Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill

It is my great pleasure to take a call on Part 3 of this mammoth legislation. Part 3 deals with consequential amendments to the Goods and Services Tax Act made as a result of the policy changes brought about in the bill. It includes clause 518 to clause 528.

Essentially, three main parts of the Goods and Services Tax Act need to be amended as a consequence of this legislation. The first of those has already been discussed on a number of occasions during the course of this debate. As I mentioned in my contribution on Part 1, the parts of this bill are divided by the various Acts that are to be amended, so the same items of work come up in repeat parts.

The first item in Part 3 that I want to talk about is the tax consequences of the emissions units and how they would work in relation to the Climate Change Response Amendment Act. That earlier legislation set out quite clearly that the Kyoto emissions units were to be zero-rated, but the issue that arose and that needed clarification in this legislation—

💬 Hon David Cunliffe: I raise a point of order, Mr Chairperson. It is with some reserve that I rise to question whether the member is focusing on Part 3 rather than Part 2. It is my understanding that the Kyoto matters fall under Part 2.

The CHAIRPERSON (Eric Roy): That is hardly a point of order.

It is clear which members have read the bill and which have not. As I mentioned, Part 3 relates to amendments to the Goods and Services Tax Act. The point I was discussing was the GST treatment of emissions units. Clearly the Goods and Services Tax Act needs to be amended, which is why it is in clause—

💬 Chris Tremain: 519(2)!

That is why it is in clause 519(2), as my senior whip has just pointed out—if that is any use to the finance spokesperson from the other side of the Chamber, who clearly has not read the bill. I do hope that is helpful; we are here to help.

💬 Craig Foss: Written apology.

I will accept a written apology at any time. That would be fine.

As I was saying before I was interrupted, Part 3 clarifies the issue around the zero rating of the Kyoto emissions unit. It needed to be made clear that the zero rating did not apply to the transfer of emissions units by the Crown under earlier agreements—primarily, the Project to Reduce Emissions.

Interestingly enough, what started off as a reasonably small, technical part of this clause was one that the Finance and Expenditure Committee latched on to in some degree of detail as a response to the submissions we had received. It led us into an interesting debate about whether the zero rating of the Kyoto unit should be extended to the non-Kyoto units—sometimes called the grey market or unofficial units. This was discussed over a number of meetings of the Finance and Expenditure Committee, and as a result the committee recommended to the House that the zero rating should be extended to the non-Kyoto units as well as the Kyoto units, thereby tidying up an area of some potential confusion. That is one of the amendments we deal with in Part 3.

The second amendment that I will touch on is the GST treatment of exported second-hand goods. The changes here ensure that in appropriate circumstances exported second-hand goods that will not be brought back into New Zealand are treated the same way as exported new goods. That was just a matter of ensuring that appropriate parity was maintained. Once more, the work of the committee ensured that a number of important changes were made. Unlike the first example, in this instance the issue was about ensuring that any potential future confusion could be minimised, such as ensuring that words like “supplier” were switched for words like “registered person” to make clear that those provisions applied only when the supplier was a registered person. I think that part of the bill ensures there are quite clear rules around the treatment of GST on these exported second-hand goods.

The final amendment I will touch on is one—I have to confess—that before this bill had never crossed my mind. It is the whole issue of how GST applies to loyalty points—air miles, the Fly Buys scheme, and the like. I will confess to being an avid shopper. I do tend to rack up a few royalty points; my husband will certainly attest to that. I know that the loyalty point schemes have been something of a phenomenon in recent years amongst avid consumers such as me—I do my bit for the economy—and the GST treatment of those schemes is a matter of some confusion.

The deputy chair of the Finance and Expenditure Committee is faster than a speeding bullet. It is wonderful to have her peroration on the subclauses about Kyoto emission units. But Part 3 is where the debate really starts to hot up. I felt in a bind because we really needed to debate Part 2 at greater length, but Mr Chairperson exercised his discretion and brought us right to the political heart of the matter.

The bill is Minister Dunne’s personal statement to the nation. It is part of his legacy. But he is not finished yet. He will no doubt be the Minister of Revenue for many more Governments, and he will not rest until he has raised GST. That is what this part applies to—GST—and it is a timely and sobering reminder to the Committee that the Government is bent on raising the rate of GST.

