Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill

I am surprised that I have 4 minutes and 30 seconds remaining, because I think I had completed less than one sentence when consideration of this bill came to an end on Thursday, 6 March. I was then speaking to clause 68(2) and the rate of 19.5c for Māori authorities.

By my own count, on at least three occasions Dr the Hon. Lockwood Smith has challenged parties on this side of the House to name one person who will benefit from this change in tax rate who is not a Māori, saying that if we can do so, he will publicly apologise to the House for insisting that only Māori will benefit from that provision. I personally know one such person. He is, I believe, of Irish ancestry, but, in any event, he is certainly not a Māori, and my contact with him was precisely because of his status as a shareholder and beneficiary of a Māori authority. He is a Catholic priest by the name of Monsignor Patrick Cullen. My instincts tell me that there are probably many Māori authority beneficiaries who are of Asian, European, or Pacific Island ancestry. But the member’s challenge was quite specific—namely, that if we could name one person, he would publicly apologise, and Dr Lockwood Smith is an honourable man.

Today I want to ask National Party and New Zealand First Party members to take a call and give a yes or no answer to a straightforward question. My question is this: as a matter of tax principle, do they believe that members or beneficiaries of family and other trusts, Māori authorities, and superannuation funds should pay tax on income arising from those sources at their personal marginal tax rate? If their answer is yes, then for them to select out just one of those groups—namely, the Māori authorities—is to select on the basis of race. That is the very thing they have falsely accused the Government and United Future of doing.

On the other hand, if their answer is no, then I will personally do my part to ensure that their policy in that regard is made known to Business New Zealand, representing 74,000 businesses in this country, and who do support the principle in this bill; the Investment Savings and Insurance Association of New Zealand, which invests the superannuation savings of probably around 500,000 working New Zealanders; and the 150,000 or more New Zealand families who have established family trusts. The 19.5 percent rate in clause 68 has been struck precisely because it is the marginal tax rate of 90 percent of the members of Māori authorities. In principle, it has nothing to do with their race and everything to do with their personal marginal tax rate.

I want to speak further to clause 68, and to address some of the comments of the ACT members. Dr Muriel Newman and Gerrard Eckhoff, who have also claimed that the 19.5 rate is race-based. I must say I was amazed to hear that, because the ACT spokesperson on taxation, Rodney Hide, is a member of the Finance and Expenditure Committee and expressed himself to be in favour of that rate. If one reads the committee’s report, one sees that a minority view claiming that that provision is race-based was filed by New Zealand First and National but not by ACT. I want to draw members’ attention to the commentary on the bill where that is clearly set out.

I guess my amazement at hearing Rodney Hide’s ACT party colleagues taking an exactly opposite point of view is based on my fairly short experience of belonging to a caucus that takes a “united” and “future”-looking view of these matters, whereas, consistent with its libertarian ideology, it appears that in the ACT party each individual member does what seems right in his or her own eyes.

The more I listen to this debate, the more pessimistic I become about it. In particular, I want to focus on clause 24, and start by saying: “Here we go again! This politically correct Government is doing deals for its Māori mates, and to hell with what the majority of hard-working Kiwis think.” In any other Western democracy, this would be called apartheid. This creeping, crawling, insipid political correctness that has pervaded this country, and that this Government champions, is soul-destroying. Doing special deals for Māori is highly divisive, and the day will come—and I think it is coming soon—when we will see a significant backlash to this type of deal. A special tax deal like this is not the Kiwi way. Our society has developed out of a sense of fair play, and this bill is not a fair go to our fellow Kiwis. If one offends that sense of fair play—as I believe this bill will do—one will suffer the consequences. I say to members opposite that that day is coming quickly, and I think it will be very apparent in the next election.

When I read the select committee report, I saw that the majority of committee members argued that the lower tax rate was being introduced because of the lower income of authority members. How very convenient that argument is! If the Government is really solely concerned with low-income earners, why is it only Māori who will be favoured with this type of tax treatment and not Pacific Islanders, Asians, and white New Zealand business people? It is not even supported by the Federation of Māori Authorities. The answer, of course, is that the Government cares more about its mates. This politically correct Government is subjugating the rest of New Zealand to a treaty that was signed 163 years ago, rather than having the strength of character to interpret the treaty just as it was written, signed, and understood by those who were present. We have already done more than most Western democracies.

I say to members of this House that this is not a time for separate deals; it is a time for coming together. There should be one standard of citizenship for all New Zealanders. Did members of this House ever think that there would come a time in this country when they would see two tax systems based on race? I never thought I would see this day. The Government is quite unashamedly favouring one race at the expense of another. That is not a fair go. If the Government had the courage to deal with the Treaty of Waitangi gravy train, and the absolute abuse therein, this situation would never have arisen. It might interest members to know that under the settlement process to date, one fifth of all settlement moneys has gone to consultants and lawyers—not to the Māori beneficiaries, who were meant to be getting it. If our economic growth—and here is something that Dr Cullen might want to think about—kept pace with the Treaty of Waitangi gravy train, he would not have the dilemma about where we rank in the OECD, because we would be leading it.

Let us look at the advice the select committee received from such notable authorities as Chen Palmer and Partners and PricewaterhouseCoopers. Chen Palmer said the changes would provide a $70 million windfall for Māori authorities in the fishing industry alone. They went on to say something that I find extraordinary—that discrimination based on race is contrary to the New Zealand Bill of Rights Act. The majority of members on the committee conveniently ignored that.

Let us look at some of these “poor” Māori businesses—the emphasis here is on “poor”. The Waitangi Fisheries Commission controls about one-third of New Zealand’s fishing quota. The Crown Forestry Rental Trust has only a “meagre” $200 million worth of assets.

There was a lot of sort of hatred and almost self-loathing coming through that speech. Let us just deal with a few facts. Firstly, of course, companies are not taxed at 19.5 percent. The select committee changed that rate to 33 percent for wholly owned companies. Various parties in this House have suggested that they would pop up and move an amendment to lower the rate back to 19.5 percent, but nobody has actually done so, I notice. Mr Morgan will remain unsatisfied on that point, because he could not find any stooge in the House to pick it up and move the amendment for him.

Secondly, in respect of the so-called separate tax regime, there has been a separate tax regime for Māori authorities since 1939 in this country—long before the term “politically correct” was even thought of. Indeed, it was not long after the National Party was thought of, which is one of the worst mistakes we ever made in New Zealand politics. There have been separate tax regimes since 1939. For most of the last 10 years or more, Māori authorities have been overtaxed compared with the rest of New Zealand income-producing assets and organisations. Most Māori authorities have ended up being double taxed, due to the absence of an imputation system, and with two 25 percent rates. [Interruption] There is a difference, and the difference is very simple. The difference is that people cannot leave Māori authorities. If one is a beneficiary, one’s assets are locked into a Māori authority, and one cannot exit from it. It is not like holding shares in a company. It is not like being a member of those wonderful family trusts that National Party members all set up as a means of tax avoidance. That is what they exist for. [Interruption] I bet Dr Lockwood Smith does not have a family trust he can set up, because it is not permitted to have one for one person.

💬 Rodney Hide: I raise a point of order, Mr Chairperson. The Minister has accused National Party MPs of setting up trusts to commit a criminal act—tax avoidance—and I suggest that you put him right into order.

Speaking to the point of order, Mr Chairperson, I want to say that tax avoidance is not a criminal act. Tax evasion is a criminal act.

The CHAIRPERSON (H V Ross Robertson): I thank the honourable member. It is a debatable point.

