Taxation (Budget Tax Measures) Bill; Third Reading
Friday 29 May 2009
Rahui Katene, Finance

In the hustle of post-budget commentary the comments of a humble crane operator from Porirua probably summed up for many, the reaction to this Taxation (Budget tax measures) Bill.

Koro Moon told local papers,

“I was hoping for more money but I’m not surprised there were no tax cuts. I’m not affected by the recession….it doesn’t bother me because we’ve just got to live the way it is….I mean, what can we do?”

What can we do exactly?

We are facing the worst economic downturn in thirty years and so it was always to be expected that we’d all need to tighten the belt and nail down the hatches if we are get through this time unhinged.

I suspect that the nonchalance expressed by Koro Moon would be not too different to the response of many New Zealanders as the Budget hit the bookshelves and the analysts plotted their storyline.

Quite frankly the repeal of the personal tax cuts and independent earner tax credits wouldn’t register with many of our constituents, who are far more focused on ensuring the whanau survives in dire times.

But there is another angle that I want to bring to this debate.

Yesterday as our budget hit the news stands, the United Nations released a statement warning that economic development activities, whether government infrastructure projects or mineral extractions b y corporations, must not infringe on the rights of indigenous peoples.

The United Nations Permanent Forum on Indigenous issues stated that these issues are extremely complex because so often we understand the need to make economies survive, but this should not be at the expense of indigenous peoples lives.

And so as we looked through this Taxation Budget Tax Measures we have been weighing that up in our minds, whether or not the decision to kill tax cuts is at the expense of indigenous peoples lives or not.

And I have to say, the balance is favourable.

For as Koro Moon pointed out tax cuts nevere actually meant a great deal in comparison to some of the other issues affecting indigenous peoples.

There has been a lot of rhetoric around broken promises in this debate.

All I can say is that for tangata whenua, there is a fairly significant promise that weighs heavy in our collective soul – and that is around Te Tiriti o Waitangi.

So let’s get a bit of perspective here.

The evidence provided to us has told us that tax cuts to mid-high income earners contribute to growing income inequality. They don’t create the economic benefits which will trickle down to lower income earners.

Indeed, the latest OECD report on income distribution ‘Growing Unequal: Income Distribution and Poverty in OECD Countries’ shows this as a particular and perverse effect of globalization.

It is well known that we were reluctant signatories to the first tranch of tax cuts.

We were always nervous that the new tax regime had created new and unnecessary layers of complexity. It was our thinking, in the Maori Party, that low income earners would be better served by blanket tax cuts as have been provided for to higher income earners, and by raising the minimum wage.

Administrative simplicity is one of the benefits of a broad-based low tax framework, and yet the cuts introduced last December failed to derive this benefit.

So we are pleased to support this new Bill to cancel further tax cuts in the context of ongoing spending restraint.

This is the time now for a fresh look.

No additional tax relief has been provided for the nations most vulnerable families in this time of global economic recession.

This must be an urgent priority for us.

In this Taxation (Budget Tax Measures) Bill, with this effective freeze on tax cuts, we hope that the Maori Party will have another opportunity to influence future tax policy.

We are pleased that those earning under $40,000 per year, and who received no tax cut on 1 April 2009, will no longer be subject to the higher taxes that were due to come in on 1 April 2010 and 1 April 2011 (up to $8.65 per week for some low-income earners).

The positive in all of this is that the increase in the inequality in disposable income is somewhat halted because of this Bill today.

But now we must turn to the task in hand.

We must think about creating ways to provide tax relief to low-income earners and families - such as through tax cuts, GST off food, and an increase in the minimum wage.

And it is in line with that vision, that we will support this Bill as an opportunity for moving forwards.

ENDS

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