A little bit of a phenomenon is being observed around the country—that is, the ability of the Government to get itself elected on a programme that is so bland—

💬 Chris Tremain: Very good question—who raised it from 0 to 10?

Yes, OK, I know. Who brought in GST? Coming back to the bill, it says right here in clause 518—the proof is here—“Goods and Services—”. [Interruption] Members opposite asked the question; they would be very well advised to hear the answer: “Goods and Services Tax Act 1985.”

When Peter Dunne was but middle-aged, GST was first introduced. He was a member of the Government then, and he is the Minister of Revenue now. He has come a long way, but he has a lot further to go—2.5 percent further, in fact, if the newspapers are to be believed.

We need to observe two things. The first thing is that when stuck with a politically unpalatable decision, the Prime Minister will identify a brave junior Minister, normally the leader of a minority party—say, Rodney Hide—and let that Minister off the leash. But when the Minister goes too far, out comes the scrub-cutter and takes the Minister off at the knees, which in Mr Hide’s case is particularly challenging. But there was no such problem with the venerable Mr Dunne, who on this matter has many more miles yet to travel.

The second phenomenon we observe is that the difficult decisions are not contained in the National Party manifesto. Oh, no—Steven Joyce has seen to that. All policy was stripped out of the manifesto on Mr Joyce’s instructions. The Crosby/Textor - Joyce manual states: “If you can say it, don’t write it down, particularly in an email, and if you can nod, don’t say it, particularly not in a manifesto.” That is the way with GST and the Tax Working Group. All the controversial ideas will be inured from politics. No way will they be part of the Government’s programme. They are the objective and conscientious product of the most learned doyennes of tax policy from out in the private sector.

The proposal will emerge to raise GST to 15 percent, and Minister Dunne will champion it, as per the harbingers in Part 3 of the bill. Out will go Minister Dunne, and Steven Joyce will blow the whistle. He will get above the trench, head into the machine gun fire of public opinion, take a few brave steps before collapsing in a hail of polls—

💬 Chris Tremain: I raise a point of order, Mr Chairperson. This Shakespearean performance is very nice, but I would like the member to focus on the part of the bill at hand, which is about emissions units, GST-exported second-hand goods in clauses 522 and 523, and GST loyalty points. I would appreciate your indulgence in this point of order.

Speaking to the point of order, I was particularly referring to GST on the loyalty points of the Minister, who is earning loyalty points with Mr Joyce for his brave carriage of the GST issue emanating from the Tax Working Group.

The CHAIRPERSON (Eric Roy): There is a bit of tolerance around this area of debate, but I think all members know that, at the end of the day, if I think the discussion is not pertinent, then closure motions are accepted. I ask the member to continue.

I shall take a more detailed view for the next few minutes. What is really important, in fact, occurs in clause 521, which relates to the time of supply of GST. We ask ourselves how long it will take for the ruminations of the Tax Working Group to come as far as the public domain in respect of GST, which is the subject matter of this part, I say to Mr Tremain. How long will it take the Committee to deliberate on it? Again, we find ourselves inescapably drawn back to the main consensus provisions of the bill, which are that the process was too constrained.

If, in tax bills to come, Minister Dunne brings forward his brave attempt to raise GST, we put down two markers right now. First, the Labour Party does not support raising GST on New Zealand’s low-income earners, unless they are more than fully indemnified from the regressive nature of any such change. Second, if there is going to be any debate about GST at all, we need to have a full and proper process, unlike the discussion of GST contained in Part 3 of the bill.

I am very pleased to speak on Part 3 of this bill, the Tax (International Taxation, Life Insurance, and Remedial Matters) Bill. I want to acknowledge a small victory for a small section of the community in this bill.

💬 Hon David Cunliffe: United Future.

No, it was not United Future; it was not as small as that. It was the scrap metal industry. Three men—and they were men—appeared in front of the select committee. They were blokes.

💬 Hon Trevor Mallard: They were real men!

They had lambs on their shoulders; they were real men. Their suits did not quite fit right, their ties looked a bit tight, and they had calloused hands. But they were the sorts of blokes who go out there, create jobs, and create exports. They were being hammered by the fact that under the existing regime when they get a load of scrap—copper or whatever—and send it off in a container to China or somewhere else, they have to pay GST on it. I thought it was great to see representatives of that industry.

Progress reported.

Report adopted.

The House adjourned at 5.55 p.m.