Thursday, 30 May 2024 (continued on Friday, 31 May 2024) - Volume 776 Sitting date: 30 May 2024 THURSDAY, 30 MAY 2024 (continued on Friday, 31 May 2024) TAXATION (BUDGET MEASURES) BILL In Committee Debate resumed. Part 1 Income Tax Act 2007 amendments commencing 1 April 2024 (continued) CHAIRPERSON (Barbara Kuriger): Good morning members. Members, when the committee rose last evening, we were considering the Taxation (Budget Measures) Bill, and we were debating Part 1. Part 1 is the debate on clauses 3 to 7, Income Tax Act 2007 amendments commencing 1 April 2024. The question is again that Part 1 stand part. And just before I give the call, I have a list and I've had a discussion with the presiding officer who was in here last night of the things that have been discussed. So on Part 1 we're looking for new information or any Amendment Papers that have not yet had an opportunity to discuss—so new things please. And at that, I'll say the question is again that Part 1 stand part. ARENA WILLIAMS (Labour—Manurewa): Thank you, Madam Chair, and good morning to you, Madam Chair, and good morning to the Minister. I thank him for his lively engagement last night in what has been an interesting and useful debate, given that we haven't had a chance for the select committee stage on this bill. And I have a number of questions about the redistributive effect of clause 7, that's Schedule 1, that is still on the Table for us to canvas a bit more today. Before the House adjourned, we were discussing some of my questions, which were still outstanding, about the redistributive effect of those numbers outlined in Schedule 1, given that there are fixed costs which are still rising for some families in the lower three brackets on that table, particularly around accommodation. Because we saw yesterday that Treasury has predicted rising rents. So my question to the Minister was about the trade-offs that he spoke about when he answered my questions when he considered the accommodation supplement going up alongside this redistribution that he's set out in Schedule 1. The reason I'm asking him this is because we want to make sure that the tax and transfer system is redistributive and is designed to provide assistance to those in financial hardship. That was something that's not only been canvassed in similar bills introduced to this House by Labour Governments but was also introduced in the 2017 bill which set out to do exactly the same kind of change that the Minister has proposed in Schedule 1. So what I want to hear from the Minister on is those questions which I asked him last night which he did not address about the values which he has used to determined the redistributive effect of those bottom three brackets alongside rising costs for people on the lowest incomes. And what I really want to get to here with the Minister is whether he's considered the tax benefits that he says will accrue for those lower three brackets, whether those will be eroded particularly by housing costs. Because, Madam Chair, if you'll let me explain this point, rising housing costs have increased the proportion of income spent on housing, particularly for low-income families. And as a result, some low-income families have seen declines in after-housing costs in their real incomes and in their spending. So the impact that I want to discuss with the Minister is what he said last night when he said that we have considered increasing the accommodation supplement alongside these changes but we decided not to do that because of the trade-offs involved. I'd like him to talk us through what those trade-offs were, particularly in the area of housing costs. Because recipients of the accommodation supplement who receive a main benefit have seen their residual incomes fall in real terms on average across the period that we're talking about here, but the Minister's choices in those three brackets in Schedule 1 don't address that aspect of it. And also people who receive superannuation and don't receive a main benefit have seen their residual incomes fall in real terms on average. So that's the point I want to get to here with understanding that. And my second question for the Minister in the time remaining that I have is about whether these changes represented in Schedule 1 represent a move that is simple in our tax system which is it's a tax and transfer model that he is using which is often complex, and the rules determining eligibility and claiming entitlements can be difficult to navigate in other parts of the section. But I want him to explain why this measure is preferred that he's outlined in Schedule 1 when other mechanisms that he is using to, essentially, give rebates in the rest of the tax bill don't meet with those objectives of simplifying the system to clearly link what he, I think, would see as linking hard work with reward. While we don't agree with that, it is a principle of the tax system that is important and is internationally recognised, and I'd like him to give us some sense of whether this is a simple and effective way to redistribute wealth. Hon Dr MEGAN WOODS (Labour—Wigram): Thank you, Madam Chair. One of the things that I'm just wondering whether the Minister in the chair, Simon Watts, has had a chance overnight to get some advice from officials on was a question I asked last evening that hasn't been answered, around what the net cost of the tax cuts will be given that there are a number of Government payments that are based on after-tax income, and given that there will be a rise across various brackets, as laid out in clause 7 of the bill, that this will affect eligibility and there will be a netting out of some of the cost. But my other question for the Minister—and we have spoken a little bit about the distributional impacts, and I think, given we're not having a select committee stage of this bill, those distributional aspects are something that it is our job in this part of the bill, where we are discussing what the thresholds are, to explore how this is impacting various groups in our communities. One of the specific questions I have for the Minister is drawing his attention to the regulatory impact statement where it talks about the 8,000 households who will be worse off under this package, that they will actually receive less income per week. They're all in the lowest quartile, so they are all our most vulnerable households, that will indeed be worse off under this package. The reason that is given in the regulatory impact statement for this is these are typically families that move in and out of benefit eligibility throughout the year. Now, any of us who do constituency work know that that moving out of benefit eligibility not only will have an impact on tax thresholds but also can mean a great deal of financial complexity for families around things like income-related rent subsidies and what is owing there. So this is actually putting this impact on some of the families who are struggling the most in the areas I represent, and I would be remiss for the people of Wigram if I didn't get some full answers from the Minister at this committee stage around what that means for these 8,000. In particular, I'd like to know from the Minister what alternative policies were considered—if alternative policies were considered—so that we didn't leave these 8,000 people who are going to be worse off under this tax package, and if the Minister didn't consider alternative policies so that we didn't leave these families worse off, why that was not considered, why that would not be a priority for some of our most vulnerable families in our communities, that we would make them, in fact, worse off. What we're already seeing, and the regulatory impact statement pertaining to that schedule laid out in clause 7 already lays bare—something that I think that we'll always know when we seek to use the tax system to do redistribution—is that it is those in the lowest quartiles who will receive the least amount of benefit, that we're seeing those on the lowest income, and the regulatory impact statement does a good job of spelling this out, receiving on average $13 a week in benefit. I think we can see that that is not going to deliver the relief that I think many people were hoping for, particularly when they went through an election campaign when they were told they were going to receive $250 a fortnight in tax relief, that $13 will be somewhat of a shock, but more of a shock will be for those families that find that they are worse off under this package. Now, as constituent MPs, we're all going to have to go back to our electorates and explain to those people why it is they have less income as a result of the threshold changes that are being passed in this House today. So, just to recap for the Minister: what alternative policies were considered to ensure that people were not worse off as a result of these threshold changes, and, if alternative policies were not considered, why his Government did not see that that was a priority to ensure that some of our most struggling families in our communities would not end up worse off as a result? It is not insignificant. According to the regulatory impact statement, there are 8,000 families who are going to be in this situation, and I think that each and every one of us at some point will be called on to explain to those families. Dr LAWRENCE XU-NAN (Green): Thank you, Madam chair. First of all, I would like to echo what our colleagues have just said, that a lot of these would have been teased out during the select committee stage, but, alas, here we are, trying to tease out some of the details around the regulatory impact statement. I have two questions for the Minister of Revenue on this. The first question was a question from Ricardo Menéndez March, which was left hanging at the end of last night, around the 8,000 households—is this part of the distribution analysis of options. In there, it was stated that there are 8,000 household who according to this would literally be in the red as part of this assessment. What the Minister didn't have the opportunity to respond to last night before the committee rose was a breakdown of who these 8,000 households are and what support has been given for these who— CHAIRPERSON (Barbara Kuriger): Can I just ask the member—because we've just had a fairly extensive question around that, and we're trying to stick to new material, if possible. Thank you. Dr LAWRENCE XU-NAN: Sure; of course. Thank you, Madam Chair. So my second question follows on, again, from the question yesterday around seniors, but this time I would like to kind of draw the attention around subclause 1 of clause 7 when it comes to the amendment, this time around students, and particularly for students who are on student allowance. Now, we know that for students who are on student allowance, they're also not getting anything out of this. So I would like to know from the Minister what sort of modelling and impact assessment has been done for students, particularly those who are on student allowance. This is in relation to those who are currently—and, particularly for us—constituents of Auckland Central and also of Wellington Central, from Tamatha Paul's and Chlöe Swarbrick's electorates. I think in this case it will be really vital for the Minister to provide some clarification around the support that students will be seeing as a result of this tax balance. On top of that, it would be good to know what other approaches the Minister will consider, or the Cabinet has considered, around the support for those on the lowest salary level, and particularly in instable and infrequent salary—for example, like what I just mentioned, those who are not getting consistent salary and consistent wages throughout the year. So it would be really good to get some clarification from the Minister on this. Hon SIMON WATTS (Minister of Revenue): Thank you very much, Madam Chair. I appreciate the opportunity. Just in response to the questions around distributional impact from the Hon Megan Woods and also from the member in regards to the number of households that have been impacted potentially that will not benefit, the regulatory impact statement does include a number around 8,000. Subsequent to that, our analysis indicates that number is probably less than 5,000. The average impact on those households primarily is those that are part-year beneficiaries. So to be clear: no one on the benefit will receive less of their benefit as a result of what's happened. There's going to be no change in that. Where the implication occurs is where people are on part-year benefits and part-year working. There are 5,000 in that group; about 0.3 percent of taxpayers. As I say, $1 is the average impact, going up to a maximum of $2. So, you know, while that is not zero, it is small in regards to the consequences there. The other questions in regards to more broader distributional impact, I have answered already last night. The implications around the tax cuts and the focusing on Arena Williams' question in regards to targeting—we are deliberately targeting the lower three thresholds to make sure that the impact hits low and middle income households; those of their households that are being significantly impacted by the impacts of inflation. In terms of the redistribution impacts, quite clearly we are deliberately targeting that group because those are the ones who will be impacted. Hon DAVID PARKER (Labour): Thank you, Madam Chair. Yesterday, in the evening—or today, in terms of our urgency clock—I asked the Minister about what part these tax reductions in this bill play in the increase in Government debt from $174 billion to $243 billion in the forecast period. The Minister said that was a question that should be put to the Minister of Finance, under the Budget, rather than be answered by him in respect of his contributions on this bill. I don't think that is a sufficient answer, with respect, because it is this bill that has the major tax reductions, outside of the tax breaks for landlords, that do cost a significant amount in fiscal terms. I'm going to put the question to the Minister in a slightly different way, and I think it is incumbent upon him to give us an answer as to the substance, so that we can get to the bottom of this. In the prior Government, there were years, prior to COVID, where we ran surpluses of 1.9, 1.5, 2.4 percent. Then COVID hit, and the subsequent deficits as a percentage of GDP were 1.3 percent, 2.7 percent, 2.4 percent, and this year, if we include that as a Government year, 2.7 percent. Every one of those was criticised by the then National Opposition as being fiscally irresponsible. Yet, the forecast for this coming year is a deficit that is larger than any deficit except for the COVID year, of 3.1 percent—a deficit of 3.1 percent of GDP—which is one of the reasons why this Government has the increasing Government debt that I have referred to. Now, by my calculation, Minister, these tax cuts here of about $2.5 billion per annum that are covered by this bill are the equivalent, given that GDP is about $400 billion, of 0.5 percent of GDP. So I want the Minister to either deny or accept that the fiscal effect of these tax cuts is to increase the deficit from 2.6 percent—which it would have been otherwise, excluding the tax breaks for landlords, which would have been in the vicinity of the 2.7 percent that the prior Opposition always criticised—and instead push it up to 3.1 percent, according to page 156 of (B.3), the Budget Economic and Fiscal Update. So, of that 3.1 percent deficit, which is an enormous deficit against the background of the deficits that we had to run post COVID, in the context of the increased expenditure that flowed from both COVID and the inflationary pressures that followed all around the world and in New Zealand—how can it be responsible to bring forward tax cuts that, in that context, are going to increase Government debt? Isn't the real game here what we just heard from the speakers at the Child Poverty Action Group post-Budget breakfast—that I've just returned from—to increase the deficit to justify the austerity that you are going to visit upon this country in future Budgets as you drive the economy into dust, driving up unemployment, cutting public services, and increasing Government debt? STUART SMITH (National—Kaikōura): I move, That debate on this question now close. CHAIRPERSON (Barbara Kuriger): I'm going to call Hon Dr Deborah Russell. I'm looking for new content now, because I'm aware that we've been on this part for probably almost two hours, and we've got several more parts to come, which will also be relevant. But I'm going to take one more call and I'm listening for very new. Hon Dr DEBORAH RUSSELL (Labour): OK. Thank you, Madam Chair. You know, this is the examination we have of this extremely important bill in lieu of having had a select committee stage. There is a series of questions here that we could have dug into at select committee and we still need to have a think about them here. I want to refer to something the Minister said last night and some more information about that which I haven't covered yet coming out of the regulatory impact statement. Now, last night I questioned the Minister about the lead times that payroll providers needed in order to get these tax threshold changes in place in time for people to actually get the money in their pay packets. I pointed out that Inland Revenue itself said, in the regulatory impact statement, that payroll providers really needed to have a three-month lead time. Now, from 30 May to 31 July, when these changes come in, is two months. So I checked with the Minister. I said, "That doesn't seem like a very long time and they actually need three months." He pointed out that the regulatory impact statement was dated on 24 April, and in that time, between when the regulatory impact statement came out and the Budget itself, there had been some ongoing consultation with payroll providers to ensure that they'd be able to get the changes in place. So they were pretty sure that they could meet that two-months lead time. CHAIRPERSON (Barbara Kuriger): Is there a new question in this? Hon Dr DEBORAH RUSSELL: Yep, there is a question coming right now. The Minister was sure about this. So I want to ask the Minister: can he guarantee that every employee will get the tax threshold changes in their pay packet in their first pay after 31 July? He said that they had consulted payroll, so I want to know: can he guarantee that? So that's the first question. I want to carry on because there's some more information in the regulatory impact statement that we haven't covered yet. I want to draw the Minister's attention to paragraphs 49, 50, and 51 of the regulatory impact statement, which have not been discussed yet. Now, we discussed some of the large Government organisations in terms of their payrolls for their employees. But paragraphs 49, 50, and 51 point out that some large Government organisations have a whole set of other people to whom they are directing payments that are subject to income tax, and, in particular, payments made by the Ministry of Social Development (MSD) to beneficiaries, payments made by ACC under the compensation system and payments made by the Ministry of Health. Now, we're talking lead times for payroll providers, and in paragraph 51, there are very specific numbers about how long each of those organisations think they need. So to make the necessary IT changes to ensure that people get that money in their back pocket, in their first pay, after 31 July—and that's what the Minister has told us he can do—ACC— Tim Costley: You don't want them to get the money. Hon Dr DEBORAH RUSSELL: —take a call—says that it needs eight to 13 weeks. So, OK, ACC is going to fit within that lead time or maybe the earlier lead time. MSD says that they need about three months from the Cabinet decision. Now, I'm taking it that the Cabinet decision would have been made on 1 May, that's the first Cabinet after the regulatory impact statement. But here's the cracker: Health New Zealand says it needs four months—it needs four months from the date of the Cabinet decision. Big workforce there, and that's what Health New Zealand said. So the Minister has put in place some changes to tax thresholds and he said that he's confident based on the consultation with payroll providers that it can be done for employees, but then, sitting in the regulatory impact statement for Health New Zealand, one of the largest employers in this country is the very clear information that they need approximately four months from the date of the Cabinet decision, and that's only if they get told about it in advance of the Budget. It happens because we've got to get that sort of thing sorted. Now, the date of the Cabinet decision was 1 May, at the earliest—so 1 June, 1 July, 1 August, 1 September. When are those people employed by Health New Zealand going to see the impact of these tax threshold changes in their pay packets? Now, the Minister has been absolutely confident that it can be delivered. I would like that guarantee that every employee will see the impact of the tax threshold changes after 31 July—in their first pay packet after 31 July. He was confident last night—[Time expired] TIM COSTLEY (National—Ōtaki): I move, That debate on this question now close. A party vote was called for on the question, That debate on this question now close. Ayes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Noes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Motion agreed to. CHAIRPERSON (Barbara Kuriger): The question is that Arena Williams' tabled amendments to clause 4 in Part 1 to replace dates with "31 July 2024" and "31 December 2024" be agreed to. A party vote was called for on the question, That the amendments be agreed to. Ayes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Noes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Amendments not agreed to. CHAIRPERSON (Barbara Kuriger): The question is that Ricardo Menéndez March's tabled amendments to insert new clauses 4A and 4B be agreed to. A party vote was called for on the question, That the amendments be agreed to. Ayes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Noes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Amendments not agreed to. CHAIRPERSON (Barbara Kuriger): The question is that Arena Williams' tabled amendments to clause 4 in Part 1 to replace dates with "1 July 2024" and "end of September 2024" be agreed to. A party vote was called for on the question, That the amendments be agreed to. Ayes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Noes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Amendments not agreed to. A party vote was called for on the question, That Part 1 be agreed to. Ayes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Noes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Part 1 agreed to. Part 2 Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 1 July 2024 CHAIRPERSON (Barbara Kuriger): Members, we now come to the debate on Part 2. Part 2 is the debate on clauses 8 to 24, "Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 1 July 2024". The question is that Part 2 stand part. Hon JO LUXTON (Labour): Thank you, Madam Chair. I wanted to discuss, in particular, the childcare rebate. I find this a very clunky and unusual way of giving supposed relief to families. There's a number of issues that I want to traverse in my contribution, and questions that I want to ask of the Minister. As an ex - early childhood teacher and centre owner myself, I'm interested to know if there's been any consultation with early childhood centres and if this is going to create any additional workload for them—are they going to have to provide a certain type of receipt of paperwork for families that they will need to use to get their rebate from IRD? If I think back to my time in early childhood education, parents would often lose their receipt, their general receipt. They found it tricky enough to fill out everyday paperwork requirements within early childhood education (ECE) itself. So you've got families who live extremely busy, busy lives—families where both parents often work, with one often working two jobs just to make ends meet. And you're giving them this rebate where they're going to have to fill out all this paperwork, collect their receipts, and pay for the childcare upfront. So let's be very clear about that. The money comes out of their pockets straight away; there is no relief straight away. They have to pay upfront, these families who are supposed to be getting relief from this Government. They have to pay money upfront, and we know that early childhood education in New Zealand is some of the most expensive in the