So we have organisations whose members are locked in. Many of those members, by the very nature of Māori authorities, are very small shareholders, because Māori authorities have thousands and thousands of members. If those authorities were taxed at 33 percent, the taxpayer would have to fund a very large amount of administration to deal with thousands upon thousands of rebates of $10, $15, or $20 a year. So stupid are Dr Lockwood Smith and Mr Connell that they would actually like to pay more taxes to fund the Inland Revenue Department to have hundreds of extra officials, so that we can deal with tens of thousands of rebates of $10 or $20. They call that being non-politically correct. I call that being utterly stupid, which is why the Inland Revenue Department and Treasury were the source of the suggestions about the changes to the taxation of Māori authorities.

This is, indeed, designed as an issue both of equity and of tax simplification. The select committee decided that in terms of equity it was fairer to tax wholly owned companies at 33 percent, where they would be competing with other companies being taxed at 33 percent. But Māori authorities are unique. It is true that no other country in the world has a separate tax regime for Māori authorities. There is a reason for that: this is the only country in the world that has Māori authorities.

I do admire the Minister of Finance. He is able to make an argument about a tax system such as this one, based on race, sound quite—

💬 Rodney Hide: Almost reasonable.

He can make it sound almost reasonable. Speaking as a member of the Finance and Expenditure Committee, along with a few of the other members here, such as Lockwood Smith and Rodney Hide, New Zealand First was concerned, and my leader, the Rt Hon Winston Peters was concerned, that one section of the New Zealand community is receiving an advantage over other groups. We expressed a minority view in the report, because of our concern. It is our intention to move an amendment that all sections of the New Zealand community that can take advantage of the proposal relating to basic tax rates of 19.5 percent should be treated in the same way. We cannot support the bill in its current form, because of its unfair and race-based system.

I reiterate that New Zealand First wants to treat all New Zealanders equally, and I have prepared some amendments to give effect to this view. I shall quickly read them out. The first one states: “That the words ‘Subpart 1—Māori authorities’ be deleted as shown on page 18, line 9, and be substituted by the following words ‘Subpart 1—Māori authorities and applicants’ ” The second one states: “That on page 21 between lines 6 and 7 the following words be inserted ... ‘Election to become applicant’—‘(1) The applicant whose tax characteristics and tax rates are similar to those of a Māori authority as referred to in this Act shall be entitled to make a similar application to the Commissioner as a Māori authority can under this Act by giving notice to the Commissioner as a Māori authority is entitled to do in terms of paragraph HI 1C of this Act, and shall receive the same treatment as a Māori authority is entitled to receive in terms of this Act.’; ‘(2) The words ‘applicant’ or ‘applicants’ shall include all persons legally entitled to be called a legal person in terms of any and all Inland Revenue Department and any other tax legislation including, but not exclusively, individuals, companies, incorporated societies, charitable trusts, sole traders, partnerships, and any other parties liable to pay income tax.’; ‘(3) The provisions of Subpart 1 as applicable to Māori authorities shall apply to an applicant.’”

In many ways the amendments answer very well the question that Gordon Copeland, the United Future MP, asked. The Federation of Māori Authorities welcomes these amendments too and is looking forward to the Government supporting them.

I reiterate that one of our Māori members, Edwin Perry, is the chairman of a trust that has 4,000 acres. He has 80 beneficiaries and they have said to him that they do not want to be treated any differently from anybody else. We as a party also believe that having different rules based on race will just create and continue the dependency programme that this Government has. We feel this very strongly, as a party that believes in one country and one people. Māori soldiers are not treated any differently from any other New Zealanders when they are in the field. They excel exactly the same as other soldiers who have enlisted with them, and they get their jobs on merit. This is the same way that our tax system should be. We have a soldier in our own party. In fact we have a couple of them. We have Bill Gudgeon here, and he had to work just as hard as anybody else to get exactly what everybody else got, no matter what race they were.

💬 Hon John Tamihere: Tell him to get up and take a call.

OK. The lion in the media is starting to roar. But we all know that he has proven to be a lamb in Cabinet.

The Government will be voting against the amendment for a very simple reason. It is actually incomprehensible and almost certainly just about inapplicable. Probably the only bodies we could be reasonably sure might slip through would be the subsidiary companies of Māori authorities, which reverses the decision taken by the Finance and Expenditure Committee. Otherwise, if we are talking about tax characteristics we would find it very hard to find anybody who fits into the Māori authority category because of some of those characteristics, which are peculiar to Māori authorities, and I have already outlined those. People are locked into membership and there are no such other organisations around that one knows of.

The amendment is meaningless. It would create huge uncertainty within the tax law, and we try to avoid uncertainty within the tax laws as far as we can.

I appreciate the fact that the Minister in the chair is taking calls and responding to, and explaining, issues. I would like to have an explanation of the effect of the anti-avoidance provisions, the eligibility criteria, and the implementation of the committee’s recommendation that companies not benefit from this concessionary or privilege regime. I ask that because it seems to me that a result of the change recommended by the select committee—a sort of attempt to lessen the insult of the race discrimination in this so that companies go back out into a more normal regime—is that companies will be a less preferred form of business entity for Māori-owned businesses. The effect of this will be that Māori may, for tax reasons, be encouraged to not use normal limited liability companies, and, instead, to trade through trusts.

If that is the case, it may be one of those horrible results of tax planning that means that the Māori authorities as defined that are not companies will be trading in a more risky position with the assets they are stewards of, and could lose them because they have decided not to use the limited liability company subsidiary structure, which is, of course, designed to allow risk to be isolated and confined to the particular enterprise. So I would be very pleased if he would take a call.

I will now go back to the comments made by Gordon Copeland, whom I first heard when this was debated several weeks ago espousing the theory that this was not racially discriminatory—that this was not racist—because anyone could qualify for the same treatment as long as that person made sure that he or she did not earn enough. I thought hard. I thought: “He is an enthusiastic member who is doing the bidding of his masters. He has definitely been given very short notice to come in here and speak, and he hasn’t a clue what he is talking about or he wouldn’t speak such twaddle.” However, I heard it again today. The member has had time to reflect, and he still says that this is not race discrimination because the same tax rate—19.5 percent—can somehow apply if people do not earn enough. I really do ask for this Committee to allow him another call to try to get to the bottom of that.

What we have here is a regime that every superannuation fund, and every trust and authority that has a mixture of members who have a low income or a low marginal tax rate, and others who may have a higher one, would dearly love to get. What it really says is that company tax, which is a withholding tax under an imputation regime, will be withheld at the rate that is applicable to the lower taxed beneficiaries instead of the higher taxed beneficiaries. Well, of course, we would all love that. The fact that this is a concession only for Māori, when so many other parts of the community would love to have it, is, of course, racism. It is not, as Mr Connell says, the result of subjugating us to an unsuitable old treaty; it is in fact a result of not applying the treaty. Article 3 of the treaty states that all New Zealanders should be subject to the same rights and privileges as British subjects. Article 3 of the treaty would not allow this provision, if it were properly applied.

I commend Mr Connell and the Minister to Sir Apirana Ngata’s little treatise on the subject of road rates, which were the way that so much of New Zealand was opened up and roads were built. They were special rates that rated the property that got the benefit of pushing road through. For decades Māori were not subject to road rates at the same rate as Pākehā. Sir Apirana said, very clearly, “This is a breach of the Treaty of Waitangi because it is treating us differently.” He went on to say: “It may be something of a quid pro quo for other breaches of the treaty, but both are undesirable, and as soon as possible we should get out of this position.” If Sir Apirana had been listened to, we would have got out of it. We would also have got out of it if this Government had bothered to treat the Convention on the Elimination of All Forms of Racial Discrimination seriously. That convention states that every form of discrimination must have an end date. It states that positive discrimination is OK, but that it must be defined for a specific period. This bill breaches that.

