Taxation (Tax Administration and Remedial Matters) Bill

I move, That the Taxation (Tax Administration and Remedial Matters) Bill be now read a first time.

💬 Grant Robertson: Is it the right speech?

I can assure Mr Robertson I have checked the drafts very thoroughly. This is the right speech for the right occasion, and it will be worth listening to. At the end of this debate, I will recommend to the House that this bill be referred to the Finance and Expenditure Committee for consideration.

This bill continues what has been a very important year for tax reform, a year that has ushered in a package of measures promoting economic growth, integrity, and fairness in the tax system. The key focus of the Taxation (Tax Administration and Remedial Matters) Bill is on efficiency and on reducing compliance costs. Reducing tax compliance costs is something that every Government and every Minister talks about, but it is something we have to work at constantly to stimulate the New Zealand economy and to encourage investment.

One of the measures this bill contains is the abolition of gift duty. I first raised the prospect of the abolition of gift duty in June of this year. Following a consultation process, I am delighted that this bill gives effect to that decision. Gift duty no longer raises any significant revenue, and imposes significant compliance costs on taxpayers. It is well past its use-by date, and I am delighted that the announcement of its pending abolition has already been widely welcomed by taxpayers. Gift duty is a tax that currently produces about $1.5 million in revenue. It directly costs the Inland Revenue Department about half a million dollars to collect, and is estimated to cost about $70 million in compliance costs. Under any reasonable assessment it does not add up, and so its abolition is long overdue.

The bill makes changes to the tax disputes process, and I am delighted that there has been generally strong support for the proposed changes to the procedural rules that we are making regarding the tax dispute process, along with some administrative changes to the process. The Inland Revenue Department manages this system through a process of significant public consultation and dialogue with key stakeholders in the matter, and I am confident that the measures contained in this bill will make for a more streamlined process for all concerned.

The bill introduces changes to the tax administration rules to relax secrecy provisions under specific criteria. The changes being contemplated in this legislation will provide better value for money across the Public Service, with improved speed, accuracy, and certainty of information through wider use of Inland Revenue Department information. Currently the tax secrecy provisions are so tight that they actually prevent the Inland Revenue Department providing better customer service. Providing the Inland Revenue Department with greater ability to provide information will enable us to improve efficiency in the Public Service, provide a better customer service, and efficiently operate the tax system. This bill introduces measures that give effect to all those requirements.

Changes to the tax information-sharing and secrecy provisions in the bill will allow the Inland Revenue Department to share information with other Government agencies for specific purposes and under specific criteria—for example, to prevent abuse of the social assistance system.

Under the current rules, it is unclear whether the Inland Revenue Department can accept the assistance of a relative or a friend helping a taxpayer who is a non - English speaker or who has hearing difficulties, even if the taxpayer has given his or her permission to be helped. This bill seeks to tidy up those sorts of anomalies. The tax system fundamentally relies on the ability of taxpayers to trust the Inland Revenue Department with the information they provide.

The changes to the secrecy provisions are, therefore, being proposed only under very carefully prescribed criteria. In addition, the bill clarifies the use of money interest rules that apply to underpayments of tax to retrospectively give taxpayers greater certainty that this interest is, in fact, deductible for income tax purposes.

The remaining items in the bill such as enhancements to the tax pooling rules and technical changes to the portfolio investment entity rules are mainly remedial in nature to ensure that those respective rules work as intended.

This is a brief description of some of the main features of the bill. For a more complete discussion of the proposals, I refer members to the separate explanatory note of the bill, which describes the changes in detail and which has been separately distributed to members.

Overall, this bill will continue the focus on positioning the New Zealand economy well for future economic growth and for a world-class tax system. I therefore with pleasure commend the Taxation (Tax Administration and Remedial Matters) Bill to the House.

I thank the Minister of Revenue, and I rise to oppose the Taxation (Tax Administration and Remedial Matters) Bill. I do not oppose the bill because of its provisions on tax secrecy. I do not oppose the bill because of the new privacy framework. I do not oppose the bill because of tax pooling, and I do not oppose the changes to donee status. But Labour most definitely opposes the change to abolish gift duty. We do so because politics is about priorities, and this is one more little straw that is in danger of breaking the camel’s back of the nation’s fiscal balance. This abolition of gift duty is not a matter of $70 million or $100 million. The reason that gifting-tax avoidance is limited to that small amount of money is precisely because rules exist. If the Minister removes the rules, I say to him that he will watch a mushrooming of avoidance structures just as have occurred under loss attributing qualifying companies and under trusts.

