25 May 2012

Legislation on Budget tax changes passed

3:46 pm on 25 May 2012

Legislation putting into effect tax changes set out in the Budget has been passed in Parliament on Friday, with most debate focusing on the scrapping of a children's tax credit.

Under the Taxation (Budget Measures) Bill, the tax credit for income under $9880 is scrapped, as is the childcare and housekeeper tax credit.

The tax credit for children in part-time work is to be dropped and replaced by a limited exemption. About 68,600 children receive the tax credit, which averages about $240 each.

Any child earning over $2340 per year will have to pay tax on every dollar they earn.

Labour MP David Cunliffe said the centrepiece of the Budget is to raid the piggy banks of 68,000 children.

"Paperboys and papergirls are going to be pick-pocketed by this Government. It is so laughable, so risible, so pathetic that it would be funny if it wasn't so sad."

National MP Todd McClay said the money saved from the tax changes will be invested in more productive areas of the economy.

"And I say to the members opposite, if they believe that we shouldn't be passing this legislation and we should be borrowing that extra $349 million, give up your seats, get off the list, get on the plane and go to Greece."

Parliament went on to debate a bill that will result in more elderly people paying for their own residential care.

It was drawing heavy criticism in the House for not having been mentioned by Finance Minister Bill English in the Budget and for being put through under urgency.

Outside Parliament, Prime Minister John Key said most children do not claim the tax credit for working part-time. He says it is a hallmark of the old system and the general view was that it needed cleaning up across the board.