Perhaps it would be good to start with a quick definition of what racism is for the Committee. I suggest that racism is discrimination against, on the basis of race. I suggest to those members who are concerned about what racism is that they might want to gather some more information about it and investigate what constitutes discrimination against. This bill does not discriminate against anyone. This bill attempts to recognise that there is such a thing as cultural difference, and that there is such a thing as a treaty-based nation, which is the nation in which we live. The treaty was signed by two sovereign States or nations that are entitled to equal recognition. I guess it is difficult for some to understand that, and some people need more time to do so, but I do commend members who have that difficulty to undertake some treaty education to inform themselves about what it means to live in a unique nation such as ours, which is premised on a treaty between two sovereign nations, and where the structures, values, and institutions of both cultures are equally recognised.

For those Māori who have made contact with the Greens and spoken to me about the bill, some will be disappointed with it, because it has some gains and some losses. But let me say that the Greens support this bill in recognition of those gains to Māori, the marae, the whānau, the hapū, and other Māori organisations. To some small extent, it is another step towards an understanding that not everything from 19th century England is appropriate in the 21st century, and, more important, that not everything from 19th century England is appropriate for the indigenous people of this colonised land. It is some small step towards recognising that this is, as I say, a treaty-based nation.

We are pleased that the definition of “charitable purpose” has been extended to include those who are related by blood. Traditional Māori structures that prioritise whānau and hapū have had real difficulty in gaining recognition as valid structures in our society. Once defined as “beastly communism”, those structures are actually fundamental to Māori cultural, economic, and political development. The extension of the charitable purposes definition goes some way towards ensuring that Māori authorities and marae are no longer prejudiced by inappropriate, culturally biased definitions.

We are also pleased that the definition of “marae” has been extended in the bill. Serious concerns were raised by the Dunedin Community Law Centre that Māori were discriminated against in the first draft of this bill, because marae could have charitable status only if the funds of the marae were to be used for the administration and maintenance of the property—the physical structures. Very real concerns were raised that such restrictions do not apply to similar organisations like churches. We are very happy that the provision has been changed so that a marae will be deemed to have a charitable purpose if it is on a Māori reserve under the Te Ture Whenua Maori Act, and if the funds it receives are to be used for a charitable purpose. That change eases the financial burden on marae and recognises the whānau and hapū support and development activities that are central to the purpose of a marae.

Finally, I will comment on the New Zealand First Supplementary Order Paper extending Subpart 1 to other applicants. The Greens do not support that Supplementary Order Paper. Those particular provisions in the bill are there to recognise the specific legal difficulties and constraints that Māori authorities face in dealing with community-owned assets. The extension proposed by New Zealand First should form part of a specific discussion in this community and in Parliament so that the full implications can be canvassed. But also—and I reiterate this because I understand that some people need time to understand it—under the Treaty of Waitangi, Māori structures and values are not to be discriminated against, and the blanket imposition of rules suggested by New Zealand First, National, and ACT, which are premised on the cultural values of the dominant culture, is nothing less than structural discrimination.

The CHAIRPERSON (H V Ross Robertson): Before I call the next speaker I thank the member for her speech and suggest that she look at Speaker’s ruling 21/8.

If there was ever any evidence needed for what I said earlier in the general debate, that never before in the history of New Zealand have we had a Government that has had so much yet delivered so little, then here is the example. If members need a further example of why we are in such a mess with this legislation today, they need look no further than watching an academic with a PhD getting involved in a topic—in this case tax law—that is not relevant to his or her area of expertise.

I congratulate the Minister on taking a call and trying to explain how he has come to the half-baked conclusion he has come to—that we should have two different tax rates based on race. I acknowledge to the Minister and those present that there are some major issues in terms of multiple ownership in Māori incorporations, and of how we should deal with them. I also acknowledge that some of those Māori incorporations are doing well, despite all the difficulties they have, and despite the Government—particularly this current Government. Today we are debating having two separate tax rates for Māori incorporations. A large chunk of them involve dairy farmers. Some of them are in my electorate, where the population comprises 23 percent Māori. We are saying to them that it is fine for them to go out and compete with other dairy farmers of non-Māori descent on a different tax rate. We are saying that is fine and that it is not discrimination.

I suggest to the Minister, to the Māori members present, and to those who are heading up some of these Māori incorporations that it is discrimination, and this bill will not solve the problem. In fact, what is likely to happen is that when we get the nanny State—headed by a socialist Government—interfering, these incorporations are likely to fail. That has been the experience of Māori in New Zealand over generations, under socialist regimes—led sometimes by National Governments, I have to say, and sometimes interfered with by National Governments, but mostly led by Labour Governments—where Māori have been trapped into poverty, steered up the wrong road, and told that the nanny State will help them at the end of the day.

Most of the heads of Māori incorporations have spoken to me and said that they have had enough, that they are better than that, and that they can foot it on the main stage with the best of them. And they are demonstrating that; there is no doubt that they can. The Hon John Tamihere has said that in recent speeches, and I totally agree with him. In my view, it is absolutely incomprehensible that United Future member Gordon Copeland could come down to the House and accuse Dr Lockwood Smith of getting it wrong because he has found somebody who is a non-Māori somewhere, who will benefit from this tax rate—

Dr the Hon Lockwood Smith: He didn’t say he was a non-Māori.

He did not say that?

💬 Brian Connell: He said he was Irish.

He said he was of Irish descent, but he could have Māori blood in him, as well. He is saying that he has found somebody who does not fit the description in this bill, and here we have the beginning of a rort, because there is a group of people that somehow or other may be able to fit itself into this without meeting the criteria, as most people understand them to be—and Gordon Copeland has actually said that.

Obviously, United Future members are in a hole here. They have vowed to support the bill, and they know it will alienate most of those who voted for them. They know that the bill is absolutely opposed to what they campaigned on, so they are trying to dig themselves out of a hole. Well, the first lesson in politics is that if members are in a hole, they should stop digging—and those members are in a hole. There is no way that United Future supporters will support the type of legislation that is in this bill. No amount of explanation, and no amount of gymnastics in terms of trying to find a way around disclaiming what was said by my colleague the Hon Dr Lockwood Smith—who I would suggest has a lot more knowledge on this issue than the Minister himself has—will dig United Future members out of that hole. My advice to them is to stop digging.

Chen Palmer said that $70 million worth of tax differential would go to the fishing industry alone. I suggest to the Minister that this industry is not headed by poor Māori. So who will be the beneficiaries? As the Hon Winston Peters has said many a time, poor Māori have not even seen a snapper out of this industry.

💬 Rodney Hide: That was me!

It might have been too, but I know that the Rt Hon Winston Peters has used that line, as well—not even a snapper.

I have to get up and sharply disagree with our colleagues across the aisle—what are they, “Future United”? Which way round are they—united in the future, or in the future they will be united? Those members say that the ACT party supports this bill. In fact, the ACT party will be voting hard against this bill. I would like to see United Future members explain to their voters how it is possible for them to be supporting two separate tax systems—one for Māori authorities and one for everyone else. I look forward to that discussion, because the ACT party says that is wrong, New Zealand First Party says that is wrong, and the “New Zealand Great National Party” says that is wrong. We are parties that stand up and say that every New Zealander should be treated the same under the laws of this country, no matter their race, religion, or creed. Members of the United Future party are standing up and saying: “Phooey to that.” They are saying that they will have a separate tax law for Māori through Māori authorities, and we say that is wrong.