world. So they're going to have to pay this money upfront, then collect all their paperwork—and they can only do this every quarter—take it along to IRD or send it off to IRD, and await their rebate, which will take some time to come through. So my question to you, Minister, is: how on earth is putting an extra administrative burden on families in order for them to get a rebate several months down the track after they've forked out the money that they can barely afford to spend anyway—how can you expect this to be successful? It is just clunky, and I'm interested to know how the Minister sees this is going to be of any real benefit for families other than creating more administration and pressure on families that have busy enough lives as it is. Hon PEENI HENARE (Labour): Kia ora, Madam Chair. Thank you very much for this opportunity. I stand interested, too, in the same matter of the rebate here. I'm a former kōhanga reo pupil myself; I think the first kōhanga reo pupil into Parliament—just a little something for us. Apparently, the kōhanga reo generation is here—been here for 10 years. But, look, to the point: the regulatory impact statement is quite clear in talking about the participation rates of Māori, the cost there is, and the administrative barriers for Māori and Pacific families. But I want to focus on Māori as it's the one I know about the most. You've seen with their tamariki o te kōhanga reo that the burden on them to continue to receive a rebate in this respect is cumbersome, it's onerous, and it will only further reduce the uptake on Māori for putting their tamariki into ECE. The regulatory impact statement (RIS) makes it very, very clear. It says there that it "will provide a reduced benefit to Māori and Pasifika families due to these groups being less likely to pay for childcare, either due to ECE subsidies covering the costs already, lower ECE participation, or greater participation in informal/non-cash-based childcare." This is a huge blow to many of the working families out there who want to send their tamariki to kōhanga reo. It's already difficult enough to get tamariki into kōhanga reo, and now they're being asked to front up with these costs. But then there is the administrative burden of going along to make sure that they receive their rebate. The next part to that is: what does this mean? It's not quite clear, and I'd like the Minister to explain to us what this means when it comes to kōhanga reo themselves supporting families to administer this particular rebate. That isn't an answer that's clearly provided for in the RIS, nor is it in the bill, so I'd really appreciate it if the Minister could help us all understand what this means and what the burden means for the ECE provider. It says something in the bill there that the forms have to match up to the IRD. It says that in Part 2, clause 41C—yep, I think that's the one—and it says that the ECE provider has a little bit of work to do to make sure that they match up with the IRD forms. And I'm wondering: (1) what does that cost our ECE providers and, in particular, kōhanga reo, who already struggle for money; and (2) will that then be passed on to families in increased cost for families who wish to put their tamariki into ECE? So those are the questions I have for the Minister, and if he can explain what material impact that has, in particular, on Māori families, and whether or not, in their decision making, the Minister and the Cabinet considered how this will impact Māori and whether or not their uptake of ECE will rise or fall—it's clear in the information in the RIS and in the feedback that we're getting already from the kōhanga reo sector that it will materially impact our families in the community. Hon SIMON WATTS (Minister of Revenue): Thank you very much, Madam Chair. Just in response to those questions, the FamilyBoost policy goes actually to the heart of what the last member was referring to in terms of the implications on families across the country, and is significant as a result of the early childhood education fees in which they need to incur. In comparison to the status quo—i.e., doing nothing—this Government and this bill are implementing the ability for families to receive 25 percent of those ECE costs, up to a maximum of $150 per family per fortnight for those that are earning up to $180,000—to have the ability to get that rebated back. Compared to the status quo, that is a significant benefit, and that money, irrespective of the background of those families, will be available for them to use against the impacts of the cost of living. The regulatory impact statement at clause 29 clearly says that Māori and Pasifika families are disproportionately impacted by the implications of ECE costs, and those families will benefit through the implementation of this policy, and that is a good thing in comparison to the status quo. In regards to Jo Luxton's questions in regards to some of the conversations around how the rebate will work and language around that, again, the regulatory impact statement does outline some of the considerations around the way in which the ECE sector was engaged and was discussed, and that engagement was undertaken, acknowledging that there are considerations around Budget secrecy. But, at the end of the day, the objective for this coalition Government is to get that benefit into the hands of hard-working families who have children in ECE, as far as practical, and the considerations and the balances that my department and IRD need to draw is ensuring that we've got an ability to ensure that those who are receiving those rebates will receive the appropriate amount of revenue back from that, to ensure that we've got a good process in regards to compliance as well, and to ensure that who is getting the money should get the money. And I think we've found that balance between the speed at which we execute and making sure that we ensure that the money goes to those who need it most. Hon JULIE ANNE GENTER (Green—Rongotai): Tēnā koe. Thank you, Madam Chair. Thank you very much to the Minister for his comments. Since we have moved on to Part 2, I have some questions specifically about the FamilyBoost package, which will help some people with early childhood education costs. But I still want to focus and come back to a question I had asked last night and the Minister responded to, about annex 2, which is the distributional analysis of options in the regulatory impact statement. CHAIRPERSON (Barbara Kuriger): If the question relates to Part 1, we can't go back there, and I— Hon JULIE ANNE GENTER: Madam Chair, if you will, this distributional— CHAIRPERSON (Barbara Kuriger): If it's in this part, that's fine. I'm just clarifying. Hon JULIE ANNE GENTER: —it includes— CHAIRPERSON (Barbara Kuriger): Don't argue with the Chair, please. I'm just saying that if it relates to Part 1, then we won't go back there, but if there is a part in Part 2 that's related to your question, we can take it. Hon JULIE ANNE GENTER: Madam Chair, as I was saying, option 2—the distributional impact analysis—is for the whole package, which includes FamilyBoost, which is in Part 2. So I think the distributional impact analysis applies to more than just Part 1. But I did have a follow-up question on his answer on that, because last night when I asked the Minister about how the—in Figure 1, it shows the impact on household incomes by equivalent income quintile, which means we break down people's household income into five parts, and it shows that most of the benefit is accrued to the top two quintiles, to the highest-income families. The answer that the Minister gave at the time seemed to indicate that there were other transfers and that that was just the changes in the personal income tax thresholds. But, as I read it, it says that this distributional analysis applies not only to the change in personal income tax thresholds; it applies to the additional transfer policies—that's what this says—including FamilyBoost, the in-work tax credit increase, and the expansion. So I guess my question to the Minister is—because he's saying that you can't just look at the tax changes in isolation; they're a whole package. But Figure 1 shows the weekly impact of the package on household incomes. So are there other changes over and above what's been analysed here that would change the distributional analysis that shows that higher-income households in New Zealand benefit more from the package of changes, including FamilyBoost, which is in Part 2, and, if that is the case, where is the distributional analysis that shows those additional policies? Because, from what I can tell, the package—and bear with me—includes four policies, which include the FamilyBoost policy, the in-work tax credit, and the other policy that is brought in by this bill. Furthermore, I thought it was interesting that the Minister just referred to the status quo and how families with children will benefit. But the status quo would have been, as of March this year, universal 20 hours free for two-year-olds, which would have had a much bigger impact on many more families. So I'm not sure, Minister, that it's fair to compare this policy, which is very complicated and very difficult to access. And I suspect that it's been designed that way to reduce the cost of it and to make it harder for some people to get it, because a lot of people won't have the ability—especially when you have young children, it's the hardest time in your life. I can speak to this right now. To do life admin of filling out forms and trying to reclaim a reimbursement four times a year—when do we have time to do that? If you're working full time and you've got little children who take a lot of parenting, when do you have time to sit down and do all this admin? It would be so much easier to just extend the benefit to everyone with the 20 hours free. So, according to the distributional analysis, FamilyBoost affects net incomes for 4 percent of all households and 12 percent of households with children. So 88 percent of households with children are not benefiting from FamilyBoost. And speaking specifically to Māori families, again, this analysis as compared to the overall population—relatively fewer Māori and Pasifika peoples and women benefit from the overall package, including FamilyBoost. So I'm interested in how the first question in this distributional analysis seems to indicate that the whole package, not just the personal income tax changes— CHAIRPERSON (Barbara Kuriger): The member's time has expired. ARENA WILLIAMS (Labour—Manurewa): Thank you, Madam Chair. Thank you for the opportunity to take a call on this, which will be, I think, a big part of this section, because it's the only part we can discuss it. It's my amendment on the tabled amendment that I've presented to the House, and I'll bring the Minister Simon Watts' attention to Part 2, clause 3A, which inserts a new clause 3A into his Amendment Paper, and that would seek to amend section MD 13 of the Income Tax Act 2007, which this part of his Amendment Paper amends. The reason that this is probably going to be quite a big part of this section is that it's to do with the abatement thresholds, and its impact on the whole-Government tax plan is quite large. So let me start with: what was sort of trailered and outlined prior to the Budget by the National Party about this amendment that I have put is that the family tax credit would be one of the main drivers of the distributive benefits of their tax plan and it would help lower-income earners to receive a greater proportion of the benefits that were being distributed by it. So my amendment would seek—you know, it's not something that I necessarily agree with, but it is what was promised by National going into this Budget, and this amendment is required to do that. So I'd like to engage with the Minister about what has changed in this bill, what was promised prior to the introduction of this bill and why they are different, and how my amendment would seek to close that gap. So, under the family tax credit, you get $25 more, but it abates at the same rate and at the same level of income. Actually, there were two changes that were signalled here. One was that $25 change, which is good. It's good to see that people with children will be getting $25 extra; that's something we support. But, actually, the bigger cost to the Government that was canvassed prior to this bill, which has not been done by this bill, is that the change to the abatement threshold would be made in this kind of legislation, and that's where you would do it. The change to the abatement threshold is actually a bigger change to the Government's books, and it would make a bigger change for tens of thousands of families who would then become eligible for extra support, and that hasn't happened here. So, prior to this change coming in—I also want to hear from the Minister, because it was said around the election campaign time that it would fit within the operating allowance to both do the $25 change and the change to the abatement threshold and that it would fit within the limits, but we're seeing here that that decision has not been made. So why was it that that was intended to fit within the Budget operating allowance but now does not fit within the Budget operating allowance? What trade-offs have been made? Have they been made in this bill, or are they elsewhere? This is something that we need to get into. I also would like the Minister to comment about whether the trade-off that's being made here with not being able to do the abatement threshold is because of the interest deductibility cost, that has cost more than the Budget operating allowance that was canvassed prior to this bill being introduced into the House. So I want the Minister to engage with me a little bit about that before I ask him some more questions about the family tax abatement threshold. INGRID LEARY (Labour—Taieri): Thank you, Madam Chair. This has been quite a technical debate, but I have to go back to basics for the people of my electorate in Taieri and ask what on earth—what on earth—was the Government thinking when it introduced this kind of complicated rebate that people who do not have internet connections, because they have an average annual income of $26,000 a year—many of them cannot afford to have home computers or internet. How on earth does this serve them? And it's interesting to see members opposite sniggering. I find that incredibly patronising to the people that I have the privilege of serving, people who have a family average household income of $26,000 a year. For many of them, they struggle to put food on the table. They struggle to get their kids to school. And now we are saying that they need—in order to get this rebate that is supposed to be helping them—to have an internet connection and to have the ability to do complicated paperwork, when they are just trying to survive day to day. Wouldn't it have been better to look at some of the policy options that are listed in the regulatory impact statement (RIS) under section 19, such as "reducing ECE fees through a direct subsidy to providers"? Now, I'd like to know if the Minister even considered that, because for many of the parents in my electorate, the ability to have the paperwork taken away and to have the really good early childhood education (ECE) providers in Taieri, in the rural communities, who are listed in the RIS as also being one of the population groups that would be disproportionately disadvantaged by this, that would have a barrier around it. It would be so much easier for the ECE to have a direct subsidy and those parents not to have to worry about this. Did the Minister consider that, or, because of the speed and the time by which they are trying to do this, did they just ignore that possibility? Did they not consult? And I note that the Minister said in his previous contribution that he talked about process and the status quo. Well, the problem with doing something like this is it looks like a fix and it kicks the can down the road for the people that will not be able to access this subsidy. So when the Minister made this trade-off about trying to introduce something that he said was speedy and was going to make a difference, did he consider the risk that those who would not be able to access it, for many different reasons that are being raised by colleagues on this side of the House—did he consider the risk of now looking like there is a fix when, in fact, it is kicking down the road a real solution that could have been consulted on properly? I note, Madam Chair, that in section 18 of the RIS, it talks about the fact that there were options that could not be examined in detail, because of scope and time. I've talked about the ECE fees, but what about also regulatory price controls or changes to reduce the impact of other regulatory systems that increase operational costs for providers? For example, the play space requirements. That is a piece of really important policy work in the ECE sector. That is a strategic approach—if this kind of approach had been taken to look at what could be done to support ECE providers to be able to make the difference that would be passed on to the parents. It really breaks my heart to think that not only are these families forgotten—the families of the deep South who do not have the means to be able to do this or access to the internet—but that somehow, now, it's being portrayed that there is a well-intentioned Government that is trying to look after them. They are deliberately making it difficult—or perhaps they live in an alternative reality where everybody has a whole lot of time to sit around in their homes accessing their many computers and doing their paperwork. Well, that is not the reality for many of the rural families in my electorate, and it is not the reality for the families that live in Corstorphine, for the families that live in Calton Hill, and for the families that come to my electorate office and ask for support for any kind of paperwork for pretty basic things. You have just put another door in their face. So my question—and I have asked questions. [Interruption] Great to see the Government members engaging so much with this—obviously they're very, very interested in this debate. I would like to hear those answers because, clearly, this has just been a once-over lightly. Finally, "increases to incomes of families utilising ECE through other government support and/or wage growth." What did the Minister do around value for money and targeted support to say how this intervention was going to help low-income families and rural families in Taieri and other places across New Zealand, instead of just trying to get this out the door? Hon SIMON WATTS (Minister of Revenue): Well, Madam Chair, I thought we were doing quite well with the quality of questions until the last contribution. What I'll remind the member Ingrid Leary is that about 96 percent of the New Zealand population has access to the internet, and then, when you throw in the ability to use one's phone in that, I'm sure access to the internet in that member's electorate, in regards to be able to claim this, is not going to be a significant issue. However, if there are individuals who do not have the internet, the ability to access Inland Revenue's myIR website is through public libraries and other assets like that. There are mechanisms through which people can deal with this, but the whole fact is, I think, a lot of people have access. So I'll leave it at that. In regards to the questions raised in regards to the fiscal implications or trade-offs in regards to Arena Williams' questions around the aspect around FamilyBoost, there was a consideration around that point. We've had to make trade-offs in regards to a number of aspects of policy. The fiscal considerations of increasing that abatement threshold was at a degree that we chose not to do, and that's a decision that the coalition Government has taken. But what is clear is that the benefits versus the status quo are significant for a large number of New Zealand households with children, and that benefit will flow through as soon as practical. Hon JENNY SALESA (Labour—Panmure-Ōtāhuhu): Talofa lava, Madam Chair, and thank you for the call. Manuia le vaiaso o le Gagana Samoa, and that is where I would like to begin my contribution, my questions, this morning. The comment from the Minister that everyone, or 90 percent or so, have access to the internet actually does not address the fact that some people, including Samoans and Tongans, may not be literate in English. They may be fully literate in Samoan, they may be fully literate in Tongan, but that does not actually necessarily mean that they are literate in English. That is actually one of the questions I'd like to pose to the Minister. How is this Government going to address the cultural and linguistic needs of Pacific families in relation to the FamilyBoost tax credit? Are there any materials and assistance available in languages other than English? I would like to refer to the census data that has just come out two days ago, which actually shows that Pacific people make up 442,632 people in Aotearoa New Zealand today—an increase of 16 percent compared to the last census figures in 2018. So we're talking about a huge number of the population. The other thing that we need to also consider is more than 50 percent of Pacific people actually have young families. So when you look at the regulatory impact statement, one of the things that it actually covers is the fact that, in paragraph 31, any Government support targeted at alleviating early childhood education (ECE) costs will provide a reduced benefit to Māori and Pasifika families due to these groups being less likely to pay for childcare, either due to ECE subsidies covering the cost already or to lower ECE participation. I'm sure it is actually the intent of this Government—any Government—to ensure that we have better participation for early childhood, because it is to all of our benefit that we encourage as many families as possible to ensure that they have their children participating in early childhood. But here's the thing: not as many of our families do participate in early childhood, whether we're talking about Māori families or Pasifika families and, if we're looking at South Auckland, quite a lot of our ethnic community families as well. If we're to look back at the census data, the highest rate of increase is our ethnic families, those who are new migrants to our country. We know that they are going to continue to be the fastest-growing population in Aotearoa New Zealand. So the question that I pose about Pasifika families also equally applies to ethnic families. Is the Government going to ensure that the materials that they're going to provide will ensure that our ethnic families know how to actually access this FamilyBoost credit so that they can actually ensure that they can claim this tax? Giving families who are really busy—especially families with two or three or four kids—who may not necessarily be literate in English, and who may not actually have access to the internet, an extra task of how to claim this funding is actually not fair. It is not fair. There, I'm sure, would have been a better way of ensuring that this kind of support from Government is something that many more of our families could actually claim. Another question I would have is: how are we going to ensure that those who do not currently participate in the online platforms or in traditional media know that this FamilyBoost is even an option to them? Many of our ethnic communities do not necessarily watch our mainstream media, whether it's TV. They have their own ethnic community radios. How is this Government going to ensure that they will know this is something that they can claim? Are they going to also translate materials into all of the major ethnic community languages that we should? Those are the questions I would like to pose the Minister. Thank you. Hon SIMON WATTS (Minister of Revenue): Yeah, I thank the member for the question. The Inland Revenue already provides a wide range of language support services. If customers are not fluent in English, then their family members can support them to call 0800 700 334—that's 0800 700 334. That'll go through the IRD department, and a language interpreter, including those that are able to speak Samoan, will be available to walk through those constituents to help them with the FamilyBoost policy. You can get more information on IRD's website. Dr LAWRENCE XU-NAN (Green): Thank you, Madam Chair. This particular part is of great interest to me, as the Green Party spokesperson for education, and I do have a whole series of questions on this particular part. But I would