It used to be the case that the once-proud National Party campaigned on the basis of personal responsibility. I call upon the House, and listeners out there, to think just for a moment about what personal responsibility means in a time of recession. New Zealanders around the country are doing it tough. God knows that West Coasters have been doing it tough! Cantabrians have been doing it tough. But in my electorate of New Lynn, small businesses, retailers, and employers are doing it tough. In a recent poll, one in four New Zealand families said they were worried about losing the roof over their heads. We know from statistics released in the last 2 days from Statistics New Zealand and Treasury that the average household family income has gone backwards by $30 a week in the last year—by $18 for the average salary of an individual. Against that background of real suffering, I call upon the Government to walk the talk on personal responsibility, and personal responsibility in the tax sphere means that everybody pays their fair share. Everybody pays their fair share.

There is no room for any form of legitimised avoidance in times of recession, when New Zealanders are fearful of not being able to keep the roof over their heads, put food on the table, pay National’s extra GST, or get by. They do not want to be told that only half of the top hundred taxpayers are on the top tax rate, which is what the Inland Revenue Department told the Tax Working Group. They do not want to be told that after two rounds of tax cuts that have overwhelmingly benefited the well-off—by cutting the top tax rate firstly from 39c to 38c, and then by cutting it all the way to 33c—42 percent of the tax remission went to the top 10 percent of earners. New Zealanders do not need yet another gift to the better-off. Politics is about priorities, and sometimes it is the little things that matter. Sometimes it is the little things that people out there can grab on to and get their heads around, and say “Ah, ha! Now I understand what this Government is really about. Now I understand the difference between National, the party of the few, and Labour, the party of the many.” Labour opposes this bill because this bill is a bill for the few.

💬 Chris Tremain: Party of the many—that’s rubbish!

The member may laugh, but this is a bill for the plutocrats of Remuera who want to gift their equity to little Johnny or little Jane—someone who, by the way, might just have a lower tax rate than mummy or daddy. Those are the issues.

It may be the case that there are perfectly legitimate reasons for gifting. Labour is not saying that anybody who indulges in gifting is avoiding tax—members should not misread me in that. There are perfectly legitimate reasons for gifting. But as of today it is possible to gift, tax-free, up to a threshold of $27,000 per annum, which is enough for most families. It is enough for most people. But it is not enough for the National Party, because its constituencies demand the right to gift more than $27,000 per annum, per man, woman, and child, because such is the burden of income to be spread.

Well, that should not be, in these tough times. If it is good enough for ordinary Kiwi families to be told to pull in their belts, then it is good enough for the Government to put up legislation that reflects the needs of hard-working New Zealand families. That is why our leader was talking yesterday about the squeezed middle, the hard-working New Zealanders who are just well-off enough not to qualify for anything in the benefit or welfare systems. They have jobs. They are plumbers, they are secretaries, they are technicians, and they may be taxi drivers—the squeezed middle—and this bill does not help them. This legislation is not a priority for the middle, because those people do not have a spare $20,000 each to give away each year.

I ask the chief Government whip: $27,000 of post-tax income is how much pre-tax income? Is that too much maths for him? The answer is that it depends on the tax rate. I thought the whip might buy into that one but, no, strange silence broke out on the Government benches when members were confronted with such a piece of mathematics. Dr Paul Hutchison, the highly qualified representative of the medical sector, is there looking at me and grinning, because he knew the answer but he was not going to tell the chief whip—they can sort that out later.

Labour will look forward to hearing the submissions on this bill, and we hope to hear from a large number of ordinary New Zealanders who will want to express their views about whether the abolition of gift duty really is a priority for tax reform. It will go down as one of those little emblems, one of those little tokens, one of those little moments of truth, at a time when the recovery is not happening and people are wondering about their futures. They will hang on to this and say “Goodness me! Wasn’t it enough to have two rounds of tax cuts for the well-off? Wasn’t it enough to take the top tax rate all the way down from 39c to 33c? Wasn’t it enough to give two-thirds of the money to one-third of the people? Wasn’t it enough to give 30 percent of the money to the top 5 percent?”. No, it was not; we are going to make it easier, then, for them to gift their winnings to little Johnny, who happens to be on a lower tax rate than mum and dad.