Let me commend the Minister for these things. It was wrong that Māori authorities not have imputation credits—and full marks for that; it was wrong that Māori authorities appeared to be getting the advantage of being taxed at 25 percent, when everyone else was taxed at 33 percent. But the fact that there were no credits applying meant they were often overtaxed compared with people taxed at 33 percent. The simple decision to make is to have the same tax rules for each and every New Zealander. What is hard about that? Why will Mr Copeland of the United Future party not stand up, put his party’s flag up a pole, and say that United Future believes that all taxpayers should be the same before the law? One’s ethnicity does not matter.

Mr Copeland thinks it somehow makes this bill acceptable that he has found an Irishman who can rort it and get on the 19.5 percent rate. He says that it is OK, because non-Māori can get in on the rort. We should be closing those rorts down, I tell Mr Copeland. We should be saying that the tax rate is the same for everyone.

💬 Gordon Copeland: Everybody in the same tax band—that’s right, Rodney!

Well, Mr Copeland sits there and chips in with: “Everyone in the same tax band.” That is absolutely right. That is why the National Party, the New Zealand First Party, and the ACT party say: “Let’s have imputation credits.” I did not hear the Minister after he had heard the Green Party’s speech in favour of this bill. I thought he was going to stand up and vote it down. He certainly did not think that was what this bill was about—something about cultural imperialism and overcoming that. Again, how hard is it to go forward as a nation with our tax laws the same for everyone?

I asked the authorities that came before the committee whether they thought having a lower tax rate would be good for their business. Do members remember that? Each and every authority said: “Yes. Having a 19.5 percent tax rate when everyone else has to pay 33 percent will be good for our business.” Dr Michael Cullen does not believe that, because he says that tax rates do not matter—that we can put up the tax rate and it does not affect business or the economy, or that we can drop it; it will not help. But the Māori authorities coming before the select committee said it would help. I would like to hear what Mr Jim Anderton has to say about this bill.

💬 Brian Connell: Who?

Mr Jim Anderton. He is the economic wizard of this Labour Government. He said that if we have a tax cut it is an economic intervention.

💬 Dail Jones: It’s a subsidy.

Well, here we have a subsidy, but only to some. I look across at my colleague the Hon John Tamihere and ask him how our children are to grow up together in New Zealand, as New Zealanders in one country, if we have two sets of laws: two sets of policies and two sets of tax systems, on the basis of whether the State declares one to be Māori and another to be non-Māori? I should declare a conflict of interest here, because both the Minister of Māori Affairs and Tariana Turia said that I am Ngāi Tahu.

It is with regret that I take part in the debate on Part 2, which creates two systems of taxation. The part has been very well argued by the ACT party and my colleague Dr the Hon Lockwood Smith and Mr Shane Ardern. When one thinks about it, the Minister’s objective sounds quite reasonable. He says that eventually most taxpayers will be on a lower tax rate, so, for administrative purposes, why not lower the tax rate for Māori organisations and therefore save those people from having to claim a refund at the end of the process? However, the question remains as to why other taxpayers who are also on a lower income level cannot receive the same benefit. That defies logic. There is no logic to that. Other taxpayers in New Zealand on a lower income level would not be able to claim the same benefit. They would have to go to the trouble of filing a tax return and claiming a tax refund, etc. That defies logic and is not fair.

The second reason is even more discouraging. The Minister and the Labour Government is resigned to the fact that the majority of benefactors of Māori organisations will remain in a low income tax bracket. Therefore, instead of sending a positive signal to Māori taxpayers to aspire to be high-income earners, the Government is conceding that they will remain low-income earners. Recently, a report conducted by the independent National Bureau of Economic Research was commissioned by one Government department. It reached a very positive conclusion on the economic performance of Māori organisations. That report stated that those organisations utilise their assets very well. I have some news for the Labour Government, which has not read that independently researched report and has continued to put down Māori taxpayers: that economic report states that a lot of Māori organisations are doing very well. So, Māori are aspiring to become high-income earners.

It makes sense that the Government has two choices. One is to bring down the tax rate for all organisations and all taxpayers, which would send a positive signal to everybody and show that the Labour Government, for a change, wants everybody to do well and wants New Zealand to return to the top half of the OECD. So Labour should be prepared to reduce income tax levels to encourage all taxpayers to aspire to become high-income earners. The alternative choice is not to complicate the tax system and the work of the Inland Revenue Department any further by creating two separate systems. Because of the complications involved in that process, we end up having to debate, once again, a bill that runs into more than 100 pages. No doubt during the process a lot of people will be arguing about the definition of a Māori organisation, and we will get into all sorts of technical interpretations. Once again, it is good news particularly for tax lawyers, but what has this particular tax legislation achieved?

I move, That the question be now put.

The CHAIRPERSON (H V Ross Robertson): No, not just yet.

It was kind of sad a few minutes ago to listen to Mr Gordon Copeland trying to justify United Future’s support for something it knows is morally wrong. United Future members know that it is wrong to discriminate on the basis of race, and we heard him trying to justify that he had found some priest somewhere—a Monsignor Cullen—who he claims is of Irish descent. He did not say that he was of Māori descent as well.

💬 Gordon Copeland: I raise a point of order, Mr Chairperson. I believe that Hansard will show, because there was so much interjection at the time, that I said “but, in any event, he certainly is not a Māori,”.

The ASSISTANT SPEAKER (H V Ross Robertson): No, the member will sit down. That is a debatable point.

Dr the Hon LOCKWOOD SMITH: I remind Mr Copeland that it is not unusual for people to claim different ancestry for different occasions. I well remember Mr Peters often claims Scottish descent when that suits him, and he is of Māori descent when that suits better.

However, I want to address a couple of serious issues because there are three areas where Part 1, I believe, is discriminatory. I realise that the bill is not in the name of the Minister in the chair, but I really would appreciate it if officials could assist him with some answers to these quite serious questions.

The first question concerns this matter. On 3 October the Law Society appeared before the Finance and Expenditure Committee and pointed out to us that the way the imputation system will work for this special taxation system for Māori authorities, is different from the way the imputation system works for normal company taxation. The Law Society indicated to us that the way it had read the bill was that it was possible for taxpayers to get an imputation credit greater than the tax they have paid, and to get a refund for tax not paid. The society certainly indicated that the way this system works is different from the normal imputation system. It would be helpful if the Minister could explain to the House whether the way the imputation system works in Part 2 is the same way the imputation system works for the normal imputation system. On the one hand we have a concern that there is discrimination on the basis of the 19.5 percent tax rate. OK, lots of colleagues have debated that issue. I am not asking the Minister specifically about that; I am asking him specifically about the way the credit system will work for tax paid by a Māori authority in allocating that credit to the beneficiaries of the authority, and whether there is a discriminatory procedure in the mechanism of the system that will treat beneficiaries differently from the recipients of imputation credits under our normal imputation law. If there is, that is a second discriminatory process in this legislation—second to the fact that there is a discriminatory tax rate in the first place. I am not asking the Minister to comment, because we have had lots of debate on that, but I would appreciate his advice, if his officials could assist him, on whether the mechanism is different and more favourable in that it would enable refunds to be paid that would not be payable under the normal imputation system.