like to start with a broader question around this, and I appreciate that this would have been something that we were able to tease out in select committee, which is: what sort of modelling—and I appreciate what the Minister is trying to do in terms of alleviating some of the financial burden this places on families. So the question is: what modelling has the Minister or the authorities done that suggests that the additional money isn't simply going to be absorbed by, in particular, for-profit early childhood education companies? So the reason I ask this is in the data—for example, in the Consumers Price Index childcare index from January 2005 to June 2022, it stated that as part of a new introduction, although it alleviates the cost immediately, the sector—particularly the for-profit sector of early childhood education (ECE)—will soon catch up to that cost. Privatisation of ECE is a hungry beast, and the for-profit companies of ECE will absorb some of these costs, as we have seen in the past. Another report also shows, when you analyse it, that—in the OECD report, which analyses more than 25 countries, it says that with tax rates and benefits, it is estimated that a New Zealand household with two preschoolers and two parents working full-time at an average wage spent 37 percent of their net income on childcare. That is triple the OECD average of 13 percent. Again, when we are looking at policies like this, what mechanisms and what modelling has there been that suggest that the sector isn't simply going to catch up and absorb that cost? I'd also like to draw attention to the regulatory impact statement (RIS) for FamilyBoost. What is quite concerning, when we're looking at paragraph 14 of the RIS—and this is something that has also been reported extensively—is the fact that there is simply a lack of fees data when it comes to early childhood education providers. We do not keep that kind of data. One of the biggest limitations and barriers in this, for both the Ministry of Education as well as Inland Revenue, is around the fact there is a lack of fee transparency that we're seeing in this sector. So, again, to the Minister: what additional modelling and information and evidence has been produced since the release and the printing of the regulatory impact statement to reassure families, to reassure parents with multiple young children? We already heard from my colleague Julie Anne Genter in terms of the compliance burden and the administrative burden this will create on parents of young children. I'm sure, for those on the other side of the Chamber—with Dan having become a new father—this is something that he will be very interested in as well. What sort of modelling has been provided that suggests that this money simply isn't going to be reabsorbed by the sector and that it provides not just administrative burden but genuine relief to that? With that, I would like to point to another section of the operation—and this is the refund model. We're looking at options two and three on pages 16 to 17 of the regulatory impact statement for FamilyBoost, paragraph 58. It says, "The impacts of the non-monetised costs and benefits have been determined through Inland Revenue's previous [operation] … [and] assumptions made on the cost for parents and the ECE sector." But what is concerning is the table itself says that the total monetised costs, in terms of the benefits, are "To be confirmed", and the non-monetised benefit of this is "Low". So, again, if the Minister wouldn't mind shedding some light on the overall picture of FamilyBoost and exactly how much benefit is going to provided, because the data and evidence we have here is not clear. Hon JO LUXTON (Labour): Thank you, Mr Chair. I'm only on to the second page of this regulatory impact statement, and I've got several questions that I would like to ask the Minister here. I do know that the fees structures in early childhood education (ECE) centres vary very broadly across many centres, and there is no oversight, exactly, of what centres charge parents in the way of fees. I note here that it says here that "The lack of fees data also impacts the practicability of a tax credit linked to childcare expenditure." So if you don't have that data, how do you determine what is the best way to provide this tax credit? Would it not have been more prudent for the Minister or ministry to undertake a whole lot of work around the fees and fee structures of ECE centres in order to deliver a better option? The second question I have for the Minister is—I note here that it says, "Inland Revenue has not been able to undertake any consultation with the public due to time constraints and Budget secrecy conventions", and I get that, but this very policy impacts the very public, the people who are most important and who are most affected by this change. There has been no consultation with parents in order to understand what they think about this proposed policy. And I know that it talks about Budget secrecy. However, the National Party did campaign on this, so I believe there's been plenty of time to consult with parents about their views on whether this was actually going to be workable. We've heard that it's going to be terribly, terribly administratively burdensome. So my question is: why on earth was there no consultation undertaken with parents who this impacts the most? Hon JAN TINETTI (Labour): Thank you, Mr Chair. I too want to talk about, and ask a question to the Minister about, the people who this policy will impact the most, which, perhaps, according to the regulatory impact statement, will make early childhood education (ECE) more restrictive to that demographic and to those people. There seems to be a lack of consultation between Education here and Inland Revenue and other demographics. It just seems to be a messy policy. Last night, the Early Childhood Council came out and said that this Budget didn't deliver for their members and, in fact, that it was actually like a cut to their members. Now, this is the Early Childhood Council, who have very traditionally probably been more right leaning on the political spectrum, but they are very disappointed in what this Budget means for them. And I notice in the regulatory impact statement that it says that "It is anticipated that without Government intervention, the current high inflation environment and trends in the price measures for the ECE sector may result in ECE costs continuing to increase." Now, that's exactly what was said to the Minister of Education last night by the Early Childhood Council—that is that this doesn't meet the rate of inflation. And so, therefore, they are going to possibly have to put those costs and those cuts, as they see it, back on to the people who are accessing their services. What that means is that fees are likely to rise for those parents, because they cannot sustain the services that they have at the moment. Now, we hear that this FamilyBoost is about increasing participation. Those two just do not match up. They cannot match up, because when you've got, on one hand, the Early Childhood Council saying that it is like a cut for their members and then you've got, in this, the FamilyBoost saying that this will increase participation, it just can't. It absolutely can't. So I'm really concerned about those demographics that find it really expensive now, those people who come from low socio-economic backgrounds who need early childhood education to be able to get themselves back into the workforce, to be able to participate in the workforce, and to actually give their young people a really good start in life through a really solid education. Those things really concern me, and it actually says that in the regulatory impact statement in paragraph 11. It says, "If ECE costs do rise,"—and we've already had that signalled over the last two days—"an increasing number of families may no longer be able to afford some ECE hours. This may restrict their ability to work or could result in pressure on other types of families spending to maintain ECE hours, consequently reducing families' income adequacy, work incentives and/or ECE participation rates." Now, that is really serious—really serious. Not only does it stop people accessing the workforce, but it hinders those young people who need that great start in education the most being able to access it. So I have a really important question for the Minister. Surely the modelling has been done around this, with something that this party and the National Party campaigned on very much when they were in their campaign mode. They must have done the modelling around those demographics who would actually be hindered by this. I want to know what that modelling showed. I want to know how many young people from those low socio-economic demographics who need quality education, quality early childhood education, the most. How many will this hurt? Just like it says in the regulatory impact statement, how many will not be able to access that childcare? How many people will have work restrictions put on them because of this poorly thought-out policy? Hon Dr AYESHA VERRALL (Labour): Mr Chair, thank you very much for the opportunity to take my first call on this bill. I want to pay particular attention to the clauses dealing with the FamilyBoost tax credit, particularly clause 12. I guess I appreciate the intent of trying to address costs for families, while I share the multiple concerns raised by Hon Jan Tinetti just before me. But my question to the Minister relates to the policy intent of this tax credit. Why is it that this particular focus of childcare costs was taken? And what was it that led to this being prioritised, this cost for families, while other costs have been put back on families in this Budget? In particular, I'm thinking of the prescription co-pay waiver that was brought in in Budget 2023, that this Budget now repeals. That is, effectively, a tax on the sick. Now, the sick, who have to pay additional for their medicines, and young working people—many of the people will also be eligible for their tax credits—have to face increased costs because their prescriptions are no longer free. So why is it that the rebates are for this cost and not for the additional cost put on to people who have illnesses in New Zealand? Multiple costs: if you have a chronic condition, you'd expect to pick up multiple prescriptions a year. We know that there are multiple public policy benefits from having a policy in place which means that people are kept out of hospital. It's thought that there's a 34 percent increase in hospitalisations for people who have chronic conditions and cannot get their medicines, because of the changes this Government is bringing in. So why is it that this particular cost is being addressed by the Government through this clause and not the cost for people who have chronic conditions and who need medicines? Not to mention, it's not just people with chronic conditions who need medicines. Perfectly healthy people also need medicines. For example, women need medicines for contraception, and yet it seems like these costs aren't considered important costs by this Government to address, and there's a focus here on a small rebate. But, on the other hand, the Government, through its Budget, takes away an important support for people who need access to medicines in New Zealand. Thank you. Hon KIERAN McANULTY (Labour): Thank you very much, Mr Chair. I appreciate the opportunity to have my first call on this. I have a series of questions for the Minister, but I'll keep the contribution here to the first of those. The regulatory impact statement outlines quite clearly that there are concerns around the potential effectiveness of the policy that's being proposed in Part 2 around FamilyBoost—in particular, the limitations on the assessment of this policy. It raises questions about whether the sector is able to make the necessary changes. It also raises questions as to whether this is the most effective way in which to deliver the policy intent. It outlines that there will be a post-implementation review to see if what is being proposed actually does what is suggested. And there have been some really important questions raised thus far in this debate that are yet to be adequately addressed. So to add to that, if this doesn't work, if the requirements on families, the administrative burden—and I'm thinking particularly those that don't have access to what some families in larger urban areas do. So specifically rural families who don't have access to the same level of internet and other technologies that would assist in what is required administratively in this. What if they can't do it? And what if, at the end of the day, this policy isn't actually effective for those families? In that post-implementation review, what is the time frame on that and what does the Minister expect that that review will cover, if they truly intend to assist the families with the cost of early childhood education, as is outlined in the policy intention? Hon DAVID PARKER (Labour): Thank you, Mr Chair. I have two questions, the first of which should be relatively easy and quick for the Minister of Revenue to answer. This part and the next part both make changes to the Tax Administration Act. It is impossible for us to check through the Tax Administration Act and check every section against amendments. In the last Government, we changed the Tax Administration Act to give the Inland Revenue Department the power to collect information for policy purposes, not just tax administration purposes. It was that power that was used in order to inquire into the effective distribution of wealth, tax paid, and economic incomes of the very wealthy. That led to the Taxation Principles Reporting Act to report on those issues into the future. The Government, under urgency, repealed the tax principles Act. I know there are many people in society that didn't like the scrutiny that came upon the actual state of affairs in New Zealand through the information collection powers for policy purposes. My first question is: I want confirmation from the Minister that nothing in this part, or indeed other parts—otherwise I'm going to have to ask the question again in respect of other parts—repeals or amends the section relating to the collection of information by Inland Revenue for policy purposes. That's my first question. My second question, sir, because I do believe in the to and fro on—well, actually, if the Minister is ready to answer. Hon SIMON WATTS (Minister of Revenue): No. Hon DAVID PARKER (Labour): Thank you for that confirmation. My second question relates to the fiscal consequences of the change to the FamilyBoost package. I can't find the cost of this measure, to gauge its effectiveness, in the Budget documents. The summary of tax initiatives on page 49 of the Budget Economic and Fiscal Update includes global figures for changes to personal income tax and the independent earning tax credit, and some other things, but doesn't list it. So it's not significant enough to make that page. I've gone through the summary of initiatives, which goes through the Votes, or changes to Votes, by ministry. I've checked for revenue; it's not separately listed there. I've checked the pre-Budget announcements; it's not there. I've checked the Ministry of Social Development; it's not there. And I've checked Education, and I can't see it there. Now, it is possible that I'm missing something, but I would like to know—and I think it's fair of the committee to want to know—what is the fiscal consequences of the FamilyBoost package? And why is that relevant? Well, we ought to know that as we pass legislation that changes these rules, but also we know from other documents released in the Budget that the overall effect of this Budget is to increase the number of children below the poverty line. I think it's relevant for us to know whether some other change to the FamilyBoost payment would have had a greater effect on child poverty. And we can't tell, if we don't know how much the cost of this initiative is. So I would like to know what the fiscal cost of the FamilyBoost package is. LEMAUGA LYDIA SOSENE (Labour—Māngere): Thank you, Mr Chair. I'm very pleased to be able to have the opportunity to also add to the list of questions that my colleagues have asked. Minister, it's really important that I am able to give you, or highlight, the concerns from my community and also for the local Māngere community, because we have over 25 early childhood education (ECE) providers which sit across the spectrum from very well resourced, to community kindergartens, and we have lots of young people, little children, for whom education in our mother tongue and in our Samoan and Pasifika languages is very important. I do want to thank my colleague the Hon Jenny Salesa for pointing out some of the issues. So, Minister, I have questions around the consultation, because some of the decisions—and I'm referring to the regulatory impact statement, and I quickly read the information that has been provided. Why has there been no specific consultation with Māori, with Pasifika, with ethnic communities— Hon Member: And rural. LEMAUGA LYDIA SOSENE: —and rural communities. That ECE, which gives a great boost for languages and early childhood education, is a very important component in a child's life. Why has there been no consultation, Minister? But, Minister, also too, it tells of all the benefits in the regulatory impact statement of this policy, but there's a big weighting aside that the onus is put directly on families. The assumption has been made that many of the families who this impacts are well resourced. What about the families who have English as their second or their third language? How are they supposed to get around understanding this new policy and the speed of this policy? Minister, I also want to ask: what was the consultation with ECE centres—specifically, ECE centres that come from areas where there's more than one language, such as te reo Māori, but also in rural communities—and why has that not been provided for our members to understand the impacts of this? Also, Minister, for your information, it now provides a competitive factor for ECE centres that were working really, really well in terms of a community like Māngere or South Auckland. So, Minister, I want to say to you that the policy of FamilyBoost has some good intentions, but it provides a number of problems that our families are going to be faced with in communities that I represent. It's really important that the education that is given to communities for who English is their second or third language—that they understand clearly what the benefits are of this policy. How will that help when you've got a very diverse community in different parts of Aotearoa? What is the face of the future of those young children whose parents may not be able to access the system, because it's just too complicated, Minister? I appreciate that you have provided that Inland Revenue does have a service that provides interpretation or staff. Is Inland Revenue going to be resourced well to cope with the demand that is coming? It's coming in on 1 July—that's what we've got in front of us. So, Minister, if you could help me understand those specific issues, it would be really helpful. Thank you. Hon SIMON WATTS (Minister of Revenue): Well, thank you very much. It's good to hear a number of members on my left are supportive of the FamilyBoost policy. I'm looking forward, hopefully, maybe, to see them supporting this part of the bill when we come to the vote. In regards to the Hon David Parker's questions—actually, the answer to your question is in the fact sheet, which is outlined as part of the documents supporting the Budget. There is a line there for FamilyBoost which outlines the average fiscal impact on the Crown over the period of the Budget. Hon David Parker: What is it? Hon SIMON WATTS: Page 7, which is $0.18 billion on average—$667 million over the total forecast period. It's also outlined—I appreciate the member might not have done too many Budgets before—in the summary of initiatives document, as well, where it's outlined on that. Hon David Parker: What page? Because I couldn't find it. Hon SIMON WATTS: I haven't got the page, but I'm sure if you have a look through it, we'll come back. The other questions by the Hon Jo Luxton in regards to public consultation: I've covered that in earlier questions. It's also included in the regulatory impact statement. The questions by the Hon Jan Tinetti in regards to the distributional impacts: again, there were questions raised by other members on the same question for which I have provided contents, and there is also information in the regulatory impact statement. The Hon Ayesha Verrall, in regards to trade-offs between health and other aspects: well, I'm proud that we're a coalition Government that is putting $8 billion more into health. That is a significant implication, but we're talking about a tax bill here, and we're clear in terms of our priorities as part of that bill. The Hon Kieran McAnulty, in regards to limitations or implementations around the assessment process and the actual review: again, I have answered those questions already. There's information as part of the regulatory impact statement, again, in regards to that, and those are pretty much the questions that I put on my list. Hon KIERAN McANULTY (Labour): Point of order, Mr Chairperson. I'm just seeking your view on a situation when, over an extended period of debate, which this is—obviously, it started yesterday, and this has carried on through to today—if a Minister claims to have answered a question but that is in dispute, how would you consider that, because I know that the Minister's response to questions— CHAIRPERSON (Teanau Tuiono): Could you turn this into a point of order, and then you could take it as a call. But it's not— Hon KIERAN McANULTY: I'm sorry, sir—I did call for a point of order. It might have been missed. Point of order, sir. CHAIRPERSON (Teanau Tuiono): Well, my understanding is that this is not a point of order. So if you could actually point to where the order has been disrupted or the Standing Orders or— Hon KIERAN McANULTY: Well, sir, we understand that a large part of the criteria by which you assess whether an issue has been dealt with is the Minister's engagement with questions. My concern is that, as has just happened, the Minister has claimed that he has answered the question and it is very much in dispute by members on this side of the Chamber, because we believe that just simply touching on the same subject actually isn't answering the questions. So my point of order is a question, and that is: how will that be assessed by the Chair? Because if a Minister simply says "I've answered that." and that is taken as fact when it is in dispute, the concern from members on this side of the Chamber is that that will be deemed as engagement when, actually, we believe it not to be. CHAIRPERSON (Teanau Tuiono): Just for the clarity of the committee, we do have track sheets. I am trying my best to track, from my perspective, whether the questions have been addressed or not—hence, the reason why I gave you the last call. But we'll take another call. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I'm very grateful to have finally been given a call on this part of the bill. My colleagues have traversed a number of the issues to do with the bill from the point of view of people who might be eligible to receive this rebate. I want to traverse some rather more technical details, and I also have a series of questions around the administrative costs for the Inland Revenue Department. Following on from the compliance costs that my colleagues have been talking about, I want to move to the administrative costs as to how Inland Revenue (IR) is going to handle this. Looking at the regulatory impact statement (RIS), there's a pretty standard assessment of options sitting on page 14 of the regulatory impact statement—looking at option 1, which is the status quo, and option 3, which is expanding the time line for implementation. Now, that option 3 was one where the rebate would have flowed through to parents to use early childhood services much more smoothly, because it would have involved IR collecting information from early childhood providers and meshing it all together in their fancy information system and then sending refunds out automatically to people who had been paying childcare fees. Now, that option was discarded, because it would have taken two or three years more to get to it. So that option was not on the table, and, actually, if you think about the kind of IT build that was needed for it, that's probably a pretty sensible move to not try to do that kind of thing. The status quo is nothing, but then option 2—the basic refund models. We've got this refund model for this rebate. So families have to pay their childcare fees up front, they get the receipts from their childcare provider, they upload those to the Inland Revenue Department, and, all going well, the Inland Revenue Department sends them some money. But, looking through the list of whether or not this is positive or negative, the positives in this table are that it increases the income of eligible families, which is obviously a positive, and they say that there's a potential to promote fee transparency—I'm marginal on that, but, you know, I wouldn't want to override the insights of the officials. But then there's a series of negatives. There's compliance costs for providers—that's a negative. There's compliance costs for customers—it's a double negative. The fiscal cost to the Government is a double negative, but, you know, Governments make choices about where to spend their money. The time required for implementation compared to the status quo—obviously, that's a negative. Anything new you're doing does take time. But the one that I'm concerned about is from the point of view of the Inland Revenue Department, and there is a double negative on administration costs. I just want to discuss this with the Minister of Revenue a little because there are a number of comments in the regulatory impact statement about how the costs associated with this option are going to affect the Inland Revenue Department. So if we're looking at paragraph 72 of the RIS, which is right on the back page, it says that Inland Revenue is going to have to be required to develop invoice verification processes. They'll be automated, where possible, but they're going to have to check that those invoices—actually, I'm hoping they're receipts proving that the person using the childcare has actually paid, because that's what the model demands. They're going to have to monitor for fraud. There's going to be a bit of an integrity risk as it's going to rely on invoices presented by parents, rather than the Inland Revenue Department directly receiving information from the providers. There's a whole set of administrative costs sitting in there for the Inland Revenue Department, so what I would like to know from the Minister is just how much more it is going to cost Inland Revenue to process these refunds, what kind of consideration that had on the thinking in terms of whether this was the best route to go down, and whether those administrative costs are justified, and I want to know what sorts of administrative costs have been taken into account. So, for example, we know that while most of the people claiming this refund will do it with a bit of honesty and integrity, there will be those who seek to game the system and to perhaps claim refunds that they're not entitled to. So I'd like to know, in terms of the thinking around the administrative costs for the Inland Revenue Department, how much thought has been given to how many extra people will be needed in order to police this arrangement, because there's a whole set of integrity issues— CHAIRPERSON (Teanau Tuiono): The member's time has expired. Hon SIMON WATTS (Minister of Revenue): I'm just responding to the member's question in regards to the compliance implications. The member's right. There are scenarios where, potentially, people will try to test the system. Those considerations have obviously been made by the department, and in terms of operational nature and the way in which they respond, they will do so appropriately. But it is something that has been considered and is being worked through as part of the process in which we assess to implement this overarching FamilyBoost policy. The reality is that we've outlined—and I outlined it again, but I'll say it again: just in terms of the overarching process, the balancing factor here was getting those payments into the back pockets of hard-working families as fast as possible, acknowledging that there are technical challenges around how we do that. The way which has been recommended by officials is the position which we've landed on. We acknowledge that there are going to be some challenges, but we're balancing out the speed of execution versus the ability to ensure that we've got the right measures and balances in place, and I think we've got that. CHAIRPERSON (Teanau Tuiono): The Hon Julie Anne Genter. Hon JULIE ANNE GENTER (Green—Rongotai): That's me? Oh, great. Mr Chair, thank you. I have a series of questions for the Minister. I would really appreciate an answer—I can't find it in either the specific regulatory impact statement for the FamilyBoost or the more broad one. How many families are expected to receive the full benefit of the FamilyBoost? That's the full $75 per week. Did he seek or receive any advice on how to ensure more families get the full support? Then, why is it capped at $75 per family when a family with two children in full-time care—$75 a week will be less than 15 percent of the total cost rather than the 25 percent I know that the Government and the Minister have said they they're really hoping to achieve. Finally, about the rules—I guess I'm interested in the relationship rules. So how does the FamilyBoost work for single parents? If we imagine a single mother who's paying all of her children's early childhood education costs is eligible for the FamilyBoost based on her income but she ends up with a new partner—a de facto partner—after a couple of years who's not contributing to her childcare costs, because it's not their child, but that partner earns above the threshold, will the single mother still get the FamilyBoost, and, if not, why not? Hon SIMON WATTS (Minister of Revenue): So just in response to that question, around 21,000 families will get the full impact of the FamilyBoost policy; around 100,000 families will be able to get some benefit from the overarching policy. Consideration was put in terms of single-parent families and the way in which the mechanics of that will work, including those that are with children in foster care and other considerations like that—all of that thinking was put through. The quite simple reality is that they will be able to claim the benefit through that process, and guidance around how they do that is included in the supporting material online on the IRD website. CHAIRPERSON (Teanau Tuiono): The Hon Julie Anne Genter. Hon JULIE ANNE GENTER (Green—Rongotai): Sorry, I can't quite hear you, Mr Chair. Just on the third question about it being capped at $75 a week, though, does that mean it will be less than 25 percent of the total cost for those families that have two children in full-time care? I do just want to come back to the question, Minister Watts—I think maybe you haven't quite answered it yet—which is about this Figure 1 in the distributional analysis of options. It does seem to indicate that households with the highest incomes in New Zealand benefit much more than the middle and low income households from the total package, including the FamilyBoost. Last night, the Minister indicated that this was only an analysis of the personal income tax changes. However, the annex of the regulatory impact statement on the personal income tax relief does seem to indicate this is the entire package. So, even with the transfers that the Government's announced, it does seem to disproportionately benefit the highest-income families. Is that correct? Hon SIMON WATTS (Minister of Revenue): Yeah, I'll just clarify that point. So the graph that the member's referring to in the regulatory impact statement for personal income tax, in the graphs, is reflective of the four elements of the initiatives, not the individual components. It actually does encompass all elements. So just to correct that point. There isn't any separate analysis of each bucket that we have, but what you're seeing there is a combination of all of the policies. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I'm sorry, I'm finding it a little hard to hear you, Mr Chair. CHAIRPERSON (Teanau Tuiono): The Hon Deborah Russell. Hon Dr DEBORAH RUSSELL: Thank you, Mr Chair, I appreciate it. CHAIRPERSON (Teanau Tuiono): I'll sit up straighter. Hon Dr DEBORAH RUSSELL: I do want to bring something to the attention of the Minister. This will be my last call before I get into the technical stuff, if I do get further calls. It's a message I got from a Rotorua father yesterday. He contacted me and said he'd taken a screenshot of what he thought that his family would get from these tax changes—the overall four changes that the Minister has just referred to. I have the screenshot here, and he says that he and his family will get about $190 a fortnight. But what he was confused about is when he was going to get that. So I'll just read his message. He says—I won't give his partner's name, but his partner, "earning $100,000 and me getting nothing"—he's a full-time caregiver—"with our two kids, four years old and one year old." So it says they're going to get $190.10. Sounds great. "So when does the money start flowing in? Or do I have to go through some sort of convoluted process? So unsure." So we've already talked a lot about the processes, but I think the question for this Rotorua father—and it was a very serious one, because the way it was presented in the tax calculator on the Budget website is that that $190 a fortnight would be available to him really from early August—that's when the changes start flowing in. But I'm pretty sure that the way that this childcare tax credit, rebate, refund—whatever we're calling it—is done is that, in actual fact, that money won't get into that family's back pocket until some time in October. So sitting on the tax calculator is the implication it's going to be there from early August. He's looking forward to getting that extra money. They need it in their family. They've got those two little ones in childcare. But I'd just like the Minister to clarify, for the benefit of that Rotorua father, when he and his family can start seeing the benefit of this childcare tax rebate. When will it actually arrive in their bank accounts? And I know it can be claimed from 1 October, but sitting in this, we need to understand how quickly the Inland Revenue Department can process those receipts. So what is a realistic time frame for this daddy to understand when that money will get into his family's bank account? TANGI UTIKERE (Labour—Palmerston North): Meitaki ma'ata, Mr Chair. Thank you. This is my first call on this bill, and I have a number of questions for the Minister in my capacity as Labour's associate education spokesperson for Pacific. My questions relate around the ability for Pacific providers and for anau to engage with this proposed process in a way that is easy and right for them. It's very clear that there are administration pressures that face the early childhood education (ECE) sector on a regular basis. So I'm yet to hear from the Minister around what level of support is proposed to be put in for those providers in order to meet the additional administrative expectations moving from what might be in many situations an annual form of accountability or receipting to, for many, four times per year. So that's my first question. Second is around this issue of consultation. I'm yet to hear a response from the Minister that directly relates to the level of consultation with our Pasifika community. I refer to the regulatory impact statement (RIS), specifically paragraphs 21 and 22, which identify that in terms of this creating an increase in administrative capacity, it will be important to consult with the ECE sector. But the RIS doesn't just say, actually, it's important. It uses the word "crucial". So I think that's a higher threshold. So I'm interested to hear from the Minister around what guarantees can be provided that there is a crucial level of engagement with the sector around these changes? Another question from me is around whether families might be in a position—for example, if life administration is quite tough, and that's the case for many—to have a number of receipts and how that might be easily accessed and able to be filed. And if so—i.e., there's a retrospective sort of condition—then what's the liability for the Government as part of that process? Statistics New Zealand identify that around 24 percent of children have care arrangements with grandparents. And in a Pasifika context, that can mean a whole range of things in terms of whether it's a grandparent or an aunt or an uncle or what have you. Those are informal arrangements. When I look at the proposed subsection MH 3(5), I don't believe that Pasifika family members would be eligible. Yet if they're proposed to receive—many of them who might be receiving New Zealand superannuation—an increase of $2.25 a week, where is the level of support for that particular family dynamic in terms of the arrangements? And, finally, just in terms of all the research, all the empirical data indicates that it can be very, very difficult—very difficult—for Pasifika community members to want to engage with many Government departments, agencies, and those sorts of things. I've heard the Minister talk about "Get a family member to provide support for accessing an 0800 number." That seems to me to be potentially a further barrier for Pasifika whānau and ānau. So I'm interested to hear what sort of face-to-face arrangement—and, again, this may have been borne out if there was a level of engagement with the sector, but I invite the Minister to address those questions. Hon SIMON WATTS (Minister of Revenue): Just in regards to the member's questions around consultation, I outlined a process. In addition to that, Inland Revenue is also consulting with early childhood education providers directly, in terms of some of the language considerations and that, depending on what is applicable. So, in addition to the services that they already provide, there will be services and documentation in different languages provided for those individuals, which covers off some of the points around consultation. The question around when the money would actually go into one's bank account: I mean, technically, and assuming that an individual—the father in the case that was raised from Rotorua—did an application that met all the criteria, in effect they could submit that on 1 October and they would be paid, due to overnight processing, on 2 October; hypothetically, assuming that everything else was appropriate. So that would be my message, and that would be backdated to 1 July. Hon PHIL TWYFORD (Labour—Te Atatū): Thank you, Mr Chairman. My question for the Minister in the chair is: what is the percentage of eligible families expected to take up the childcare-fee refund option, based on the modelling that I assume was done to inform the Government's policy choice in this area? The Minister said, in an earlier intervention, that he had answered Jan Tinetti's question on this. I don't believe, with respect, that he did. I have to assume that modelling on uptake was done. It would be negligent, I would think, if it wasn't. And I would ask the Minister to comment on what that modelling says in terms of breaking down projected uptake on the basis of income, ethnicity, and one- and two-parent households, for example, which I think would be helpful to the debate that the committee is having. It's clear from the regulatory impact statement that the Government opted to go for the quicker option instead of the option that would have put in place a system that would have less compliance burden on families. As Deborah Russell has commented, it would have taken maybe a couple of years to put that in place. And I'm interested to know what the Minister's rationale was, and what Cabinet's rationale was, for going for the shorter-term option— Hon David Parker: Or transitioning. Hon PHIL TWYFORD: —or transitioning or going for the shorter-term option but actually putting in place the better option over time and transitioning to what is described as option three in the regulatory impact statement. Hon SIMON WATTS (Minister of Revenue): The modelling that we undertook assumed 100 percent uptake. Hon WILLIE JACKSON (Labour): Thank you. Kia ora—kia ora tātou. I'm just following the kōrero from some of my colleagues, particularly from Deborah Russell and Lemauga, our MP for Māngere. We have early childhood on our marae, Minister. We have always gone down the track of reo, of support for our kids—we used to have a kōhanga reo on our marae—and so we're always balancing what was in the best interests of our kids. So these are big political decisions, particularly in South Auckland—you know, you also attract some criticism when you make a decision on behalf of your whānau to go, some would say, the Pākehā way in terms of early childhood. And we got there when we shut down our kōhanga reo. There's always been this conflict in terms of kōhanga reo and early childhood. Minister, I'm wondering in terms of that consultation process—and I accept that you would have gone down that track—how did you balance that? What sort of balancing act did they require? Because I can see through the Budget that there has been some support and assistance for kōhanga reo, but there's a competition—our kōhanga providers have been a bit twisted through the years because they felt that they were totally ignored in the interests of early childhood. But, for us, as community providers, we have to make the best selection for our whānau and for our communities. I'm interested in that wider consultation, Minister, if you can help me there. I'm also interested, again, in the process for whānau, particularly Māori and Pasifika whānau. As has been pointed out by colleagues, it's all so clunky and heavy and administration-heavy, and it'll probably come back on so many of the mothers to work out how to get the rebate. Has there been consideration given in terms of how they work in tandem with the providers? Have you been able to coordinate a strategy, say, with Whānau Ora, Minister? I note that, in that particular area, at least this Government has not reduced any funding in that area, which I'm very pleased to see. So is there a coordinated strategy or are whānau just being left on their own to work this all out? Because our worry is that they give up and they do not access the support that is due to them. Some of our mums are just fantastic, and I'll give them their credit. Some of our other mums are just so busy trying to get the kids their lunch and everything else that they are just unable to access the community provider and the support necessary. So has the Government thought about a coordinated plan, working with community providers? Because this system, in terms of accessing funding, looks very clunky and very, very tough in terms of the whole administration side. I'm also worried about providers and the extra burden on them now to claim what is rightfully theirs. So just some questions for the Minister. Dr LAWRENCE XU-NAN (Green): Thank you, Mr Chair. First, I don't think the Minister answered my question before around the modelling of the potential increase in the cost in the early childhood education (ECE) sector. I guess, reframing it, the regulatory impact statement actually shares my concern that this has the potentiality of increasing the cost of ECE. I would like to hear some more about a commitment from the Minister, if possible, that this is not going to drive up the cost of ECE. But what I want to really talk about is a perspective that we haven't talked about yet, which is the interaction between the FamilyBoost tax credit and the already existing 20 hours free ECE. So one of the things that we're looking at—and, again, I understand the intention of this FamilyBoost tax credit, which is to support and supplement the existing 20 hours a week of ECE. But, at the same time, I would like to ask the Minister—my first question is: has there been any modelling done? I do not see, in the regulatory impact statement, anything about potentially expanding ECE to longer hours beyond 20 hours, which then would require less, as we heard, compliance from parents having to do the rebate and having to do it and then only getting a tax credit quarterly after they pay it, and there's a statement and calculators and all of those. So has it been considered to increase—simply increase—the extension of 20 hours of ECE to beyond the 20 hours? The other thing is—and I'm looking at paragraph 10 of the regulatory impact statement on the future outlook on ECE affordability. It says, "The recent repeal of the planned extension of 20 hours ECE to 2-year-olds also reduces future support to some families to meet ECE costs." So the second question I have here is whether the 20 hours of ECE applies to those who are aged three, four, and five, and whether the FamilyBoost here will add on top of that what they already get for 20 hours. However, what additional support will there be for families with children who are two and under other than the FamilyBoost they get, and also additional family subsidies because of the fact that they don't have the 20 hours of ECE? So those are my two main questions. And then my next question, again, because when we're talking about the amount and abatement and of the $975—I'm looking at new section MH 3 subsection (2) and (3)—is: how does that $975 come about? Because, again, we have heard the impact that this has particularly to lower-income earners. And when we're looking at something like the statistics and the census, we know, as mentioned, that Māori and Pasifika and, for me, my constituents of the Chinese communities, on average, earn less in Aotearoa than others. So, as we see here, the cost of ECE increased faster in the report—and this is from Stats NZ as well—that from June 2018 to 2022, you can see that the bottom 20 percent of salary earners face increased costs much more than all households, against the average. So the question here would be whether there has been consideration—and this is particularly subsection (3)(b) of new section MH 3—that is being placed on the inequity that we see in our communities. We have talked about the fact that the language barrier is a real concern—and for me, I can think of Chinese families—and I'm sure that other Chinese MPs will also echo the same sentiment that certain Chinese families who may not be proficient in English will find it a struggle when navigating this system. On top of that, they have the additional barrier of already earning less than average of the income and having to face additional complexity but also not necessarily getting the same amount. So the third question I have to the Minister is: has there been any sort of modelling being done in terms of balancing out some of the inequity that we're currently seeing in our communities and particularly the ethnic communities? SUZE REDMAYNE (Junior Whip—National): I move, That debate on this question now close. Hon JO LUXTON (Labour): Because we aren't having a select committee process and there isn't the ability for people to come and submit on this particular piece of legislation, I asked the Minister a question before, and he said he addressed it, but he actually has not addressed two of the questions I asked before—the first one being: why were parents not consulted as part of this, and why was there not any work done on the fees that centres provide in order to make this bill more practical? Those were just the questions that the Minister didn't answer, but I just wanted to get back in front of him again. I wanted to follow on from a point that my colleague Tangi Utikere made around retrospectivity of this legislation. I want to know, if I'm a parent and I miss out on making my quarterly submission to IRD, whether I can save it up and do it the next time and whether I can, in fact, save my whole year's worth and do it in one lump sum so I get myself quite a little pocket full of cash at the end of the day. So I really appreciate if the Minister could actually answer the questions I've asked. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I do want to dig into some of the really technical aspects of this bill now. So the first clause I want to look at is clause 9 of the bill, and what it does it inserts new section GB 44B, and it's an anti-fraud provision—that's what that section of the Act is all about. So what it says is basically if someone enters into an arrangement and the purpose of that arrangement is to defeat the purpose of new Subpart MH—whatever the new Subpart MH, which is the "FamilyBoost tax credits"—then the tax credit is "reduced to the amount the Commissioner considers would have arisen had the arrangement not occurred." So, basically, someone could, if they want to try to get around the system, maybe submit some invoices that weren't actually correct, or they could make some claims that weren't correct and they could get some money, but then the commissioner could go and overturn them and get that money back. So it's pretty standard, saying, "All right, mate, you've tried this one on, but we're going to take that back." What I want to understand from the Minister—I mean, that just reverses the payment back out and ensures that no one gets any childcare rebate that they're not entitled to. But will there also be a penalty attached to anyone who tries to pull a swiftie? Because I guess we've got a really well-known phenomenon of people who try to pull a swiftie over at the Ministry of Social Development on benefits and the like getting pretty soundly punished for that in many ways. There's some really interesting work done by Professor Lisa Marriott showing that we are far more punitive towards benefit fraud than we are towards tax fraud. So this is an interesting one—whether it's a benefit or a tax part. But I would like to understand from the Minister, as the first of my technical questions, is whether there is any penalty associated with entering into an arrangement. Now, I'm not talking about where someone's just made a mistake. You can totally get that a busy and flustered parent might accidentally load up the wrong invoice or might repeat an invoice from one quarter because they just lost track of something, because people do get busy and get flustered and things do go wrong. So that, obviously, probably couldn't meet the level for it to be deemed an arrangement. Arena Williams: A mum and dad with little babies. Hon Dr DEBORAH RUSSELL: Yeah, that's right. But there's a circumstance where someone does deliberately set out to defeat the system and the money's been gotten back, but is there going to be a penalty associated with it as well? I'd like to know that. REUBEN DAVIDSON (Labour—Christchurch East): Thank you, Mr Chair, and Fa'afetai, because it is Samoan Language Week and it would be very easy for us to lose sight of that this week. But I would like to make a special shout-out to our large and proud Samoan community in Christchurch East—the electorate I am lucky enough to be the MP for. I'm also pleased to be able to take a call on this, because there are still so many questions, I think, not just from our team here on this side but also from our community, about the approach that's being taken here. Specifically, my questions are around a very local perspective and around a community perspective for early childhood education (ECE). The example that we have in Christchurch East is the Avonside Early Childhood Centre. Now, this is, proudly, on Woodham Road. It's been there for 80 years. It's one of the oldest early childhood education centres in New Zealand. It was originally called the Avonside Girls' High Nursery School, so things have moved on. No longer do the ECE teachers there wear nurse uniforms, and no longer are they seen as babysitters. This is a vital, not-for-profit community service that allows parents to get back into the workforce, back into study, and to have a fantastic start for their children in an early childhood education environment. The really important thing about the Avonside Early Childhood Centre is that it's about childcare; it's not about profit. It's a not-for-profit. It has a board of trustees. It has a focus on accessibility for the local community, and that local community needs support for things like early childhood education. The issue with the approach that's being taken here is that there's a really strong administrative load put both on to the parents—and we've heard a lot of questions around that, because that's not really the best approach for busy parents who are juggling a lot—but there's also a really big administrative load that is put on to centres like the Avonside Early Childhood Centre. And, at a time when the Government is telling us through the Budget that they want to cut backroom services, what's actually being created here is a whole new backroom role both for families but also for early childhood education centres. So we're creating a backroom boost away from Government but into family homes and into early childhood education centres. Carl Bates: A back-pocket boost. REUBEN DAVIDSON: I've heard a member shout out "back-pocket boost". It's a very small back pocket. I'd love you to talk further about it, because it's a very, very small back pocket. My question for the Minister around this approach is— Carl Bates: Are you trying to slow down money into the back pockets of New Zealanders? REUBEN DAVIDSON: My question for the Minister, when his colleagues will allow it to be heard, is: what was the engagement and what has the Minister's engagement been with early childhood education centres and particularly with community-focused and not-for-profit early childhood education centres? And not only what has the Minister's engagement been but also what was their feedback, what was the response, what was the feedback that you got from that sector, and, as a result of that feedback and as a result of a consultative approach, what support is being promised and provided for that sector to navigate what is going to be a heavy administrative load—new roles needing to be created within childhood centres where the focus really should be on providing the best start for children and for families whose parents are balancing the very busy time of returning to study or returning to work and accessing childhood care? So I look forward to the Minister's answer to those questions. Hon JO LUXTON (Labour): Thank you, Mr Chair. I appreciate the opportunity to make a call, and I am looking forward to, hopefully, the Minister in the chair, Simon Watts, answering my previous questions. I just wanted to follow on from a point that the Hon Dr Deborah Russell brought up. If I think back to my time in early childhood education (ECE), when we enrolled children, we had to verify that they actually existed. We had to upload information into the Early Learning Information System; we had to have evidence of birth certificates and what have you. I'm interested to know whether there is going to be security or what is actually going to be in place to stop someone—say I find out what these receipts are going to look like that centres provide and I'm going to pretend I have a child in ECE and I'm going to start claiming this rebate, I want to know what security is going to be in place. Are ECE centres and IRD's IT systems going to be talking to each other to verify that there is an actual child here, or are parents going to have to also be expected to provide verification that there is an actual child here as well? I'm talking a bit about the whole fraud side of things, because we do know there will be people that, if they can, might like to take that opportunity. So I'm actually really interested to know what security measures will be in place to protect against that. Hon DAVID PARKER (Labour): Thank you, Mr Chairman. Can I thank the Minister for providing me the information as to the fiscal costings of FamilyBoost. For the benefit of listeners, I couldn't find it, because it's not in the bill, it's not in the explanatory note to the bill, and it's not on the regulatory impact statement to the bill, and when I went through the summary of initiatives, I checked education and social development, but I wrongly checked Inland Revenue under "I" rather than revenue under "R". You might call that a rookie error, but I was somewhat pleased to see that it took the Minister a minute or two to find it. In any event, it now discloses that the cost in 2024-25 is $174 million, and it goes down by about $3 or $4 million a year—$171 million, $167 million, and $165 million—in the subsequent years. There are two questions that I have arising from that. The first is that the National Party campaigned at the time of the election that the abatement threshold for this increased subsidy for childcare costs would rise from $42,000 of family income to $50,000. Presumably, given that the National Party would've liked to have kept their electoral promise, they did cost what would have been the fiscal impact of lifting the abatement threshold from $42,000 to $50,000. It's relevant both to the cost of the policy relative to what was promised at the election, but it's also relevant to the Amendment Paper that is in the name of Arena Williams, which seeks to lift that threshold to $50,000 as per the National Party promise at the election. So I presume that that would have been costed at the time of the election. I'm interested because it seems likely that the National Party's either going to rule out this amendment on fiscal grounds or vote against it, either of which does bring into relevance the cost of changing that abatement threshold. The second point I would make—I have already referenced the decreasing amount of the cost of this over time. I am presuming that as a consequence, either fewer people get the benefit of FamilyBoost over the time or the amount that people get under each of those entitlements decreases over time, or a combination of both, as a consequence of inflation and inflation-related wage increases. I would like the Minister to confirm that that is in fact the case and, if that is the case, whether any consideration was given—given that we quite often hear from the National Party about the desirability of adjusting thresholds for inflation, whether any work was done on adjusting the FamilyBoost payments to make sure that, over time, it didn't decrease by $3 million per annum. MILES ANDERSON (National—Waitaki): I move, That debate on this question now close. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I've still got a whole set of technical questions which we just haven't gone into yet. What I want to understand is how the abatement works for this policy. It's like a lot of policies. It is income tested, and, as far as I can tell, a person or family can get this childcare tax rebate. But what I want to understand is how abatement works. I want to direct the Minister's attention to new part—so this is in clause 14 of the bill, and it will insert new section MH 3, "FamilyBoost tax credit", where it's looking at the entitlement to the family tax credit. Then it talks about "Amount of credit", so up to 25 percent—well, it's "25% of the licensed early childhood service fees payable by the person for the quarter up to a maximum credit of $975." All right, so that's the maximum amount a person can claim. And a "person" means, basically, family if you look further on. That's how it works. But it could be a single person, it could be a family unit, or something like that. But then, in new section MH 3(3), it starts to talk about the abatement amounts. It says that "If the person's tax credit income for the quarter is greater than $35,000,". So the way I read that is that once someone's tax credit income—now, you have to sort of work at what that tax credit income is, and it says, as far as I can tell: "tax credit income", if you go back to the definitions in new section MH 2, "means the amount determined under section MH 4". So you go to new section MH 4, and the amount of the tax credit income is determined by "reportable income". So there's a number of questions here. First of all, it would be helpful to know from the Minister what "reportable income" is, because that determines the tax credit income. There's quite a lot of tricky definitions in here. So just if we could get that little bit of clarification around what "reportable income" actually is, and then that tells us what the tax credit income is. So it tells us how much income a family can earn before the tax credit itself starts to abate. So that's the first point of clarification. I guess "reportable income"—it does say that it's defined in the Act. Of course, we don't have the Act here with us in the Chamber, but I'm sure that the Minister or his officials can let us know what that "reportable income" is. I'm sure it's somewhere in Part Y of the Act, but it would be good to have that there. So that's the first question. Then the second question, related to this abatement, is that "tax credit income for the quarter is greater than $35,000", so it's for the quarter, so if we go to what the annual amount is, then, it'll be $140,000. So if there is—you know, the way I'm reading it, if a family has income of up to $140,000, then provided they've spent—I can't remember what it is per quarter—the full amount of childcare fees per quarter, they can get the full amount out. The greatest benefit for this tax rebate will be to those families who can afford to pay the childcare fees upfront. And the benefit goes to families where the income is up to $140,000. Now, that doesn't matter whether there are two income earners in the family or one income earner or so on. That's where the benefit goes. But I would just like the Minister to talk us through how that abatement is going to work. And, more to the point, I haven't had time to do the maths myself, so at what point, what level of family income, does the tax credit fully abate away? So what's the maximum income a family can earn and still receive even just a few dollars of this FamilyBoost—what are we calling it?—tax credit, the childcare tax rebate? So I'd be really interested to know at what point it fully abates away. Obviously, that's going to be quite a high-income family. So I get the point of abating it away, but just what's the maximum income a family can earn before this new FamilyBoost tax credit fully abates away? Hon SIMON WATTS (Minister of Revenue): Just working through some of those questions, the answer is $180,000 for the last aspect, which was the maximum income threshold. Reportable income includes salary, wages, interest, dividends, scheduled payments, and employee share incomes—and that is a defined term. The abatement question, in regards to the National Party policy: it is something that wasn't proceeded on, raising it from $42,000 to $50,000, but it relates to the Working for Families tax credit, not the FamilyBoost conversation that we are having at the moment. In regards to why the numbers decrease, on page 79, the summary of initiatives, in terms of the cost, it is because there is an understanding that household incomes are expected to increase in time, and those aspects will always be subject to review by Government in regards to its broader tax policy. Dr LAWRENCE XU-NAN (Green): Thank you, Mr Chair. I have more of a question of clarification. This is with regard to a section that we haven't discussed yet, and this is clause 14 inserting new Subpart MH, new section MH 4(5) and (6). So, for new subsection (5), it talks about the question of "If the person has a spouse, civil union partner, or de facto partner". This is something that is going to be really crucial when we're looking at something that is retrospective in nature of people getting a tax credit quarterly. So, in this case, it says that the personal tax income takes into consideration the person's tax credit income and the tax credit income of their partner, for the quarter. But I have a question of what happens if the couple separates. So, luckily, this was mentioned in subsection (6), which says, "Subsection (5)"—which is the previous subsection—"does not apply for a quarter if the person is separated from their partner and does not have a new partner at the end of that quarter." So my question here is: when subsection (6) is triggered, does it encompass the entire duration of the quarter, as indicated in subsection (5), or does subsection (6) only consider pro rata the period of time where the main person with the tax credit income no longer has a partner? I think this is a really important point of clarification for, in this case—in more cases or not, as we see in the regulatory impact statement—it affects women and, particularly, solo mothers with young children. So I think that clarification of whether subsection (6) encompasses the entire quarter or if it's going to be pro rata when the partner is separated is going to be a really important clarification for the people of Aotearoa. So if the Minister wouldn't mind just clarifying whether subsection (6) applies to the entire quarter or just for the period that the person no longer has a partner. That would be really good if he could answer that. ARENA WILLIAMS (Labour—Manurewa): Thank you, Mr Chair. I have eight questions for the Minister of Revenue, straight questions that we haven't dealt with yet. I've had one call in this debate to speak to my amendment to Part 2. I'll give the Minister a heads-up about what it is. It's to clause 3. It would include a new clause 3A that amends section MD 13 of the Income Tax Act. That clause, just for the Minister's information, is about the family tax credit abatement rate. In my colleague the Hon Dr Deborah Russell's contribution, she was talking about the abatement for the FamilyBoost package. This contribution, Minister, is about the family tax credit abatement rate, which my amendment seeks to change. All right, to the eight questions that I have, which haven't been answered yet, the first is about the fiscal cost of the lack of a change to the abatement rate from $42,000 to $50,000. This was something that was costed into the National Party's provisional Budget. It was in their operating allowance at the time prior to the introduction of this bill. So the House has had two days only to consider the fiscal impact of not doing the abatement rate. I'd like the Minister to give me the fiscal cost of that change and the savings that have resulted from that, so that we can understand the impact on low-income families. The second question I have is: how many households would have benefited from the family tax credit had the change to the abatement rate been made? A change from $42,000 to $50,000 represents perhaps 10,000 homes who are now missing out on the family tax credit because that decision has not been taken. The third question I have is: which households? Can the Minister give the committee an understanding of what kind of households are missing out on the change that would have seen them eligible for the family tax credit who, because of the decisions not to include a change to the abatement rate in Part 2 of the bill, will not be receiving that? Which households are they? What kind of income profiles do they have? And are they exactly the low-income families that the Minister has talked about Part 1 most affecting? The fourth question is: how is it being offset for them? The Minister has talked about low-income families being the primary beneficiaries of those changes to the three categories of the lowest-wage earners in his changes to Part 2—I believe it was the clause 7 changes to Schedule 1 of the Income Tax Act. I want to understand how the Minister has gone about offsetting the loss of tax benefits by not increasing the family tax credit abatement rate that will now apply to these low-income households—if, indeed, it is low-income households; because the Minister hasn't answered my previous questions in the call about how this will affect the tax spread and the tax efficiency outcomes that he surely wants to see from his decisions in this bill. The next question I have is that he did speak about, in his answer to my earlier questions, there being a number of trade-offs being made here, and that the abatement not being made—which would have been the bigger change to his tax package—was about trade-offs and fiscal considerations that were taken by the coalition Government. What I want to understand is: given that it was in the National Party's operating allowance that they campaigned on, that doesn't really answer the question, because, if it was in the operating allowance, what has changed in the operating allowance now not to include it? We're not talking about taking on further debt; we're talking about policy decisions which affect exactly the same people which the Minister is trying to get to in his changes in this bill. So the fifth question I have for the Minister—number five—is: is interest deductibility the trade-off that he is talking about? Is it because that change cost hundreds of millions of dollars more than it did in the operating allowance that the National Party was discussing at the election time? Is that the trade-off that he was talking about in his previous answer to my question? Question number six: is it the gambling tax? Is it that the gambling tax does not raise what was expected, and is that trade-off that he is talking about in his answer to my question? The next question is: is it overseas buyers? Is overseas buyers and the failure to be able to deliver on that campaign promise the reason why the operating allowance is different and why this abatement hasn't been able to go ahead? The eighth question I'd like the Minister to give us an answer to in this committee is: because of those three measures—questions five, six, and seven—is that why low-income families, who the Minister is helping in Part 1 of the bill, will be not receiving that benefit in Part 2 of the bill that they would have received? CHAIRPERSON (Greg O'Connor): I'm going to indicate that I'm going to go back to Lawrence Xu-Nan—I noticed when you were asking your questions, the Minister in the chair at the time was on a cellphone for the whole time. So while the Minister's fully entitled to be out of the Chamber, I would expect the Minister in the chair to show a little more attention to the Chair while he's in that position. So, Lawrence Xu-Nan, we'll go back to you for your speech. And, Arena Williams, if you would like some of those earlier questions, you're welcome to them as well. Lawrence Xu-Nan. Dr LAWRENCE XU-NAN (Green): Thank you so much, Mr Chair. I will keep this brief because—if I can find the section. This is around new section MH 4—I have lost it. This is around subsections (5) and (6) of new section MH 4, in new Subpart MH, inserted by clause 14. The question I have to the Minister is: if the Minister wouldn't mind providing a clarification of subsection (7) of new section MH 4, where it says that subsection (5) does not apply if the main income tax holder has a partner and has split up and they no longer have a new partner by the end of that quarter. So clarification is needed as to whether it meant that that main partner would be considered single for the entire duration of that quarter—because it says "Subsection (5) does not apply"—or if it's going to be pro rata, as in they will only be counting depending on the date of separation or the precise month. So I think that clarification will be quite helpful. ARENA WILLIAMS (Labour—Manurewa): Thank you, Mr Chair. My question is about my question about the fiscal cost of the abatement is something that I acknowledge the Minister has been asked a couple of times and he hasn't been able to answer, so what I might do is clarify why that is important while he considers with his officials. So this question is because there are two changes being made to the family tax credit regime that were being considered only two days ago, before the introduction of this bill. One was increasing the rate to $25 a week. That has been done in this bill—that is a good change. That is a change we can all support because it means that low-income families are getting $25 extra a week in the hand through the family tax credit and that is both an efficient way to distribute that money and it is a targeted way that goes to the people who need it. But the second change that was being considered prior to the introduction of this bill was the bigger change. It was the bigger fiscal impact that affected more people—we're talking in the number of tens of thousands of people. That hasn't been done. That was the change to the abatement threshold, and it was from $42,000 to $50,000. So the reason I'm asking the Minister is about the fiscal cost of that, which is not being done. Then I want him to help us understand how big that is for the families who have been affected by the decision to not make that change. I ask it because I'll bring the Minister back to Part 2 of my Amendment Paper. James Meager: Are we still on Part 2? Been here for a while. Carl Bates: Are we on Part 2? ARENA WILLIAMS: It's on the Table for the members who are a bit confused about where we are—I hear their interjections. James Meager: Oh, what clause? ARENA WILLIAMS: It's Part 2, clause 3A on my Amendment Paper. It inserts a new clause 3A which reads, "ND 13 Calculation of family credit abatement." James Meager: Not Part 2. Part 2 is clause 8. ARENA WILLIAMS: I think the