For those without high or even medium-speed broadband, the Hansard is below:
6. Hon DAVID CUNLIFFE (Labour—New Lynn) to the Minister of Finance: Which of the following statements by the Prime Minister accurately reflects the Government’s position: that a capital gains tax would send New Zealand “screaming backwards” or that “we actually have a capital gains tax in New Zealand”?
Hon BILL ENGLISH (Minister of Finance) : Both statements are correct. Tax is paid on some capital gains in New Zealand, and the member’s package of big spending, more taxes, and more debt would send New Zealand screaming backwards.
Hon David Cunliffe: Did the introduction of a capital gains tax in Australia in 1985 send Australia screaming backwards, or did Australia’s GDP per capita begin to grow much faster than New Zealand’s from that point?
Hon BILL ENGLISH: That is probably stretching the bow a bit, even for the member. I am not familiar with what happened when it was introduced in Australia. What I do know is that one of the reasons the Australian economy performed better over the last 10 years is that it had better spending restraint, better tax reform, and better microeconomic policy—and that was when that member was in Government.
Hon David Cunliffe: Does the Minister support Labour’s $5,000 tax-free zone that delivers a net income tax reduction for 98 percent of income earners; if not, why not?
Hon BILL ENGLISH: No. I understand that that is part of a package that Labour is proposing that involves a big increase in Government spending, new taxes, and more borrowing, when the economy needs exactly the opposite to get on its feet, to grow, and to lift incomes.
Michael Woodhouse: Who would be the losers from a partial and poorly designed capital gains tax?
Hon BILL ENGLISH: There is quite a long list of them, actually—pretty well anyone who benefits from productive investment. So 1.6 million KiwiSavers would face increased taxes on gains on their investment; 500,000 businesses would have to have their operations valued for tax purposes, then keep track of the value through their lifetimes; and, interestingly, property traders would get a cut in capital gains tax, because they currently pay 33c in the dollar and, under the Labour package, people who trade in property would pay only 15c on their capital gains.
Hon David Cunliffe: I raise a point of order, Mr Speaker. I hesitate to interrupt my own flow of supplementary questions, but the misrepresentation in that reply was just so extraordinary—
Mr SPEAKER: No, no. The more valid point of order would have been that the Minister should not be commenting on Labour Party policies, for the risk of—
Hon David Cunliffe: Misrepresentation.
Mr SPEAKER: —misrepresentation, indeed. It is an extraordinarily difficult thing to try to referee, because the question was not out of order and the Minister was being very careful until the last minute. Members can see how the House gets into disorder and how difficult it gets when members encourage Ministers to comment on other parties’ policies, because Ministers have no responsibility for them.
Hon David Parker: I seek leave to table the question and answer produced at the time of the release of our capital gains tax, which shows that the tax treatment of traders in property would not result in a reduction in taxes for them.
Mr SPEAKER: I take it this is a document prepared by the Labour Party?
Hon David Parker: Yes. It was our policy.
Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is objection.
Hon David Cunliffe: Does he agree with Labour that the tax system should be designed to minimise harmful impacts on growth; if so, has he seen this graph from Treasury showing that a capital gains tax is better for the economy than income tax?
Hon BILL ENGLISH: I do agree with the member that tax systems should be designed so that they do not have a detrimental impact on growth. That is why I find it hard to understand why he has just released a package that will have exactly a detrimental impact on growth.
Hon David Cunliffe: Given his belief that a comprehensive capital gains tax is the right thing to do, will he be proposing a capital gains tax that includes the family home, or will he stick with his current tax settings, which the Tax Working Group he set up calls “deeply flawed”, “inequitable”, and “inefficient”?
Hon BILL ENGLISH: That is not correct. The Tax Working Group followed the same logic as a lot of people do, and that is the experts start out saying a comprehensive capital gains tax is a good idea, then they have to come up with exemptions, like people over the age of 55, the family home, some classes of shares, property speculators, and so on, and they end up with a tax so complicated that they do not implement it. That member has produced a package that is about bigger Government spending, higher taxes, and more debt, and that is bad for the economy.