My next question to the Minister is this: is clause 66 in Part II also covering that extension to charitable purposes? That is also discriminatory, because for all other people in this country where beneficiaries have blood ties to the charity, they do not qualify under the definition of a charitable purpose. This legislation will allow exclusion on the basis of blood and blood ties for Māori people alone, and for no one else. Pacific Island people who may have blood ties to an Irish charity do not get that benefit. It is specifically for Māori people. OK, that is another discrimination made on the basis of race, but clearly the Government has decided to make it. My question to the Minister specifically concerns this issue. When the Inland Revenue Department was in front of the Finance and Expenditure Committee on 30 October it was asked how many people would benefit from that change, and what would be the fiscal cost of removing that exclusion on the basis of blood ties and extending charitable purposes to marae.

The Inland Revenue Department could not tell the select committee. I tell the Minister standing in for the Minister responsible for the bill, I think it is fair enough that, in this Committee stage, this Parliament should know the fiscal cost of this provision, because the Inland Revenue Department—and I have notes here from 30 October—could not tell the select committee what the cost was, how many people would be involved, or the cost of this provision. So those are two specific questions for the Minister, and I think they are reasonable questions. The first question was: is there a different arrangement in the way the imputation system will work for this special Māori taxation system? The Law Society certainly believed there was. My second question is simply: what is the fiscal cost? Those are reasonable questions deserving an answer.

I move, That the question be now put.

Part 3 covers amendments to the Tax Administration Act. Clauses 86 to 89 cover the issue of distribution statements of Māori authorities and the credit account returns of Māori authorities. I ask the Minister in the chair again, whether there are differences in the way the imputation system or the credit system will work for Māori authorities. Are there differences from the standard imputation system? We were led to believe at the Finance and Expenditure Committee that there were differences that were discriminatory because the way the system will work here confers favouritism that is not available through the standard imputation system to the people of races other than Māori. I think it is fair enough, and there may be good reason there is a different imputation system, but we need to know. If this Parliament is passing legislation, it is fair enough to know what it is doing. I think it is reasonable that the Minister should explain. Is the imputation arrangement here the same, apart from the fact that it is a discriminatory tax rate, or does the credit system, or the imputation system, differ in the refunds available for tax not actually paid? That is my first issue.

The next issue is this. Clause 74, in particular, relates to the power to remove documents from businesses. The Law Society was very concerned that the power provided in this legislation—the power of search and seizure—on the face of it was in conflict with the New Zealand Bill of Rights Act. This was not some minor submission to the select committee. The New Zealand Law Society made this submission. Again, I would like the Minister to advise us what further advice the Government has taken on whether clause 74, and this issue of the power of search and seizure, is in conflict with the New Zealand Bill of Rights Act. That is my second question to the Minister.

Another very important issue in this part of the bill is, I think, under clause 100. Up until now, if a person has had a dispute with the Inland Revenue Department, there has been a provision that the department collects 50 percent of the money from that person, and that person does not have to pay the other 50 percent until the dispute is sorted out. The amendments in this legislation will enable the Inland Revenue Department to claim 100 percent of the money in dispute. Sure, the select committee managed to get some easing of this provision so that the department is meant to claim this 100 percent only if it has concerns that it may not receive the money in the event it wins the case. But the problem is this: if the department gets 100 percent of the money and it is wrong, the use-of-money interest rate it pays is only 4.83 percent—way below commercial rates.

There is an issue there that should be addressed by the Government. I would like the Minister to respond to this. If he is allowing the Inland Revenue Department to claim 100 percent of the tax in dispute with this legislation, why is it not that a more reasonable use of money interest would be paid if, in fact, the department were proved to be wrong when the dispute is resolved? That is my third question to the Minister.

The fourth question concerns clause 114, which, from memory, provides for promoter penalties where promoters promote schemes that are clearly inconsistent with our tax legislation. National has no great problem with penalties in that clause to start avoiding what are ridiculously avoiding schemes. But the problem is—and I want the Minister to explain what would happen in this case—what happens when there is a tax adviser who has promoted a scheme that he or she believes is perfectly reasonable? The Inland Revenue Department is not sure about it, and gets into dispute with the taxpayer. The taxpayer gets all nervous about being in dispute with the department and settles with the department, because lots of taxpayers are scared of the might of the Inland Revenue Department. That means a precedent is set that suggests that the scheme is outside the law.

Now the tax adviser who promoted the scheme is caught without having had any say in its defence—in the first place because a person involved in the scheme may have agreed to a settlement with the department. I would like the Minister to explain to us how in this legislation the situation will be overcome in which we have a perfectly honest and reasonable tax adviser, promoting what he or she believes is a reasonable scheme, but being caught because a taxpayer agrees to a settlement.

Following on from my colleague in this part—

💬 Rodney Hide: A good speech, actually.

It was a very good speech—very informative. It was most helpful. My colleague touched on a few very good points. I would ask the Minister in the chair to take a call to answer some of the questions that the member raised. Why is it that legislation concerning the Inland Revenue Department can require somebody to pay 100 percent of the tax the department deems to be owing, before it has been demonstrated that it is owing? Why is that the case? Why is it that that person will then receive a much lower interest rate than he or she will probably be borrowing to pay the tax? The people who are likely to find themselves in that situation are the entrepreneurs of this country—the sorts of people that the Prime Minister of this “Labour propped-up Government by a few on the side” has said—

💬 Brian Connell: United!

United Future members, who say one thing, and vote another way. That Government has said that it will support entrepreneurs. It will support small-business people. It will support the wealth creators of the economy. Here we have a situation where Part 3 of this tax amendment bill being debated in Parliament today does exactly the opposite to what the Government has been talking about doing for the last 3½ to 4 years. In fact, it could be enough, as my colleague has pointed out, for people like tax advisers to become so shy of what could happen—its ramifications to them and their businesses; they could be in breach of the law—that they will not give that advice.

Dr the Hon Lockwood Smith: The penalty is 100 percent.

The penalties are so tough. Most people know that they do not want to get offside with the Inland Revenue Department, and I know in my own farming business, and in small businesses around me, the amount of effort that people go to, to make sure they comply with the department’s requirements. Sometimes it is to an extreme point, where they worry themselves and they worry their families. There are many documented cases of where that has happened. Many members of this Parliament have raised those issues, and here today, despite all the rhetoric about those issues, we have legislation that is likely to make them worse. That is absolutely contrary to what the Government has told everybody it will do. It is another layer of cost, another compliance that will be hard to live up to, and another potential situation for good honest citizens who do not understand the detail of tax law to get themselves slightly out of line with the Inland Revenue Department and to have thrust on them that draconian penalty of 100 percent of what the department deems them to owe. There is no natural justice in that. I suggest that the Minister take a call and explain to us why, on this basis, the legislation should proceed through this Parliament.

I also want to touch on the whole issue—once again, it is referred to in Part 3; I have just been flicking through and having a look—of two separate tax rates. It is the issue of a different tax rate based on race. I want the Minister to explain that to this Committee, once again, because the previous Minister in the chair, the Minister of Revenue, got up and made an attempt to explain it. I congratulate him on that but I certainly was not convinced, and I know that the Māori authorities were not convinced either. This Minister in the chair may have a different approach that is more convincing. I suspect he will have a few Māori authorities in his own electorate, and I am sure he will have a bit of knowledge of the issue. Maybe he can take some advice from his officials. I would like this Minister to take a call when my time is complete, to explain to us why we will have this draconian legislation pass through Parliament under this Labour-led Government, and why it feels we should have our tax laws based on racial grounds rather than any other criteria that would be sensible to apply.