member is a bit confused because he might be looking at the Minister's Amendment Paper. My paper seeks to amend the Minister's amendment and so where we are is we're amending, in the Minister's Amendment Paper, the Income Tax Act 2007. This Amendment Paper would seek to insert a change to that principal Act, the Income Tax Act 2007. The reason it is here is this part is the only part in which I could amend it for the Minister because he promised to do it before we got here with this bill. CHAIRPERSON (Greg O'Connor): Just before—for the Hansard—I was not referring to this Minister in the Chair being on his cell phone. I want to clarify that you've been very attentive, Minister Watts. Hon SIMON WATTS (Minister of Revenue): Thank you, Mr Chair. The member Arena Williams doesn't have an Amendment Paper on the Table, so I'm not sure what her contribution was referring to. But in regards to the question in regards to a circumstance where there may be a separation during the quarter, there is no appropriate pro rata or apportionment process. The decision around eligibility is a point-in-time decision at the end of the quarter, and so, quite simply, that's how that process would work in regards to that question. CARL BATES (National—Whanganui): I move, That debate on this question now close. TANGI UTIKERE (Labour—Palmerston North): Kia orana. Thank you, Mr Chair. I'm yet to receive a response from the Minister to a question that I put to him. It's largely framed around the support and how Pacific communities as a family unit can function. So I would be very interested for the Minister to at least address the question if he's not able to provide a fulsome response. Just to remind him, the data indicates that just under a quarter—around 24 percent, Minister—of children are looked after or cared for in informal arrangements that involve grandparents or potentially extended whānau or anau. Now, in a Pacific context, that could, again, mean an aunt, an uncle, an older sibling, or perhaps someone much older, and so I am interested in hearing an answer from the Minister, given that we are an urgency, given that we have not had an opportunity to put this in front of the very people who would be impacted by this potential change. I referenced the change in new section MH 3(5), inserted by clause 14, because my read of that section indicates that those that might fall within that Pasifika context and the definition of that would not necessarily be eligible, even though they would be seen or perceived as the primary person that is responsible for the children, even though many of them will be 65 or over and what they would be getting in terms of proposed additional support is $2.25 a week. I'm interested to have a response from the Minister around that. I'm also interested in the Minister commenting on, or at least addressing, what has been raised by my colleague Dr Russell, and that's around the fraud aspect. So I think this is really important because it is a new process, it is a new opportunity, and I'd like to hear from the Minister, please: where is the integrity within the process, particularly in the context of a Budget that potentially provides less for prosecution and more for enforcement? So where there might be family units and others that may find it difficult to engage with the administration requirements and the criteria of getting this in on a quarterly basis—or, indeed, whether it's the early childhood education (ECE) provider that may be held up and not able to, so it's not actually the fault of the parent or the family unit to get the information, but the additional responsibilities on the ECE provider—where is the integrity in the process in terms of addressing the potential for fraud so early on in this process? ARENA WILLIAMS (Labour—Manurewa): Thank you, Mr Chair. I want to give the Minister an opportunity to answer at least one of the eight questions I have put to him about what is an incredibly important part of this part. This is the only part where we can discuss a promise that the National Party campaigned on and costed in, an operating allowance that we could have relied upon until just two days ago, an operating allowance which included a change to the family tax credit abatement threshold. That would have been the bigger change; it's not in here. We don't know the fiscal cost of it. We haven't been told how many people that affects. And so the Opposition is struggling to be able to decode why the Minister wouldn't accept my amendment to Part 2. The amendment to Part 2—the only answer that the Minister gave me then was that he couldn't tell where my Amendment Paper was. I hope the Clerk can help him find the amendment that was tabled. One was tabled at 7.20 p.m. last night, and I believe the other one was tabled at about 1.20 p.m. yesterday. So the Minister and his officials have had time to consider this. You know why they've also had time to consider this? Because it was fully costed in the National Party's fiscal plan. It is in their operating allowance, and it wasn't there until two days ago. Why can't the Minister tell me what the fiscal cost of the amendment on the Table is today when he thought there was value in introducing it, because he campaigned on it? Why can the Minister in the chair not answer one of the eight questions I have put to him about this amendment? Why isn't the Minister considering it? Is it the case that he has told the backbenchers on that side that he will be voting for my amendment? Because this amendment is in line with his values—it's not what I would do, but it is what he would do. It is what he told the electorate he would do. So let me help you, Minister. FRANCISCO HERNANDEZ (Green): Just a very quick question, a very quick contribution. I'm curious to hear the Minister's explanation about why a four-year period was picked instead of any other time frame. That seems to be quite a short time frame. This is new section 41C, subsections (9) and (10). They refer to the four-year period in both (9) and (10), and so I'm just curious what the rationale was for picking a four-year period. I want to also know if other kinds of year periods were explored and what the kind of shake-up of that was. Thank you. SUZE REDMAYNE (Junior Whip—National): I move, That debate on this question now close. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I want to come back to a point I raised earlier around the abatement rates, and particularly— James Meager: Oh, has it already been covered? Hon Dr DEBORAH RUSSELL: —how quickly—take a call; take a call—the tax credit abates. Now, I hadn't done the math, so I hadn't worked out exactly how much a family could earn before the tax credit ran out. Carl Bates: So you want people to get tax cuts? Hon Dr DEBORAH RUSSELL: The Minister—take a call, Mr Bates; take a call. Carl Bates: Do you want people to get tax cuts? Are you encouraging us to give more tax cuts? Hon Dr DEBORAH RUSSELL: Mr Bates, stand up and take a call instead of shouting across the Chamber. I am going to carry on with my allocated time, but I notice that the members are very engaged. If they would take a call, that would be fantastic. Getting back to these abatement rates. Fortunately, either the Minister of Revenue himself—because I know he is quick of mind—or perhaps his officials were able to tell us that the tax credit fully abated away at $180,000. So that means that the maximum amount that can be received—a person earning $140,000 can claim the maximum amount, but then, after that, it abates away at whatever the rate is, until, at $180,000, the person or the family can't get any more of the tax credit. So that's quite a steep abatement rate across $40,000 of income. It might be $40,000 of family income, or it might be that $40,000 split between the two incomes—whatever it works out to be. But my question is to do with whether any modelling was done by the Minister's officials—and I'm assuming he would have asked them to do this, because it's quite important—around EMTRs, effective marginal tax rates. Now, here's the thing. If someone is earning, say, $150,000—so their marginal tax rate at that level is 33 percent—but if they have a student loan as well, then there'll be another 12 cents going on to their effective marginal tax rate. So their effective marginal tax rate would be up to 45 percent. Then, I think, at that stage, they run out of family tax credits and things like that. So that's not going to affect the EMTRs. But if the Minister could clarify that for me. But what I'd like to know—and it's a pretty simple example to work out mathematically, and I'm sure the officials can do it for them fairly quickly. Let's assume we've got someone who's got an income of $150,000—just one income in the household; let's assume a spouse who is fully occupied in other activities or may be a sole parent or whatever. So their marginal tax rate is 33 percent under the new tax scale as well, and maybe they have a student loan of 12 percent, so our effective marginal tax rate is up to 45 percent. What is that effective marginal tax rate increased to, thanks to the abatement of this childcare tax rebate? So that's the first question—just exactly what that EMTR is. And I'd like to know if there's any modelling done around that. I'm assuming there was; or, if not, I actually know that those officials will be able to come up with that number fairly quickly for us. But here's the other thing: I just want to know what analysis was done on the effect of that increased EMTR, on whether or not a person is liable to go and look for more work or look for other income. Every time we have a look at EMTRs, we know that it impacts a whole series of other decisions that people make. So I wonder if the Minister could just add that little bit of detail around those abatement rates. It might be in the regulatory impact statement—I'm sorry, given the speed with which we've had to deal with all that, I haven't seen it. But I would like to understand the effect of the abatement on the effect of marginal tax rates. I think it's a fairly important one to understand, as we understand the impact of this policy on ordinary New Zealanders. RACHEL BOYACK (Labour—Nelson): Thank you, Mr Chair. I'm delighted to be able to take my first call on the Taxation (Budget Measures) Bill, and I do appreciate, Mr Chair, your providing me with that opportunity to take this call. I wanted to begin just by reminding the committee that as we are in urgency, we do expect to have answers to those questions that colleagues have put forward, and I want to touch quickly on a couple of the questions and contributions from my colleagues, because, obviously, we don't have the opportunity as members to engage through that select committee process. So I do just want to begin my call by really asking the Minister to engage and to respond to those questions. The first was around the contribution from my colleague Dr Deborah Russell—which Tangi Utikere touched on—about the analysis around fraud, and I just don't believe we've had a response yet from the Minister. So I'm looking forward to the Minister, hopefully, taking a call—are you going to take a call? Great! Hon SIMON WATTS (Minister of Revenue): Yeah, thank you very much. I'll take a call in response to those questions. So in regards to the abatement rate and the effective marginal tax rates, the modelling will depend on the ability to get the respective data from the relevant players, including the early childhood education sector. That's not information that the IRD currently holds, so that modelling—for the member's question—has not been undertaken, but as and when that data starts to flow through, we'll be able to do it. There was a question before around the four-year period, in terms of why it's four years. Four years is a standard period in regards to the way in which—time-barred for Inland Revenue's products. So that's the basis for those two. RYAN HAMILTON (National—Hamilton East): I move, That debate on this question now close. A party vote was called for on the question, That debate on this question now close. Ayes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Noes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Motion agreed to. A party vote was called for on the question, That Arena Williams' tabled amendments to replace section MD 13(3)(i) and (ii) be agreed to. Ayes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Noes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Amendments not agreed to. A party 1vote was called for on the question, That Arena Williams' tabled amendments to replace section MD 13(3) and delete clauses 12, 14 to 16, and 18 be agreed to. Ayes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Noes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Amendments not agreed to. A party vote was called for on the question, That the Part 2 be agreed to. Ayes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Noes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Part 2 agreed to. Part 3 Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 31 July 2024 CHAIRPERSON (Greg O'Connor): Members, we come now to the debate on Part 3, which is the debate on clauses 25 to 32, "Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 31 July 2024". The question is that Part 3 stand part. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I appreciate the opportunity to take a call on this. Part 3 looks incredibly dull, and I'm sure the Minister would agree that it looks pretty dull too. It really is a series of clauses which replace one number with another. For example, clause 26 amends section LC 13 of the Income Tax Act, and it just says, "In section LC 13(5), replace "$44,000" with "$66,000". In fact, all the ongoing clauses pretty much look like that. So it's a whole series of replacing one number with another number. But, however dull it looks, it's actually kind of important, because what it's doing—and I had hoped the Minister would explain this himself, but perhaps not—is it's setting the new amounts for independent earner tax credit, the in-work tax credit, and the minimum family tax credit. And then, following on from that, clause 29 amends an amount in Schedule 1. Part 3 then goes on to a whole lot of stuff that's in the Income Tax Act. Then there's a whole lot of stuff amending various sections in the Tax Administration Act as well. But hiding in between these seemingly dull-looking changes, which do just substitute one for another, are some pretty important policy decisions that the Government has made. This will be one of our few opportunities to debate those policy decisions as to why they chose particular amounts. So I'm just going to go to, first of all, the independent earner tax credit, and in sectionLC 13(5) we're replacing $44,000 with $66,000. Now, that is a pretty technical change, but I think that for the benefit of the committee and for the benefit of people watching and for the benefit of people who actually want to understand what is going on with our Income Tax Act, it would be helpful if the Minister could explain exactly what that clause does and why that amount of $66,000 has been chosen. There will be some policy thinking behind it. I would like to have an explanation of that policy thinking. So, Minister, it would be great if you could just explain that clause to us. RACHEL BOYACK (Labour—Nelson): Thank you, Mr Chair. Look, it's a great opportunity to take a short call on the Taxation (Budget Measures) Bill. Hon Member: A short call. RACHEL BOYACK: It will be a short call, but it would be wonderful to hear from some members opposite about the questions that they might have for the Minister. I mean, they wouldn't have had an opportunity, I don't think, to take this through their caucus. I will just repeat the comments that I made at the beginning of my call on Part 2, which was that the reason that we do put these questions forward for the Minister—and the Minister is obviously able to seek guidance from his officials—is because we don't get the opportunity to have the full scrutiny through that select committee process. So this is an important part of the House's role to scrutinise this bill. Now, one of the things that I'm quite interested in is the overlap that we will see between the tax credits in terms of the threshold—the minimum family tax credit—and to ensure that the Minister can guarantee that every family will be better off regardless of where they fit in the margins in terms of the interaction between those different components of the tax system for families. And so the question in particular is whether, if a taxpayer would receive more from the independent-earner tax credit than the in-work tax credit, because obviously we have different parts of the system that interact, the IRD would actually proactively go out and change it for them or, at least, advise. One of the things we're mindful of with how the IRD operates—and there were some really good changes brought in under our Government to allow the IRD to be more proactive with people when perhaps they were on the wrong tax rate or if they needed to get a special tax rate. One of the things is that regular interaction that occurs between the IRD and the other systems that are in place and whether there will be a system devised in this situation so that when the IRD identifies those families who have an interaction between different parts of the tax system that means they might actually be collecting the wrong benefits through that tax system, how do they know that? And is there advice that's then provided to those families so that they can update their tax records and interact with the IRD in order to make those changes? So as I said at the beginning of my call, we do hope that the Minister will be able to engage in, as Dr Deborah Russell has said, a bit of a dry section of the bill, but it is actually important that we hear from the Minister. He has his officials here to advise him so that he can provide that advice to the committee—just reminding the Minister, and the committee as well, that the discussions that are had on the Hansard in the House can be very important for interpretative matters, perhaps in the courts or in times when clarity is sought around what was the intent of the Minister and what was the intent of the House when this particular piece of legislation was put forward? So I'd be really encouraged to hear from the Minister now. Thank you. Hon SIMON WATTS (Minister of Revenue): Thank you very much, Mr Chair. Part 3 is very routine and standard in nature and, I think, as one of the prior members has noted, a little bit dull. I wouldn't quite go as far as that; tax legislation is never dull, but there is very little that one can say about this section. It is simply effecting the changes in terms of the changes in rates. In regards to the question around policy, around why $66,000 versus any other number, those are policy decisions that the coalition Government have landed upon, and there's not much further that I can say other than that these are the rates that we've landed on, and this section effects those changes. FRANCISCO HERNANDEZ (Green): Thank you, Mr Chair. I'm taking a short call, quoting some of the regulatory impact statement (RIS) that's been published about Part 3 and some of the changes around the tax brackets. I just want to quote a section of it because I'm curious to see the interpretation about the effective marginal tax rate (EMTR). So the RIS, Annex 1, page 18, says that "The personal income tax threshold changes and extending the income range of the Independent Earner Tax Credit reduce EMTRs for 335,000 people (positive impact on work incentives) and increase EMTRs for 85,000 people (negative impact on work incentives). Adding the proposed family-based tax credit changes (the In-Work Tax Credit and FamilyBoost) increases the EMTRs for a further 45,000 people (negative impact on work incentives). These people are in coupled families with children, and are spread across the first 4 income tax bands ($0 to $180,000). Modelling did not indicate an increase in EMTRs for sole parents." I'm curious about the 130,000 people who have been negatively affected by the changes in EMTRs. Does the Minister in the chair have specific analysis about who the people who have been negatively affected are? Like, is there a specific breakdown in terms of, perhaps, income quintiles or specific breakdowns in terms of ethnicities or even specific breakdowns in terms of geographic region or electorates, for example? Thank you. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. That is an excellent series of questions that has been raised by my colleague in the Green Party, having a look at the effective marginal tax rates because there's quite an interaction between— James Meager: Oh, it's a love-in. He's well educated, that's why. Otago graduate. Hon Dr DEBORAH RUSSELL: I'm willing to yield the floor if the member would like to make a call. CARL BATES (National—Whanganui): I move, That debate on this question now close. Hon Dr DEBORAH RUSSELL (Labour): Point of order, Mr Chair. Mr Chair, my understanding is that when a member yields the floor in order for another member to make a contribution, that call may not be used to call for the end of the debate. CHAIRPERSON (Greg O'Connor): I'm not familiar with that rule, but, Mr Bates, there was an indication that you were taking a call, so—[Interruption] No, no. You're bordering on an abuse of process there. Does the member wish to take a call on the bill, or was he going to take a closure motion? Carl Bates: Mr Chair, my understanding was that she was offering me the floor to make a call, and so I put the closure motion. CHAIRPERSON (Greg O'Connor): All right, OK. Well, now, I think that's probably clarified something now—that members on my right, if they do want a genuine call, they're obviously welcome to it but it may well be through the nature that they'll need to indicate to the Chair that they're looking for a call on the bill. Otherwise, there is the assumption, given we know the problem of too much assumption, is that it will be a closure motion. So we will resume now. TOM RUTHERFORD (National—Bay of Plenty): Point of order. Thank you, Mr Chair. I just want to seek some clarity there. So we need to differentiate on this side between whether we're rising to speak on the bill or whether we are going to be putting forward a closure motion. That's the ruling you have just made there. CHAIRPERSON (Greg O'Connor): No, no, what I said was the assumption will be that members on my right, at this stage of the debate, rising as they have, will be taking a closure motion. However, it is only an assumption—there is no ruling—but I would always welcome a call on the bill, to my right. We're very early on in the debate on this part of the bill. So it may well be that a call at this stage may well be a call on the bill. So it would be useful just to indicate to the Chair—myself and my fellow Chairs—that you are seeking a call on the bill. That might just help the committee act more smoothly. TOM RUTHERFORD (National—Bay of Plenty): OK, and just speaking to the point of order, when the Hon Deborah Russell took her seat, she cited that there was a Standing Order or Speaker's ruling that said if a member in this House yielded the call, they would not be able to take the closure motion. Could you please let me know what that is. CHAIRPERSON (Greg O'Connor): As I indicated, that is not a rule that immediately leaps to my mind. I'm not saying it doesn't exist, and I'll put the Clerk's Office to work now, seeing if such an order does actually exist. Hon KIERAN McANULTY (Labour): Speaking to the point of order. Thank you very much, Mr Chair. As I understand it, the rules around yielding are quite restrictive. It's an unusual procedure in the House, but it is prescribed in the Standing Orders and Speakers' rulings: a member has the ability to yield time within their allocated speaking time if another member seeks that that is their intention. When yielding the time, that time is to be used to seek clarification from the speaker—the person speaking, that is—as to a point they are making so the House can better understand what they're talking about. It is not to be used as an opportunity to make a debating point, a political point, or, in, this case here, a closure motion. So when the Hon Dr Deborah Russell offered to yield and gave up her time, it was in the hope that members on the other side would contribute to the debate, not use that opportunity to try and close the debate down. CHAIRPERSON (Greg O'Connor): All right, and thank you for that contribution. As I said, I'm vaguely aware there is such a thing. I don't know the detail of that yielding—it certainly