This is what Labour would do. It is that time in the cycle when the public wants to know what Labour would do. Labour would not abolish gift duties. Labour would crack down on avoidance. Labour would hack into the $2.3 billion per annum of losses on loss attributing qualifying companies alone, and Labour would ring-fence loss attributing qualifying companies. Labour would ring-fence loss attributing qualifying companies. There is no reason why the losses on a company should be written off against personal income. It is fair enough to carry them forward to future profits. It is fair enough to allow the company to manage between good times and bad. It is fair enough for a company to write off legitimate expenses, but it is not fair enough to use a company structure to avoid paying personal income tax, because in these tough times personal responsibility means that everybody pays their fair share—everybody pays their fair share.

The last thing New Zealanders need to hear is that it is a priority for this Government—for the plutocracy—to ram through the House, in a week when we face urgency, a bill to allow them to gift to little Johnny at a lower tax rate. That is not a priority for the New Zealand Parliament. It is not a priority on the gates of Christmas. It is not a priority in a week when urgency is looming. It is not a priority for the Labour Party. Labour opposes this bill, which in many ways is innocuous, but the abolition of gift duty will go down as an emblem of a Government that has lost touch with ordinary New Zealanders, with people who are doing it tough in a recession, and with its own values of personal responsibility. It has lost touch with the electorate, and is soon to lose touch with the Treasury benches. Opposition has been fun but we are over it; we are ready to govern.

Obviously, the previous speaker, David Cunliffe, has been very busy over the break, practising his elocution, speeches, and presentation. I thought I was watching the United States House of Representatives for a while then. I would point that member towards the Supplementary Order Paper that will be put forward in the Committee stage of the other tax bill on, I think, Thursday. I also point him towards Budget 2010, which talked about loss attributing qualifying companies, qualifying companies, and the need to claim credits at the same rate that they were built up in the first place. That is what that Supplementary Order Paper will be all about.

💬 Hon David Cunliffe: Tinkering.

Well, it is quite major tinkering, because the thrust of those arguments has already been debated in this House and voted for in Budget 2010. The member will see those amendments in the Supplementary Order Paper on Thursday, and I am sure he will be voting for them, given the speech he just made.

The Taxation (Tax Administration and Remedial Matters) Bill is a continuation of a move towards a world-class tax system. It is a move to remove arbitrage, to remove any problems or differentials between the various tax rates where possible, and to try to align rules and regulations.

The previous speaker talked about tax avoidance. If members look at the statistics from 2000 to 2002, they will see that as a consequence of moving the highest marginal tax rate from 33 percent to 38 percent versus the corporate tax rate and the trust tax rate, there was an absolute explosion in the use of loss attributing qualifying companies in various structures, and even more so when the portfolio investment entities came out.

Only the Labour Party would want the community—middle New Zealand, as the previous speaker said—to spend $70 million in order to retrieve $1.5 million of tax revenue. That is such backwards economics. Given the previous speech, we see that essentially the Labour Party wants New Zealand to spend $70 million on accountants and lawyers to retrieve $1.5 million in tax revenue. That is total voodoo economics. There are less polite ways of describing it, but maybe a bit of education is required over there. It is absolute nonsense. We now know that Labour members will be campaigning on a platform of introducing a capital gains tax and hiking the top tax rate. They will be bringing back gift duty, by the sounds of things. Given the speeches the other day from Mr Goff and Mr Cunliffe, or “Mr Caygill”, I think they are all over the show. At the end of the day Labour can promise all it likes, but we inherited an economy that had tax problems, with declining revenue and an increase in expenditure, and we are just hearing a continuation of that from members opposite. Obviously, that will be a debating point on this bill.

The other point is about sharing information across agencies. Many electorate MPs have people coming through the door, and often their problem is a communication issue between various Government departments. For example, Work and Income New Zealand might not have spoken to the Inland Revenue Department or to the Accident Compensation Corporation, and they all throw up their hands. In fact, often it is not actually legal for them to share information. But for the benefit of that person, and for the benefit of the taxpayer and the taxpayer’s balance sheet, a more lateral sharing of information is required within the tight parameters that the Minister outlined earlier. This change is a welcome move towards a world-class tax system.

If this bill passes its first reading, and I am sure that it will, the Finance and Expenditure Committee will welcome it and will work hard on it. I look forward to seeing this bill at the select committee. Thank you.