Hon David Cunliffe: I seek leave to table the Tax Working Group report that described current tax settings as “deeply flawed”—
Mr SPEAKER: All members have had that report available to them. The Tax Working Group report is available to all members.
Hon David Cunliffe: I seek leave to table this graph from IMF data, which shows the percentage gap between Australian and New Zealand GDP per capita increasing—
Mr SPEAKER: Would the member tell the House who has prepared the graph.
Hon David Cunliffe: The source is the IMF and the data was graphed by the Labour research unit.
Mr SPEAKER: Leave is sought to table that document prepared by the Labour research unit. Is there any objection? There is objection.
Hon David Cunliffe: I seek leave to table this graph prepared by the New Zealand Treasury, which shows the growth effects of taxes and public expenditures, showing that an income tax is generally worse for the economy than a capital gains tax.
Mr SPEAKER: Would the member identify the document it came from.
Hon David Cunliffe: It is sourced from Treasury. It is part of the Tax Working Group’s background papers on its website. [Interruption]
Mr SPEAKER: A point of order is being considered—both sides, please. Leave is sought to table that document from a paper prepared for the Tax Working Group. Is there any objection? There is objection.
Hon Trevor Mallard: In light of the Prime Minister’s statement that we actually have a capital gains tax in New Zealand, what is the current list of exemptions from that tax?
Hon BILL ENGLISH: The member can look up the tax Act if he wants to see exactly how it applies. What I can tell members is that the package of measures that involve bigger Government spending—
Mr SPEAKER: Order!
Hon BILL ENGLISH: —new taxes—
Mr SPEAKER: Order!
Hon BILL ENGLISH: —and more debt is bad for the economy.
Mr SPEAKER: I ask the Minister why I should not ask him to leave the House, because he clearly saw me on my feet and was determined to continue. The question asked was a fair question, in fact, asking the Minister of Finance what the exemptions from the existing capital gains tax were. That is actually a fair question, and the House could perhaps expect the Minister of Finance to know that. To answer it by way of talking about the Labour Party’s policy when I am on my feet is unacceptable—totally. There are not any other questions to the Minister. I will ask the Minister of Finance to leave the House.
* Hon Bill English withdrew from the Chamber.
Mr SPEAKER: Ministers will learn that they must not continue when I am on my feet to stop an abuse of question time. I do not mind Ministers climbing into some questions because they contain political assertions and the questioners deserve anything they get, but that was a straight question. It asked the Minister of Finance what the exemptions to the current capital gains tax were. For it to be answered in that way is not acceptable. I warn all members of the House that we are heading towards a difficult time of the year—I know that; I am not stupid—but we have to keep this House operating effectively.
Hon Trevor Mallard: Supplementary question, Mr Speaker.
Mr SPEAKER: The Minister is no longer in the House.
Hon Trevor Mallard: Well, there has to be a Minister responsible—
Mr SPEAKER: In considering the matter I looked at whether there were any more questions to the Minister, and determined that there were not any, and no one indicated to me that that was wrong. Had there been any indication that there were further questions, I would not have asked him to leave the House. So the member cannot win twice.
Hon Tau Henare: I raise a point of order, Mr Speaker. I do not want to challenge your ruling on the Hon Bill English, but day in and day out Trevor Mallard continually—
Mr SPEAKER: Order!
Hon Tau Henare: I would like to have the opportunity to—
Mr SPEAKER: The member will resume his seat. I am aware of what he is trying to say, but it is not helpful. I am fully aware of what goes on, and the member saw me express my displeasure to the Hon Trevor Mallard today for some of his interjections. I did it in not very complimentary language. I have to be totally impartial in this House. When Ministers refuse to acknowledge the Speaker on his feet, and continue—the member will stop interjecting—to get a political point across when I am on my feet, that cannot continue.