sounds like the member might know a little more than me—but I'm certainly going to take some advice on that so that I can advise the committee on the motion, because having now come to the fore, I'm sure it will be something to the minds of all the members present. So we'll now resume with the Hon Deborah Russell, and I'll treat this as a continuation of that call. Hon Dr DEBORAH RUSSELL (Labour): Thank you, Mr Chair. I think that's appropriate, Mr Chair, and I thank you for your ruling in that matter. It is a shame— James Meager: Stay standing. Hon Dr DEBORAH RUSSELL: You're welcome to take a call. Look, I want to carry on with discussing these effective marginal tax rates (EMTRs), in particular, following on from what my colleague Mr Hernandez was talking about. I want to draw the Minister's attention to page 10 of the regulatory impact statement (RIS). It's got something quite alarming in there. So this is the regulatory impact statement on the $25 per week increase, the in-work tax credit—it's really all the adjustments to the Working for Families tax credits. So it's not just the in-work tax credit; it's also the minimum tax credit and the independent earner tax credit and so on. So they all kind of fit together. But there's a really difficult overlap between the minimum family tax credit and the in-work tax credit and all the various sorts of tax credits that are available. In particular, I want to look at the issue around the impending overlap of the minimum family tax credit threshold and the Working for Families abatement threshold. Now, the minimum family tax credit is a really small tax credit. It only applies to a few people—or a few families. But the minimum tax credit is designed to ensure that between the operations of benefits from the Ministry of Social Development and tax credits and income earning and the complicated interweaving of all those different measures we have in place, it tops up a family's income to a minimum level to ensure that a family who is in work—as in "work" as defined—actually ends up a little bit better off, even if only a tiny little bit better off, than a family on benefit. So that's the idea of the minimum family tax credit. But it is continuing to go up as benefits increase because of the operation of wage increases or Consumers Price Index increases, because that's how we set our benefits each year. That means that the minimum family tax credit threshold is going to have to increase over time. So that's one aspect of it. But then over time, all these Working for Families tax credits, they abate. So once you earn a certain level of income, those Working for Families tax credits start to abate. Here's the problem—and I'm going to need to seek a little bit more time to explain this, Mr Chair, but sooner or later, that minimum family tax credit threshold is going to cross over the Working for Families abatement threshold. It's set out really clearly in the RIS. It says that "As the [minimum family tax credit] threshold increases annually, it is forecasted that on 1 April 2027 it will overlap with the [Working for Families] abatement threshold." Mr Chair, I'd just like to carry on with this call if I may, because this call is—I've just got to get through the problem. So if I can just carry on—thank you, Mr Chair. This means that Working for Families customers will face effective marginal tax rates of over 100 percent, so an EMTR, an effective marginal tax rate, of over 100 percent. So in layperson's terms, what that means is that if that family earns an extra dollar, then $1.10 might be taken off them in abatements. All right, so that's kind of worrying. So when the EMTRs go over 100 percent, there is then no—well, why would you do the extra hour of work if more is going to be taken off you than you get paid for the work in the first place? So what it means is—as the regulatory impact statement goes on to say—that "[minimum family tax credit] recipients who are some of the lowest income working families would face decreases in their income as they work additional hours." So as a result of the changes that are going through in this tax bill, we are now facing this very real problem at 1 April 2027. So it just means that the policy intent, and it's set out in the regulatory impact statement, is they would owe—you know, they conflict. On the one hand, we're trying to encourage low-income families into employment. On the other hand, we're going to abate away, every single dollar they earn. The problem is going to come about because of the way that tax credits have been changed about in this bill. Minister, it's a real problem. I'd like to hear some of your thinking on it. CHAIRPERSON (Greg O'Connor): I'm going to call the honourable Minister, but just before I do that, if you would indulge me, please, Minister, I'll just make a comment in relation to the discussion we've just had on yielding. When a member invites a member on the opposite side to yield, or offers to yield, it is actually part of that member's call. So that is why that precludes a member from taking a closure motion during the middle of a call. So if members intend to yield, it would be useful to actually use the word "yield". It would just be useful, because then we know. So as far as the members on my right go—there was a question, in relation to the debate, about whether the fact he's used a closure motion precluded him from another closure motion. That is not the case. It was only in the case of that particular call. So, Mr Bates, you're welcome to continue your vigorous efforts at closure motions. Hon SIMON WATTS (Minister of Revenue): Thank you very much, Mr Chair. In regards to the member's question in regards to the issue that has been highlighted in terms of the overlap between the minimum family tax credit threshold and the general Working for Families tax credit abatement threshold, look, this is an aspect of—technical in nature, obviously. It is an element which will, in terms of scenario, come into play, forecasted by IRD, on 1 April 2027. That overlap consideration is an issue and it is an issue that I'm aware of, obviously. I have asked officials to provide us with some advice later this year about how we look to address it. So that is an ongoing aspect and it is due to the uniqueness of some of the changes. There was another question also in regards to tax codes and how IRD identifies the appropriate tax codes. IRD will use the appropriate and existing systems and processes in order to determine those tax codes. Obviously, if IRD is aware that employees may be using the wrong code, etc., which occurs occasionally, then it will be up for the employees to inform them. This is a standard practice, nothing sort of out of the ordinary in regards to this restoration to this bill. Hon GINNY ANDERSEN (Labour): Thank you very much, Madam Chair. Thank you for the opportunity to take a call. In terms of the amendments that this bill is making to the independent earner tax credit and also the in-work tax credit, I have a couple of questions for the Minister of Revenue, and it really comes down to how people are going to figure out exactly what they're entitled to and how they know that those corrections have been done accurately, and maybe the Minister might like to shine some light on this. When we're going through the bill's commentary that's been prepared by the Inland Revenue Department, it gives some examples of how composite calculations for the 2024-25 tax year can be analysed, and it reads kind of like a sixth form maths problem. You've got someone called Elizabeth, and they've got how much the abatement under the current settings is, which is 13c per $1,000. Then you've got the calculation of the number of days that the current settings apply, which, in this example, is 121, and then you've got the amount of the abatement under the proposed settings, which is 13c times zero dollars. So when you're trying to calculate the differences between how those settings have changed, it is not really that straightforward for members of the public to ascertain what, in fact, they're entitled to. If you're a salary earner who's getting paid, then a lot of that is already done on your behalf, but if you are, in fact, generating your own income and if you are having to also pay staff, there seems to be quite a complicated sort of formula in terms of trying to establish what the number of days are that you are entitled to, the periods that it applies to, and how that increases. In particular, what I would really like to know is what the role of the IRD is in this to assist people to understand what they are entitled to, and if a taxpayer would receive more from the independent tax earner credit—which I've just referred to—than the in-work tax credit because of these changes, what the role of the IRD is to proactively change it for them. I don't think it is made clear that it is incumbent upon the taxpayer to do those calculations and to ascertain the interactions between the independent earner tax credit and the in-work tax credit, and also I think that that sort of bleeds into the minimum family tax credit. So while people can go online and plug their details into the calculator, I actually think that there's additional information that people out there who have figured out that they get maybe $80 a fortnight—how does that actually work for them, and what do they do to ensure that they get that money coming back to them? I think, to be honest, that there's a high level of suspicion sometimes when it is said that you're going to be getting this extra money, but what happens if those calculations are being done on your behalf, and what if those calculations aren't quite accurate? What is the recourse for those people who believe they are entitled to a greater share of tax relief, but who haven't managed to realise this increase in their back pockets? So I think, just from looking at how people calculate it through this document, it seems incredibly convoluted in terms of establishing the process, particularly in this transitional period of changing where the thresholds are, and the interactions that that makes for people. So I would really appreciate it, on behalf of the people who have contacted me since the Budget has been announced—for those people in our own areas who are interested to know how they would access this—how it works for those people who are not necessarily salary earners, but who are generating their income either from their own business or from a range of other sources. If the Minister is able to address some of those questions, I'd be really happy to hear that. KAHURANGI CARTER (Green): Thank you, Madam Chair, for the opportunity to speak on this Taxation (Budget Measures) Bill. We are looking at Part 3, "Income Tax Act 2007 and Tax Administration Act 1994 amendments commencing 31 July 2024". Now, looking at clause 27, "Section MD 10 amended (Calculation of in-work tax credit)", I want to draw from the regulatory impact statement on the $25 per week increase to the in-work tax credit (IWTC), particularly around the impact on child poverty, and the increase of the IWTC by $25 per week. I'm really interested to understand what ongoing work there will be to model what hasn't been done yet, which is the independent model on the other tax packages due to those time constraints: It says that "the tax package may slightly reduce moving-line BHC50 child poverty, since the poverty line for this measure is set at 50% of the median household income." Well, when we're talking about child poverty in Aotearoa New Zealand, as the child spokesperson for the Greens, I go back to Jonathon Boston's quote about raising tamariki in New Zealand, which was that above all, New Zealand should be a great place for raising children. Now, for some children in New Zealand, it's far from a great place. Their reality consists of living in cold, damp, overcrowded homes, moving homes frequently, experiencing hunger, suffering Third World diseases like rheumatic fever, and missing out on many things which the majority of children take for granted. Furthermore, looking at the table on page 21 of the regulatory impact statement, where it says that there will be an average weekly increase of $16.97 for 170,000 households, I want to understand what $16.97 actually achieves. Well, if we're talking about it at the flaxroots for families, that's about a block of cheese and 500 grams of butter. So how is that really going to help when we've got more children going into poverty? Furthermore, on page 22, what I'm really keen to understand is how these tax credits can actually help lift children out of poverty, because we can actually be the best place in the world for children to grow up. New Zealand can achieve that, but when we're looking at the table on page 22, the analysis is saying that the impact of this wider tax package is very low. The impact on child poverty reduction from the increase of $25 per week has not been modelled independently of other tax package changes. We really want to focus on lifting children out of poverty in New Zealand, and I really want to understand when that independent review on how this tax package will actually affect children—particularly children in poverty in New Zealand—when this table itself says that the impact on child poverty is going to be low. Thank you. Hon SIMON WATTS (Minister of Revenue): Thank you very much, Madam Chair. Obviously, the implications of reducing child poverty are a significant priority for this coalition Government, and the Budget that we released yesterday, by reducing the cost of living pressures for low and medium wage households, will aid in supporting that. In respect of the specific question around what are the implications that the changes to personal income tax, the IETC, the IWTC, and FamilyBoost will have—now, all of those acronyms are, basically, the different changes that have been made as part of this tax bill—there is an estimation that child poverty will reduce by 17,000 children, plus or minus 6,000 by the 2027 tax year, and there is a margin of error on that, using standardised measures. That is statistically significant. If you refer to a status quo model, then the expectation is that without doing any of the changes that this Government is driving through, then child poverty, potentially, could increase by 2,000 children, plus or minus 500—again, acknowledging that there are margins of error—by the 2027 tax year. REUBEN DAVIDSON (Labour—Christchurch East): Thank you, Madam Chair. It's a pleasure to make a contribution on the in-work tax credit and to really pick up on content specifically around what the Minister was just answering in the child poverty space. On page 3 of the regulatory impact statement, there is a paragraph headed "There will be reductions to child poverty". It goes on to say, "The impact on child poverty of option 2 (increase the IWTC by $25 per week from 31 July 2024) has not been modelled independently to of the other Tax Package changes, due to time constraints." There appears to be a missing word here. And there's some thoughts on that. One is: what is that referencing—"to" something "of". What should the missing word be? But more than that—more than that—the concern is that this work has been rushed, potentially done too fast, and that the matter of child poverty hasn't been given the serious weight and consideration that it deserves. It also begs the question: if such a glaring omission is made already by page 3, is there the possibility that, on deeper reading of this, we will find further errors, further omissions, further concerns? I'm really interested to know from the Minister what word should be in there. Any word, just about, could be inserted in there and this paragraph and this statement would start to mean completely different things. Now, if the target is to reduce child poverty—and the Minister has just given us some numbers, albeit with a rather large margin of error around what those child poverty reductions should be—surely the task of reporting and measuring child poverty becomes all the more critical, given that the Living in Aotearoa survey was developed because it was determined, probably by leadership at Stats New Zealand at the time, when the legislation was being drafted, that New Zealand did not have the appropriate data, either in our existing surveys or collected through administrative records, to measure persistent poverty or persistent hardship. I realise the Minister doesn't have responsibility for statistics, but given the context of yesterday's Budget showing significant cuts to Statistics New Zealand, and already the cut and cancellation to the Living in Aotearoa survey— Carl Bates: It was your idea. REUBEN DAVIDSON: Sir, if you wish to take a call, we've just discussed the procedure for that. I'm happy to yield. CHAIRPERSON (Maureen Pugh): Order! Please do not debate across the Chamber. REUBEN DAVIDSON: Sorry, Madam Chair. If the member on the other side of the Chamber wishes to take a call, I would be happy to yield on the provision that he is going to deliver a proper speech— James Meager: Point of order. Speaker's ruling 62/4: "… it is not for the member with the call to invite another member to intervene"—so I'd ask you to reflect on that Speaker's ruling, please. REUBEN DAVIDSON: Thank you. I'll reflect on it deeply! But I will get back to what I was discussing, and I'm concerned that I may run out of time in my allotment to actually raise this issue. And it is a serious issue. To refresh on what I was saying, for us to know if people are persistently in income poverty or material hardship, we need to collect longitudinal data—that is, we need to go back to individual households, families, children multiple times, across time, to ask their income, the age and relationship profile of the people that are living in a household, and their material hardship. Now, a set of 17 questions collected on surveys can never be obtained through administrative data. At a minimum, we need longitudinal surveys that follow families for five to six years. And that's exactly what we saw confirmed as cancelled in yesterday's Budget. That's a real shame, and it makes a mockery, in my opinion, of claiming that there is any meaningful intention on this part of the Budget or on the actions in the in-work tax credit to reduce child poverty. So my questions to the Minister are—[Time expired] CHAIRPERSON (Maureen Pugh): I'll call Reuben Davidson to finish his contribution. REUBEN DAVIDSON: Thank you, Madam Chair. Just to recap, before we ended there, the loss of a longitudinal survey that followed families for five to six years is a huge loss. And in the regulatory impact statement— CHAIRPERSON (Maureen Pugh): I'm sorry to interrupt the member. I extended your call so you could complete your contribution—the questions you were asking. REUBEN DAVIDSON: Sure. Thank you, Madam Chair. My questions to the Minister are: what engagement has the Minister had with the Minister of Statistics to ensure meaningful longitudinal—and that's the really important part here; not admin data, longitudinal—research and surveys to measure the real and enduring effects and impacts of child poverty? Hon SIMON WATTS (Minister of Revenue): Thank you very much, Madam Chair. I'd direct the member Reuben Davidson to the Child Poverty Report 2024 that's been released this morning. That will outline a number of aspects in regards to the member's question, not necessarily directly related to this bill. CARL BATES (National—Whanganui): I move, That debate on this question now close. Hon Dr DEBORAH RUSSELL (Labour): Oh, thank you, Madam Chair. I want to revert to something that my colleague the Hon Ginny Andersen was discussing and take the question a step further. Now, in her call, the Hon Ginny Andersen was talking about the interaction of the minimum family tax credit, the in-work tax credit, paid work, all the sorts of sources of income and tax credits that people interact with, and she was concerned that people wouldn't know what their entitlements were. I realise, from my previous time in a similar role to the Minister in the chair, Simon Watts—that often people who are getting minimum family tax credit and sort of wavering between benefit and paid work, they do go through complex calculations. One of the standard ways they work out whether or not to take on those extra few hours of work is that they ring up Inland Revenue and they ask questions of the call centre, and they go through that whole process of engaging with Inland Revenue directly in order to ascertain what their entitlements are. So, given these changes to tax thresholds, the in-work tax credit, the minimum family tax credit, and so on, which are really quite complicated, and what we anticipate will be the number of people who really don't understand what they're going to get, my first question in this regard is to what extent the Minister has, as a matter of prudence, I guess, ensured that Inland Revenue is resourced—I do have another question, Minister; just hold your fire—in order to handle all those incoming queries. Now, obviously, there's the tax calculator on the website, but that probably won't work for the people who we're talking about who are making that very marginal decision about whether to take on more work or to continue as they were, and so on. So there will be some pretty complicated stuff going on in that regard. So just a resourcing question there. There is another point here that I do wish to consider, and it's one that we were working on when we were in Government and I'm sure the current Government is continuing to work on, and that's the people who end up in debt to Inland Revenue—sometimes to the Ministry of Social Development (MSD)—because they've gotten their numbers wrong or they don't understand the complexity of the law. So they get too much of a tax credit—their Working for Families tax credits get overpaid and they end up in debt. Now, some of the time, this is pretty easily sorted with the end-of-the-year tax calculation and so on, but, again, for these families who are in a pretty marginal state, who are on pretty low incomes, then getting too much Working for Families tax credits creates a problem for them because they then have to start paying it back on an already marginal income. Now, the standard strategy for a lot of families is just to, when they're claiming those tax credits, overstate their income, and that means that they get a lower tax credit during the year and they get the difference sorted out at year end. It's a good strategy, I know, particularly for lots of families where their income is earned from a business or something where the flow is a little bit uncertain and it gets sorted out that way. But these families who are really marginal, they actually want their tax credit as they go. They need that money on a week-by-week basis, so they are actually more vulnerable to falling into debt if they don't get those tax credits right. So, again, it comes down to a resourcing issue for the Inland Revenue Department, and do they have people on hand to help with that? But, also, has the Minister given any consideration to ensuring that families don't end up in debt to Inland Revenue, to MSD, as a respect of getting the tax credits wrong? And is there any ongoing work in that regard to ensure that when these tax credits and the tax threshold changes flow through to people, they get the right amount and not more than the right amount so that they don't end up in debt, which then just creates a further burden for them? RICARDO MENÉNDEZ MARCH (Green): Thank you so much, Madam Chair. I wanted to expand on and bring some lines of question on clause 27 in relationship to the increase of the in-work tax credit. I particularly wanted to focus on whether the Minister has sought any advice from the Ministry of Social Development particularly around whether the increase to the in-work tax credit would widen the wealth and income gap between those in work and those out of work. I wanted to particularly, I guess, get an analysis from the Minister about whether there's any concerns that that increased income gap between those on the benefit and those in employment would have negative impacts. I mean, the regulatory impact statement (RIS) on the in-work tax credit changes talks about how the effectiveness of this tax credit has diminished over time, particularly when it comes to people being able to take up and stay in employment. I wanted to ask whether the Minister knows where that assertion had come from and whether there was any research around the effectiveness of the in-work tax credit at all in its effectiveness to support people into employment, because, I mean, one thing is to have a value statement