The Minister may not consider taking a call right now. He might consider waiting until the Minister of Revenue comes back. That will be fine, but one Minister somewhere in this Government needs to explain to the rest of the New Zealanders who are listening today, and who are wondering about this legislation, why we are proceeding with it, given the overwhelming advice of a range of people in the select committee my colleague was part of, who suggested that this was not the right approach. Why has the Government finally decided that it needs to proceed with Part 3 of this bill today, when there is an overwhelming majority of people who have said it is not right?

We see in the Chamber today the contempt with which this Government treats Parliament. We do not see the Minister rising up to answer questions. I can understand that, because this Minister in the chair, the Hon Mark Burton—

💬 Jill Pettis: There are thousands here.

—is incapable of understanding this bill or answering questions on it. I am pleased that Jill Pettis called out about the lack of Government MPs in the Chamber, because there are only three MPs from the Government present. One of them is the Minister sitting in the chair, not paying attention, and the other two are here to move that the question be now put. Not one of them will stand up and speak to the bill, or answer questions. I am afraid the Greens have become doormats, and I hope the United Future members are not doormats, because I have a very serious issue and want to take members to page—

💬 Jill Pettis: How many ACT members here—one?

Ah, but what a member!

The CHAIRPERSON (Ann Hartley): I remind members about the convention of not referring to the absence of members. Thank you.

I was referring to the fact that there were three Government MPs present. So it is not that the others are absent; it is that there are three Government MPs here. I want to direct the attention of members to clause 103, which is a disgrace. We had a committee inquiry to hear how the Inland Revenue Department could get a bit out of hand. It was a good committee, chaired by Peter Dunne. Members were stunned to learn that one could get hit with a 50 percent prepayment of an amount in dispute. We heard of cases, demonstrated as true, where the Inland Revenue Department without any reason declared that a taxpayer owed $1 million. The poor old taxpayer had to front up and pay half. We thought that was outrageous. It was never tested in court, but just made up. So we got rid of that provision in this bill. The payment goes to zero—unless the commissioner says otherwise. That means the commissioner, or any one of his or her officers. They could just say: “Oh, look, we don’t actually like you, so we’ll charge you 100 percent, plus interest.” That is arbitrary power.

Every submission we had was against that arbitrary power, but members will be pleased to know I have drafted an amendment—[Interruption] Thank you! I know that United Future will come in and support it and so will Mr Dail Jones—to delete clause 103(1C) and clause 103(1D). With good Minister Dr Cullen’s assistance through the experts in the Inland Revenue Department, we have it in form so that it will absolutely work and do the biz-o. A commissioner or departmental officer will not just decide that Mr Dail Jones is to be “done”, and make up a million-dollar tax bill against him without proving it, and without having any reason for thinking it. Poor Dail Jones would be bankrupted before he could ever get to court. That is wrong, and that power should never be put across.

I invite members to reflect on this point, and I am sure that Mr Dail Jones as the only lawyer present will back me up. There are two lawyers—one from the Green Party. She will back me up. If they think that there is a problem they can go straight to the High Court—and help me with my pronunciation—[Interruption] No, John Tamihere was a lawyer, and that is a long story; he was a lawyer, but he had to give up his licence. They can go to the High Court and get a Mareva injunction, which ensures that assets are not distributed. So the person goes to a second authority—a High Court—presents the case in front of a judge, and can hold the assets. That is the way every other litigant or disputant has to do it. Why? Because that is a fair process. How can we have the Inland Revenue Department finding a taxpayer a bit mettlesome, and saying: “You owe $1 million, and you have got to pay it now because we think you might run away. If you don’t think you do, take us to court. Oops! Sorry. You’re bankrupted.” ?

Dr Lockwood Smith knows this. We heard this from taxpayers who were in that situation. This is the most draconian move against taxpayers we have seen in my time in Parliament. We are giving the commissioner, and all who work for him, arbitrary power to declare an amount of tax, never to have it tested, and to demand that it be paid. It is a backward step of unimagined proportions. I am afraid that if this goes through, taxpayers will have to be very, very afraid, and it is unnecessary.

I myself do not take any heart from the Inland Revenue Department saying: “Oh, we’ll use it only in a limited number of cases.” The people who decide whether it is appropriate are Inland Revenue Department people. I look forward to members supporting my amendment, because I know that under this Government I will not get to speak on Part 3 ever again. The Government will move to shut it down.

I wish to speak to Part 3.

💬 Rodney Hide: Will the member support my amendment?

New Zealand First will support the amendment to clause 103. First and foremost, I want to talk about the imputation system in clauses 86 to 89. This revolves all around this separate taxation system. I must admit that Rodney Hide was very right. I am very proud of Rodney Hide. He was very selfless. Being a member of the—

💬 Rodney Hide: The Ngāi Tahu.

I was going to say Te Māngai Pāho, but I do not think it is that. He is a member of the Ngāi Tahu tribe. He is laying it down—

💬 Rodney Hide: I’ve got no Irish in me though.

He has no Irish in him! However, he said we should all be treated as one people. Even when we are talking specifically about clauses 86 to 89 in relation to the imputation system, it still revolves all around this particular issue of a separate tax system, and so on. The Hon Dr Lockwood Smith made some very interesting points. It would be good for the Minister in the chair at this point to talk about the reason that this imputation system is in place with this bill. If he is not totally up with the play on it since the bill is not under his name, that is not a problem. I will not make fun of him for that, but maybe he could get that information for us or he could speak to us. That would be much appreciated by all members on this side of the Chamber. Pansy Wong and I are in agreement. I guess we will enjoy that moment, because it is a bit of a worry. We might not see that moment ever again.

I want to ask a question in relation to this part. Is this bill fair? Are clauses 86 to 89 fair? Rodney Hide asked a good question. Is it a fair process?

💬 Opposition Members: No!

Members all around the Chamber agree with me. They do not feel that it is a fair process. Is this bill just?

💬 Rodney Hide: No.

It is not just. I do not know what the lion is saying, but he is laying down like a lamb. He is roaring again. As we look through this part, the question we need to ask is whether it is draconian legislation.

💬 Rodney Hide: Yes.

The answer is yes. It has changed from no to yes. We also have to ask whether it is arbitrary. Yes, it is. We have to ask ourselves whether this is a step forward in the right direction for the people of New Zealand.

💬 Rodney Hide: No.

Even the member of Ngāi Tahu says “No”. It is not fair for all of us when we talk about clauses 86 to 89.

I want to focus on clauses 86 to 89, as well. Essentially, this goes to the heart of this debate. I am talking about the tax rate and imputation credits. I want to take a moment to read from the commentary. It is important that people understand exactly what this issue is: “Currently income retained by Māori organisations is taxed at a rate of 25 percent,”—there is something in that for a start—“refundable if the income is distributed within 4 years.” Up to that point there is not a problem. “If the income is retained for 4 years before distribution to members, the distribution is subject to resident withholding tax at a rate of 33 percent.” This is where we run into a problem. No credit is given for the 25 percent tax paid by Māori organisations.

That is clearly wrong. I do not think members on this side of the House have a problem with that, but one does not fix one problem by creating another. The tax imputation issue should be dealt with. One does not have to go down the track of introducing a race-based tax just to fix that issue.

The other issue I would like to draw to the attention of the Committee is that the way this legislation is drafted is anti-competitive. By that I mean that it gives a party a competitive advantage. If we really want to grow our economy and if we really understand how to grow our economy, we will understand that we need to attract foreign capital, we need to give those people a fair go, and we need to give our business people a fair go. We will not do that, if we put in place legislation that is anti-competitive.

