive a tax credit, dollar for dollar of their contribution, up to a cap of $20 per week. Those opting into the scheme or a complying super fund will receive compulsory matching employer contributions - starting at 1% in 2008, reaching 4% of gross salary or wages by 2011.

But for some vaguely defined "different sub-groups of the labour force" - that's the working poor and beneficiaries, the benefits will be negligible. This new category of people - subgroups - appears in the General Questions and Answers of the Kiwisaver package. I wonder if these are the people who earlier this year were referred to as the under-class? Sub- meaning subordinate; secondary; below the radar, inferior. These "different sub-groups" presumably are those families who live with net-of-housing cost incomes below the 60% line - 23.6% of whom are Maori; 40.2% of whom are Pasifika and 15% are Pakeha. Sub-groups are also no doubt those who live in houses defined as overcrowded -23% of all Maori; 43% of all Pasifika; and 5% of all Pakeha. Sub-groups are no doubt those who live in severe hardship, below average earnings; and with high frequency of visits to food-banks.

Sub-groups are no doubt those who live in 'clusters' drawing a benefit.

Sub groups are obviously not those who benefit from the government's largesse in this budget.

We do support the enhancements to KiwiSaver which act as incentives to join the scheme. But we will not desist from confronting the situation for beneficiary New Zealanders, living or struggling to live on a measly few hundred dollars a week. For the average person on an unemployment benefit, a 4% contribution would see them put about $12 a week into KiwiSaver. While they won't of course receive any employer contribution, they will get a tax credit of $12. That brings them to a grand total of $24 savings a week.

That may not sound like very much to anyone in this House - but if it means sacrificing 20 litres of milk a week; or bus fare for the kids to get to school, then the prospect of savings becomes remote. Whether low-income workers will be able to commit to the minimum four per cent of their pay to join up to Kiwisaver has of course been frequently raised by the Maori Party. And it is ironic that just two days after a Bill to protect the rights of children is passed, another Bill is before the House which still continues to leave our poorest families behind. The proportion of all children in severe and significant hardship in New Zealand has increased from 18% to 26% since the year 2000.

Mr Speaker, I am reminded of the wisdom of Bishop Desmond Tutu who said, and I quote:

"If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality".

The ongoing injustice of social exclusion which is evident in the thousands of New Zealand families who are struggling to live on incomes well below the poverty line.

We can not collude with the silence of neutrality, the 'fairness for all' rhetoric which ignores the reality that too many New Zealanders are unable to participate in their communities. Benefit levels are still far too low to enable whanau to do anything about the situations of social distress that they find themselves in.

We contrast that with the projected three billion dollars to enhance the KiwiSaver Scheme; or the $2.1 billion that the reduction in company tax rates will cost the country in lost revenue.

We believe the moral test of a government is how it treats those who are at the dawn of life, those who are its most vulnerable; our poorest and socially impoverished citizens, and amongst them, tragically, the disproportionately number of young people.

The Maori Party believes that if we invest in people, if we give priority to our human capital, our whole society will prosper.

We believe the amount of the benefit should be raised to the minimum wage; and that work should be meaningful, productive and skill-enhancing.

And these, Mr Speaker, are aspirations that are worthy of urgency at any time of the year.

ENDS

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