and an assumption that if you have this tax credit, people will take up employment; the other one is actually having that based on any substantive research. So that's my second question: what research has the Minister seen that substantiates the statement in the RIS that the in-work tax credit supports people into employment? We've talked about how the in-work tax credit is seen as make-work pay, but that takes me to my third question, which is whether he considers caregiving as work and labour that actually deserves to be remunerated as such. Right now, the way that the in-work tax credit is laid out completely ignores caregiving responsibilities that sit outside of employment relations. So my third question is whether he has a view on whether caregiving is work; if not, why not? At the moment, that line of work, which the Greens do consider to be work that is currently undervalued and under-resourced, fails to be acknowledged in the in-work tax credit. So when we're thinking about, for example, caregivers, parents, people who support disabled people—they're not eligible for this payment. They don't benefit from the increase in this payment, and those who may be receiving a benefit, for example, to do that work, which the Government doesn't officially consider work, will continue falling behind compared to those who will benefit from the in-work tax credit. The other question that I had—and I wanted to pick up on where my colleague Francisco Hernandez took over from—was whether he actually had any information around the people who will have an increased effective marginal tax rate as a result of the changes outlined in Part 3, and whether he could give us, or whether he even received, a breakdown on who these people are. I think it's one thing to have in the regulatory impact statement a kind of broad assertion about how some people will have a higher effective marginal tax rate, but, as I said, I'm starting to get really concerned around the robustness of the work the Government undertook to put forward these tax cuts, the inability for the Government to actually give us a population breakdown on how these changes will benefit or widen issues that already exist. So, to recap, I'm interested in whether he's received any advice around what the gap will be between those out of work, which includes many disabled people, and those who will receive the increase in the in-work tax credit; whether he's engaged with the Minister for Social Investment in this; a breakdown in the population groups who will have a higher effective marginal tax rate as a result of these changes; and whether the Government, and whether the Minister himself, considers caregiving to be work, and, if not, why not? So far, these changes will widen the gap from those who have, primarily, caregiving responsibilities as opposed to those that are in paid employment. Hon SIMON WATTS (Minister of Revenue): Just in response to the member's question, I mean, Part 3 is a very tight section, but I will provide a little bit of context outside of that, just to elaborate. So, as part of this process, Inland Revenue and officials have engaged extensively with the Ministry of Social Development throughout in regards to the interaction with this point. The point of this payment is to incentivise people to leave the benefit and get into work, and I think that's a pretty sensible objective. The reality is—and the member may want to reflect on why this was the case—that this has not changed or been adjusted since Budget 2015. So what we're, in effect, doing is making a change to reflect that implication, to incentivise moving from benefit to work and provide that benefit to nearly 160,000 households. That is good news and should be something that should be celebrated. So I'm looking forward for the member to support this aspect. CATHERINE WEDD (National—Tukituki): I move, That debate on this question now close. CHAIRPERSON (Maureen Pugh): I think there is still a bit of scope for interrogation of this part, but I am aware that we have started to get some repetition. RACHEL BOYACK (Labour—Nelson): Thank you, Madam Chair. The South Island thanks you, Madam Chair. Look, I wanted to come back because I appreciate that there has been— James Meager: Oh, new material, Rachel Boyack. RACHEL BOYACK: Look, I think Mr Meager should take a call, but I appreciate— Hon Member: Yield. RACHEL BOYACK: —we're not going to go there again—that on this side of the Chamber there have been some questions that we put to the Minister again. I guess I've made this point, and I often make this point during urgency at this stage of a debate that we— Hon Member: New material? RACHEL BOYACK: I'm going to make it again. The reason I'm making this is that tax is actually the most significant topic that we can discuss in this House, I would put on record, and the Minister is agreeing, so I'm really hoping that he's actually going to come back and answer the questions that have been put already by myself, by my colleague Deborah Russell, and by my colleague Ginny Andersen specifically around the interactions between these tax credits. I note that we do not have the opportunity to interrogate this matter in front of a select committee. The Minister has access to his officials to help guide him. So we would like to have a response to that question. We've been discussing this on this side of the Chamber; we would like to hear about it. The particular issue we have is that when all of these different tax mechanisms interact with each other, there are times when a person could end up, as the Hon Dr Deborah Russell noted, even being in debt to the IRD, which is not something, I think, any member in this Chamber would like to see— Glen Bennett: Not at all. RACHEL BOYACK: Definitely not at all, Mr Bennett. So the question I had specifically for the Minister was that, under Labour, we introduced payday filing, which, I'm sure, everyone understands is when there is a real-time tracking between the employer making the payment, and the IRD, to ensure that we have that real-time record. I've certainly been contacted by the IRD before to say, under that system, that I was on the wrong tax code at one point. The question we had that was quite specific around this piece of legislation is: what mechanisms is the Government going to look at in terms of ensuring people are advised, rather than waiting until the worst happens at the end of a tax year and they have a debt to the IRD? I'm sure none of us would want to see that, particularly—let's be clear—with low-income families; I think we would all like to make sure that they are receiving the correct mechanism throughout that year. I see the Minister jumped up, but the last time that happened, I didn't get an opportunity to complete my call. The other thing I just wanted to ask the Minister specifically, because he did, earlier in the debate, bring in the conversation around child poverty. I note, yes, this is a tight debate, but the Minister has actually introduced that matter himself into the debate. We on this side of the House do have questions about child poverty. My specific question is that we have seen from the Budget figures that there is an indication that child poverty numbers will increase in New Zealand as a result of these changes. On this side of the House, we are concerned about that. We put in place measures to ensure that we knew what the position was for the country, and we're very concerned to see that going backwards. So my question to the Minister is: what specific advice has he received on the interaction between the tax changes that the Government is making through this bill? Again, I note we do not have the opportunity to get a departmental report. The Finance and Expenditure Committee— Todd Stephenson: It's just normal. Normal practice. RACHEL BOYACK: —would get an independent adviser to come in and actually ask these questions and provide this advice. We are not having that opportunity. I'm just noting, under the Standing Orders, Mr Stephenson—go read a book—that this is an important part of the debate. We do have officials here who can advise the Minister, who could answer these questions. We on this side of the Chamber would like to hear those answers. Thank you. RICARDO MENÉNDEZ MARCH (Green): Thank you so much, Madam Chair. I do want to echo the fact that we haven't had a select committee hearing. I also want to respond to the Minister's comment that while he may claim that the clauses in Part 3 are tight, actually this is regarding the increase to those base rates. Those have significant impacts. So let's not conflate short language in legislation to a small impact to our communities; I think that's a disservice to the people who this bill claims to serve. So the Minister alluded to the fact that he had engaged with the Ministry of Social Development (MSD), that there was engagement with the Minister of Social Development. I want to ask what was fed to him and to the Government form the Minister of Social Development in those consultations. Because I do think that we didn't have a select committee hearing; we could have had robust engagement and evidence in relationship to what the Minister of Social Development said. He's got the officials behind him. So I think this is one of the flagship things in the Budget. The Government owes the public to have a robust discussion on who exactly will be impacted. We haven't received any form of engagement or even an address to, for example, the evidence that the in-work tax credit and increases to the in-work tax credit actually support reducing unemployment. I think the Minister owes the public a bit more robust engagement with the evidence behind this. The Minister has also not been able to address, and has refused to even take note, who the people who will face a greater effective marginal tax rate are. Who are these people? He's got the officials behind him. If he cared about a robust debate, he actually would be seeking greater advice, because this, like I said, isn't just a casual bill; this is one of the flagship things in the Budget. I think, if members of the Opposition are trying to ascertain the robustness of the work, the Minister owes us some answers. Finally, I know that we've talked about the impact on disabled people in relationship to other parts of the bill, but I did want to get a sense of, in relationship very specifically to the increases in the in-work tax credit base rate, how many of those parents who are in work, who will receive a top-up, have disabled children, and have other additional needs. I wanted to get a sense as to whether he had had any interactions with MSD specifically in those interactions in the system. Then, I wanted to get a sense of what engagement with Whaikaha had been specifically on the increase to the in-work tax credit. Hon SIMON WATTS (Minister of Revenue): With not risking more repetition, but I will note again that we have undertaken significant engagement with multiple agencies in regards to this. One of the uniquenesses—and maybe this is an incentive to try and accelerate and close this out, but we're talking about legislation that hasn't yet passed. It needs to pass before we know what impact that will have exactly. We won't know who the individuals are by specifics until they file their returns in the future. So asking questions about who these people are and what they are in the specific nature is just simply not possible. So the theoretical element of the question is without basis. Hon GINNY ANDERSEN (Labour): Thank you very much, Madam Chair. I've got a very specific question in relation to the independent earner tax credit. The Minister might want to revisit his last answer, because I think what he just said was we should pass legislation and see how it works and then we'll know what it does. Like, that's just loopy. That's like, "Let's just pass some stuff and see what happens, and then we'll know what it does." Like, I think it's incumbent upon lawmakers within this House to go through some regular process, a regulatory impact statement, some analysis, some data, some evidence, to understand what the potential impacts of legislation would be on the population of New Zealand, instead of just decreeing law and seeing where it lands. So I'm quite struck by that comment by the Minister and he may wish to revisit it because it isn't really that sensical to a lot of New Zealanders—who will be at the other end of this legislation. I think it would be within their best interests to understand that he's actually turned his mind to how it might impact upon them before he simply passes this legislation through urgency. So my question, specifically, to the Minister is in and around the independent earner tax credit. We know that what this bill does is it lifts the upper income threshold from $48,000 to $70,000, but that lower threshold limit remains at $24,000, and this all comes to into effect on 31 July. So we know that the independent earner tax credit is available for those individuals who might not be eligible for other kinds of Government support. So they won't be eligible for Working for Families or a main benefit or even superannuation. So the abatement rate for this tax credit will remain at 13c and this will apply to every dollar of income over $66,000 per annum. But I would like the Minister to confirm and specify—because I've had some queries from people who are sitting right around that threshold, so this is where families are looking at what they earn, looking at where they're eligible, whether they're under that limit or over that limit. Can the Minister confirm that this would mean that there is, or there is not, any remaining entitlement to that independent earner tax credit when a person's income exceeds that $70,000 annual amount? I think that's where a lot of people are really doing those sums and looking to see whether that works for them or not. The second question that I have for the Minister relates to increasing the in-work tax credit rate. I think we haven't actually had this clearly answered, and so what I want to know is that if taxpayers receive more from the previous one, the independent earner tax credit, than they would the in-work tax credit because of the change, does the IRD do that, or not? Or is that incumbent upon the wage earner, the person who's paying the tax, to figure that out? Are people required to do those sums, figure out which one they get more on and do it themselves, or is that work that the IRD will do on behalf of New Zealanders? Furthermore, can the Minister speak, is the IRD well-resourced enough to be able to be doing all this work? There's going to be hundreds of thousands of New Zealanders coming forward with questions about which tax credit they're eligible for, how they interplay with each other. Is the IRD going to have their 0800 number up and running without two hours of waiting time, so that New Zealanders are able to get answers to these questions and figure out how they go about getting additional money each week? So they're my two specific questions to the Minister. It's around the $70,000 tax threshold, whether they're eligible; and the second one is on that interaction—whether IRD proactively makes that change for them or whether that is incumbent upon the person. RYAN HAMILTON (National—Hamilton East): I move, That debate on this question now close. A party vote was called for on the question, That debate on this question now close. Ayes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Noes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Motion agreed to. CHAIRPERSON (Maureen Pugh): The question is that Arena Williams' tabled amendment to amend clause 27 be agreed to. A party vote was called for on the question, That the amendment be agreed to. Ayes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Noes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Amendment not agreed to. A party vote was called for on the question, That Part 3 stand part. Ayes 68 New Zealand National 49; ACT New Zealand 11; New Zealand First 8. Noes 49 New Zealand Labour 34; Green Party of Aotearoa New Zealand 15. Part 3 agreed to. Part 4 Income Tax Act 2007 amendments commencing 1 April 2025 CHAIRPERSON (Maureen Pugh): Members, we now come to the debate on Part 4. Part 4 is the debate on clauses 33 to 39, "Income Tax Act 2007 amendments commencing 1 April 2025". The question is that Part 4 stand part. Hon Dr DEBORAH RUSSELL (Labour): If we thought that the last part of the bill was exciting, this is even more exciting in this part. Ha, ha! I had hoped the Minister would be especially excited about it that he would stand up to explain what this part of the bill is about, but he's been in the chair for a long time. These are a whole series of Income Tax Act amendments. And it's quite curious because it says, "Income Tax Act 2007 amendments commencing 1 April 2025". We've already had a bit of a discussion way back in Part 1 about the starting date of a lot of the tax threshold changes—31 July. I did have one final question for the Minister on that part, and that was whether that was because it's Milton Friedman's birthday on 31 July. But perhaps not. Nevertheless, we would have expected that most of the amendments and changes would take place from that date. But here we have this part of the bill that is talking about all the amendments starting from 1 April 2025. So that's a curious question in the first place as to why it would start from 1 April 2025. So just before we really get going on this part, I'm going to invite the Minister, I guess—I hope he'll explain exactly why we've got these ones starting on 1 April 2025. Can someone jump up? Dr TRACEY McLELLAN (Labour): Thank you, Madam Chair. Thank you, my colleague the Hon Dr Deborah Russell, who I know is very passionate about all things tax and very learned as well. I think it would be good for the Minister (a) to provide us with that sort of foundation knowledge—that little bit of background that Deborah Russell has asked for. But when we think about Part 4 in particular, as opposed to Part 3, which was described as just a whole lot of numbers changing—but as we found out throughout that process, it ended up being not quite so technical and there were some real nuggets of interest in there that without asking those questions we wouldn't necessarily have had those answers elucidated to us in lieu of, obviously, there being no select committee process. So when I turn my mind to Part 4, I suppose, which is a very technical part of the tax change—flowing the tax threshold changes to all sorts of other thresholds in the actual Income Tax Act, if I have read that correctly. I wonder if the Minister could tell us a little bit more about how those threshold rates of the new tax thresholds—I think they're on page 20, if I'm in the right part; clause 33 to 39. Yes, so if we look at page 20 about the fringe benefit tax rates, just as an example, it's not clear from the bill. So could you just talk us through that table in particular in relation to those fringe benefit tax rates. I think that background will help inform the rest of the questions that we've got about this part in particular. But if you could do that, that would be much appreciated. Just looking at colleagues here, I know that there's a couple of other questions probably looking for that elucidation of that foundation work. And I know that Dr Deborah Russell has some other technical questions to ventilate on this part before we sort of move on. So that would be much appreciated if the Minister could do that, please, and I'll come back and ask my other questions subsequent to that answer. Hon Simon Watts: Yeah, thank you very much for the member's questions— CHAIRPERSON (Maureen Pugh): I call the Hon Simon Watts. Hon SIMON WATTS (Minister of Revenue): Well, thank you very much, Chair, for the opportunity to provide a little bit of context on what is a very exciting Part 4 of this bill. Now, what, in effect, is happening with the dates here is that the overarching changes that we've outlined will be effective from 31 July 2024. However, there are a number of consequential tax changes which will occur from 1 April 2025. The member asked the question in terms of why that is the case. Well, primarily the reason is to reduce the compliance and administrative burden from the fact that we are starting a process part way through a tax year, so that when we make the other consequential adjustments on other tax groups, we want to start clean, in effect, and start from 1 April 2025. So it's very much just a very pragmatic and practical approach that officials have flowed through to enable us to deal with the reality of introducing tax threshold changes part way through the year. Hon GINNY ANDERSEN (Labour): Thank you very much, Madam Chair. My question is also in relation to table 1, which is on page 20 of the bill in question. I would like to know how the range of dollar and pay threshold and rates relate to the new tax thresholds and rates that are stipulated in that table at the top of page 20. So what I think I heard, and if he can confirm, is that if this table is, in fact, about fringe benefit tax rates—which is not that apparent from reading the bill, to be honest. Could you clarify that? Specifically, it would be good to know how the range of dollar and pay thresholds and rates relate to the new thresholds and rates that have been proposed through the changes. Thank you. INGRID LEARY (Labour—Taieri): I note that—picking up from where my colleagues have left off—looking at the ESCT, which is the employer superannuation contribution tax, a lot of people may not have heard of that, but that is very similar to a fringe benefit tax, except that it applies to superannuation contributions. We've heard a lot of discussion about what the change to thresholds are attempting to do, but I'm really interested to know—given my capacity as Opposition seniors spokesperson and the information that I've had and the calls that I've taken over the last few months about the impact of superannuation and the superannuation gap for women—what advice or consultation there was for the superannuation contributions in these tables around these thresholds? Was there a gender lens put on it at all? Because this would have seemed a really good opportunity, in my view, given that there is a big disparity about the superannuation that many women are left with because of the stalling in their careers—often they go off, have children, whatever and they don't get to contribute. Now, under the previous Government, we had committed to having a superannuation scheme that meant that those women who took time out from their careers would still be able to benefit and to close that gap. I see it a lot in my electorate with homelessness. It's called the "invisible group", a lot of women who don't have that money are often left couch surfing and so on. So it would have seemed like an ideal opportunity here, when shifting these groups and looking at superannuation specifically—which is what this table does—to consider a gender approach and see whether there would be any kind of policy intervention, policy tool, that could have been used cleanly in this legislation to try to leverage off that; to close that gap. Given the speed at which we're doing this in, and given the fact we don't have a select committee process, I can harbour a guess and I would say in all likelihood that the Minister probably didn't even remotely consider it because I don't think it's reflected in any of the policies that we've seen. But I would like it on the record, if that's the case, because we don't have a select committee process. Women are concerned; aged care groups are concerned about the gender gap. This would have been an opportunity, maybe not to fix it but to at least get advice on that. I'd like to know if the Minister sought advice or if the officials provided any advice, or if he even turned his mind to what the implications of this would be for the superannuation gap for women. Hon SIMON WATTS (Minister of Revenue): Thank you very much, Madam Chair. The member raises a fair point, and the reality is that if we go broader, the disparity for women in particular at retirement is a gap against men and that is a well-known factor. The reality of what we're discussing here, though, within this bill, is the consequential impacts of changes in personal income tax rates. What the member is referring to is a broader conversation in terms of superannuation from a policy point of view, which is not reflected in this part of the bill. CHAIRPERSON (Maureen Pugh): Members, the time has come for us to break for the lunch break. We will suspend until 2 p.m. Thank you. Sitting suspended from 1 p.m. to 2 p.m. …