Let me remind members why I say that it is anti-competitive. The select committee was told that this would provide a $70 million windfall for the Māori authorities in the fishing industry alone. That is not a fair go. It will lead to a racket. Gordon Copeland has already started to establish that there will be rackets. He has gone out and found someone who feels that he or she would like to take advantage of this. But, more than that, we have authorities like PricewaterhouseCoopers that told the select committee that it would not be difficult for Māori businesses with the help of PricewaterhouseCoopers to access the very favourable 19.5 percent tax rate. I again ask the members of this House whether that is a fair go. What does it suggest to members? It suggests to me that we will see widespread abuse. What we are doing is creating structures with the incentive for abuse—and human nature, being what it is, will take advantage of that.

I will reflect on United Future’s position for a moment. I find it very ironic that a party with the word “united” in its title can be supporting legislation that is so divisive. What they are saying to the people who supported them—[Interruption] Someone is yelling out over there. I think it is the senior Government whip again. I did not think that genetically modified organisms had been released yet! United Future members are telling the people who supported them on the basis that United Future wants a united future for this great country of ours, that they are supporting a race-based tax. They will put a minority group of people at an advantage over others.

The irony of this, of course, is that the Minister is right to reduce taxation if he wants to grow the economy. The problem is that the Government should not do so for just one section of the community. It should do so for everybody. It is a basic construct, if I could use that word, that if we want to share wealth, then we have to create it, and by lowering tax, that is exactly what we will do.

I really think the Minister should take a call, because my colleagues, starting with the Hon Lockwood Smith, have raised four very substantial questions during the debate on this part. We have not heard one intelligent reply from the Labour side, or from the Minister. National will certainly support the amendment to the draconian measures imposed in clause 103.

I am going to raise another question, and I really think it would be helpful if the Minister could pay attention, start to read Part 3, and start to consult the officials. I have been reading Part 3, in which there are quite a few definitions. Part 3 involves the issue of penalties. Clause 72, “Interpretation”, now has a subclause (2B). We now have the term “acceptable tax position”. The term “acceptable tax position” apparently means a tax position that is not an unacceptable tax position. This is very interesting. The public will be interested to know that an “acceptable tax position” means a tax position that is not an unacceptable tax position!

So at that point, I thought I had better do some research. I went back to section 141B, “Unacceptable interpretation’’, of the Act. Apparently, in that section headed “Unacceptable interpretation”, an unacceptable tax position occurs when it: “(a) Is an interpretation or an interpretation of an application of a tax law; and (b) Viewed objectively, that interpretation or application fails to meet the standard of being about as likely as not to be correct.”

I think that the Minister should really take a call. The wording of that section is very unclear, and many taxpayers may start to get really worried. First of all, I would like the Minister to explain whose objective will be taken into account when they interpret whether that application fails to meet the standard of being about as likely as not to be correct. What is the test to determine whether the interpretation is “as likely as not to be correct.”? Is it at the sole discretion of the commissioner? Is there a process of application for review, or is it done through some very long-established court cases?

I say to the Minister that it is important for taxpayers to understand when a penalty is imposed on them, when they become caught in a position that is actually not an acceptable tax position—no wonder people need lawyers to help when they are filing simple tax returns! I raise that issue because that particular interpretation alone is enough to scare taxpayers, because how can they be sure that they are in an acceptable tax position?

I also want to, once again, comment on a very important point—it was raised by both the Hon Lockwood Smith and Rodney Hide of ACT—and that is this: why is it once again not a level playing field? The Inland Revenue Department is a very significant Government department. It is well resourced. Why should it not be held to the same standards in terms of getting its assessments correct, and in terms of the detail it needs to go into before the commissioner can actually say how likely it is for one to assume that the taxpayer is part of a scheme that is liable to be caught under the Act? It certainly is not fair for the commissioner to arbitrarily say “50 percent” or whatever the outstanding liability should have been.

I rise to talk about issues regarding clause 103 that were raised by Rodney Philip Hide of the ACT party. Clause 103 should be renamed “Kiwi Protection Clause Against Rodney Hide and the ACT Rort Party”. The reason the clause should be so renamed is that when payments are disputed—and in large part they are disputed by larger corporates—[Interruption] There is Rodney Hide, protecting his mates. He worked for Tappenden Holdings, with his friends Gibbs and Farmer. I have to tell members that these clauses are vitally important to protect the revenue of the nation against white–collar, gold-pen pushing people who owe the State $4 billion.

💬 Rodney Hide: I raise a point of order, Madam Chairperson. Does the Chair seriously think it is in order for John Tamihere to speak like that—because he is a guy who has actually been done for fraud in the courts of this country.

Madam Chairperson—

The CHAIRPERSON (Ann Hartley): Is the member wishing to speak to the point of order?

Well, it was not a point of order, so I wanted to get your steer so that I can get on with my speech. He is trying to break it up.

The CHAIRPERSON (Ann Hartley): Members need to stick to the bill and be orderly, otherwise it will lead to disorder.

I refer to the requirement for payment of disputed tax, and the requirement for a discretion on the part of the commissioner. We must protect the revenue. There is $4 billion outstanding, and it is owed particularly by corporates who dance and use smart alec accountants and lawyers to defeat the purposes. The wage earners and salary earners in this country are the honest Kiwis. They make up 89 percent of the payers, and they pay on the knocker every time. We have to protect them against the types of people from the rort party. That is what clause 103 is all about. Clause 103 protects the revenue, and it protects the revenue from the types of people Rodney Hide is in Parliament to look after.

I have never heard anything as despicable as the speech I have just heard from John Tamihere. He is supposed to have had some legal training, and for him to say that that type of clause is there for that type of purpose is utterly ridiculous.

Sitting suspended from 6 p.m. to 7.30 p.m.

When the Committee rose, various issues were being discussed. We had just had to put up with a speech from the Labour Minister, the Hon John Tamihere, which must have been one of the low points of the House since I have come back to it. With speeches like that, one wonders how he can remain a Minister under this Labour Government. From his speeches about Labour Party policy, and from the manner in which he conducts himself in the House, it seems he has dissociated himself from Labour Party policy, which is totally outside the Westminster system, but that is obviously the standard the Prime Minister wishes to set. That is all I will say about that.

In so far as the bill is concerned, I refer to clause 103, “Obligation to pay tax during challenge”. As I see the bill now, it seems to require that the total amount has to be paid. There was a time when one paid only 50 percent—and although I say “only 50 percent”, it was still 50 percent. I believe the reason it has been increased to 100 percent is that it was possible under the old system to get some money back from the Inland Revenue Department. If one had paid the Inland Revenue Department 100 percent, and was under a challenge, one could then say to the Inland Revenue Department: “Look, I’ve paid you 50 percent more than I had to, and now I want 50 percent back.”

That situation applied to a client of mine when I was involved with the taxation review. Do members think I could get that 50 percent back from the Inland Revenue Department? Under that system, the department insisted that people pay 50 percent, but when people overpaid the department and they tried to get 50 percent back, it was virtually impossible. Fortunately, in that case, not only did I win, but I was also given interest on the money the Inland Revenue Department had failed to pay back to my client. That is a dreadfully uneven playing field.

As the honourable Rodney Hide mentioned, people can go broke in the course of that process. As the member also suggested, if there were a malevolent Government in place that could somehow influence the Inland Revenue Department, this clause could be grossly manipulated to put people into bankruptcy and companies into liquidation. I am pleased to say I have never ever known that to happen, but times can always change.

Even in the fairest of economies, and in the fairest of times, someone in the Inland Revenue Department can make a mistake. We have known of cases where that has happened. Was there not a Mr John Henderson involved once?

💬 Rodney Hide: David.

David Henderson—he got into all sorts of financial difficulties, as I recall, and that would have been under the 50 percent system. Members can imagine what would have happened to him under the 100 percent system.

This is an iniquitous clause. It is dreadful legislation. It shows that the Government and the Inland Revenue Department have no faith in their view of things. Most people have the opportunity to go to court and to fight out a case, and if they lose, they pay. One of the things Roger Douglas did in the 1984-90 era was to increase the amount of penalties, so that people thought twice about getting involved in that type of situation. If they did try to take on the Inland Revenue Department and lost, they paid through the nose with interest, penalty interest, and suchlike. That made it very, very dangerous to try to take the Inland Revenue Department on. I will be supporting Rodney Hide’s amendment, for that reason.

The other area I will discuss is with regard to Māori authorities, which are mentioned in this part of the bill, as well.

I am taking a call on Part 3 because I have been listening to this debate, and I have to say that this bill, the whole bill actually, is causing me more and more concern. This bill, I think, is quite a serious bill because of what it is doing. Part 3 is an example of that, and we have just heard a very good speech from Dail Jones about the concerns we have. To be fair, I must say that the Minister of Finance was taking calls in this debate, and helping to explain to the Committee what is going on—

💬 Hon Paul Swain: Not according to my notes.

Michael Cullen did not take a call? He has taken a call, but not on this part. In fact, he took two or three calls, and I thought he was very helpful. He tried to explain the bill but, at the end of the day, he was not able to. Nevertheless, his contribution was useful, and it was good to see the Minister in the chair take a call. I really would like the Minister in the chair now, Paul Swain, to stand up and advise the Committee why he thinks this legislation should be passed. Also, it would be great if the Minister of Māori Affairs would take a call on this part and explain to the Committee why he believes it is an important part of what the Government is doing for Māori.

💬 Rodney Hide: He needs money for the booze-ups.

Well, he could explain why money has been spent in the wrong places. But what concerns me—and I know that it probably concerns the Minister of Māori Affairs; or I suspect it does—is the injustice of what this bill will do for all non-Māori in this country.

💬 Hon Parekura Horomia: Don’t forget your mokopuna.

She would not expect to have special attention just because she is of Māori descent. She is a person who will stand on her own feet in this country, thank you very much. She does not need to have a Government saying to her: “Sorry, you aren’t capable of looking after yourself.” She is a young lass who will get on her feet and make something of her life by herself, for herself. She does not need somebody like the Minister of Māori Affairs coming along and saying: “Sorry. You’re not capable.”, which is what this bill is doing. It is saying: “Sorry. You seem to be disadvantaged and incapable of looking after yourself.” I am pleased to say to my colleague across the way that my mokopuna will not be in that situation—no one in this country needs to be—but the Government, with this legislation, is encouraging that to happen.

I know that that Minister across the way does not think like that, actually. I am surprised that he is sitting here, listening to this debate, and not contributing. More important, I am surprised he is allowing his Government to put this sort of legislation through. In the days when he was an ordinary person, prior to becoming a member of Parliament, he never thought like that, at all. That member over there worked at trying to get people on their own feet and using their own values. That is what he used to do. Now, he is not even defending Part 3.

As I said, we have just heard a very good speech from the honourable Dail Jones, who told us about the difficulties that this legislation will cause people, and about the extra costs they are likely to incur. I am talking entirely about the extra costs that are likely to be imposed on people if there is a dispute about any area of Part 3 with regard to the payment of tax. I say to the Minister in the chair and to the Minister of Māori Affairs, particularly, that they need to be concerned about that. The Minister of Māori Affairs needs to read Part 3 if he has not yet had the opportunity to do so—and he may not have—and ask why an extra impost will be put on his people. He needs to ask why the Government is imposing extra compliance costs when this legislation is supposedly an advantage to people of Māori descent. I say to the Minister across the way that I do not know that that is so, at all. He needs to think seriously about how he will vote on this legislation, because when he is on the marae next time, somebody who knows a bit about taxation law will stand up and start asking him some questions—and what is going to happen?

I will speak on clause 103. If members look at the clause, they will see that it has the word “New” written there, then, in brackets, the word “unanimous”. For the benefit of those listening, I point out that that simply means the clause was unanimously approved by the Finance and Expenditure Committee. The names of the members of the Finance and Expenditure Committee are also set out in the bill, and they include the honourable member Rodney Hide. At the select committee Rodney Hide agreed with everyone else that clause 103 was a good clause to include in this bill. He heard the explanation, as we did, from the officials. They said that this clause is intended to address situations where people blatantly set out on a course of tax evasion, then, when the Inland Revenue Department catches up with them, decide to transfer their assets off shore, liquidate their New Zealand position, and dodge the tax. This clause is aimed at addressing those specific situations where there is significant risk—and that is what the wording is; “a significant risk”—to the revenue. People will have to front up with that tax, and pay it into an escrow kind of account whilst the matter is determined in the courts.

However, I go back to my comments about the member, Rodney Hide. Having agreed to the clause in the select committee, he now comes along to the Committee of the whole House tonight and proposes his amendment. I have not actually seen the amendment. He has not bothered to show me a copy; nor has he bothered to read it to the Committee. We have no idea what is in it. But I ask myself why he has done that. Is it because the member does not know his own mind, or could it possibly have something to do with the fact that what happens in the select committee with the officials is kind of a private matter, whereas what is happening here in the Chamber tonight is broadcast on the radio?

The CHAIRPERSON (H V Ross Robertson): I am sorry to interrupt the honourable member, but I am having trouble hearing him because of the noise that is taking place to my right. I remind honourable members that if they want to have long conversations, they can do so in the lobbies.

Concerning the situation about the so-called race-based rate for Māori authorities, I would like to make a couple of points. First, once again, if we look through the list of members on the Finance and Expenditure Committee, we will see that it includes Rodney Hide from the ACT party. He did not lodge any kind of minority report about his disagreement with that particular clause at the select committee, yet he comes to the Chamber tonight and brings out the race card. By contrast, Craig McNair and Lockwood Smith, from the other two Opposition parties, at least had consistency in their position—a position, by the way, that I completely and utterly disagree with. But at least they were consistent in saying at the select committee and here in the Chamber that they oppose those particular provisions in Part 3.

I was delighted to hear Brian Connell admit that the present tax rules that apply to Māori authorities here and now tonight are totally unjust. They amount to a double taxation on those authorities, and I am glad that he picked up on that and was prepared to admit it. Tonight we are removing a complete injustice, a double taxation, which applies only to Māori authorities. That is the point—it applies only to Māori authorities. It does not apply to companies. It does not apply to other organisations. Tonight we are putting right a fundamental injustice towards Māori organisations. That, in my opinion, is something that this Chamber ought to freely acknowledge. As I said before, I totally and utterly disagree with the position taken by New Zealand First and National. On the one hand, Brian Connell has started to admit that this is a serious injustice and, on the other hand, he argued that this injustice should continue. I believe that that is a totally unacceptable situation.

The CHAIRPERSON (H V Ross Robertson): Would members please resume their seats. I am sorry to interrupt the honourable member, but there is too much noise. One or two yellow cards will be going out. Will the member please continue his speech.

I do not think there is really much more one need add. This is a clear case of Parliament being asked to rectify an existing serious injustice against Māori organisations. I think that that is the reality, and I totally disagree with all the concerns being expressed that somehow this is racially based. If it is racially based, it is removing an injustice that applies only to those people who are predominantly Māori.

I move, That the question be now put.