I have to question this Government’s priorities. We are a week away from the end of the parliamentary sitting year, and here we are with the introduction of the Taxation (Tax Administration and Remedial Matters) Bill, in which the priority is abolishing gift duty for the wealthy. Some members opposite may recall that 3 months ago my province of Canterbury was hit by a force 7.1 earthquake. It has faded from view for some people, including some members opposite, but not for many members of the Canterbury business community. Tonight they still face the impacts of that quake, and those impacts extend to their businesses. They are not looking for a bill to abolish gift duty; they are looking for some assistance from the Government to help them through a period that has seen, in many instances, turnover reduce by 50 percent or more since the quake.

A week ago last night I attended one of the many business group meetings that have been happening in my city of Christchurch. I was one of two MPs there; the other was the Hon Jim Anderton. It was a meeting called by concerned business owners who cannot sustain the jobs that they want to hold on to, in the face of the impact of the quake on top of a recession that still very strongly lingers in Canterbury and across the country. At that meeting one of the speakers was a woman called Judy Tardi, who for more than 20 years has run the Aspiring Language Institute. She is a Hungarian migrant who came to New Zealand for the opportunities that it presented. She has worked very, very hard. She has paid her taxes. She is not looking for a cut in gift duty. She told the meeting she had survived the impacts business-wise of 9/11 and of the severe acute respiratory syndrome crisis. Indeed, she had survived the recession. But on 4 September a 7.1 magnitude earthquake flattened not only many parts of Christchurch and Canterbury but also the prospects of many businesses, including hers.

Judy Tardi’s business turnover is down by 80 percent, and she is not even sited within the central business district of Christchurch; she is based further out in my electorate of Christchurch Central in St Albans. But the images of the quake endure. The only images of Christchurch and Canterbury that people who in the past might have come and taken up courses at her language college have seen are of a city that is very badly damaged. Despite the fact that 90 percent of the city is perfectly fine, the images on television do not convey that. Judy Tardi has now borrowed $85,000 on her own mortgage to try to keep her business going and her staff employed. She asked why the Government is not providing some assistance to her.

Judy Tardi is not alone in asking that. Another speaker at the meeting was Ange Leonard, who runs the City Seafood Market retail outlet in Christchurch. It was a top shop finalist last year. Her turnover, despite the business premises not being affected by the quake, is down by 50 percent. She has had to let two staff go. Those businesses are only a fraction of the hundreds of businesses across Christchurch and Canterbury that have been knocked for six by the quake and its ramifications, because people are not coming into the inner city in the same way as they used to. They are going to the malls; they are staying away from the central business district. Those businesses are not looking for a cut in gift duty. They are not looking for this bill; they are looking for something to assist them. They want a helping hand with their cash flow.

The Canterbury Employers Chamber of Commerce put up a package to the Government—a very modest package—for $3.1 million to assist businesses like the two that I have detailed, and many hundreds of others. Nothing was sought in that package in respect of the abolition of gift duty. It related to assisting businesses with such expenses as relocation costs when they have had to move. That package was turned down flat last Monday, and instead a pathetic, derisory package was announced by the so-called Minister for Canterbury Earthquake Recovery, Gerry Brownlee. What Canterbury got after a 7.1 magnitude quake, which was the biggest in this nation’s history and the biggest single natural disaster that we have ever seen in our nation, was a package that provided two full-time business mentor advisers and a half-time person in Kaiapoi. It was two business advisers and $100,000 to promote Canterbury business—$100,000 to be shared with Kaiapoi to promote Christchurch and Canterbury business. That, by my estimation, would buy two television commercials on Australian television—and the people of Australia still have those enduring images of earthquake damage, as do many other people around the world.

Again, I have to ask the question, where on earth are this Government’s priorities? We have a city that is still feeling the ramifications of our worst natural disaster. Why are the Canterbury members of Parliament opposite not standing up for their constituents and for their businesses, which have been knocked for six by this quake? Here we are, debating the introduction of a bill that is simply a further tax cut for those at the top end of the income spectrum, when we have very fine business people who want to continue employing people, but who have been unable to hold on to staff in many instances because of the impact of the quake and all that it has brought upon our city and region. We are not seeing the advocacy that we expect from members opposite when it comes to saying this is a time when the Government needs to come to the help of Cantabrians.

This is a time when we expect the Government to intervene. If one is a farmer affected by snowstorms, then one looks to the Government. If we have a region affected by drought, we look to the Government. If we have a region affected by floods, we look to the Government. Well, surely, when we have a region like mine, which has been affected by a 7.1 magnitude quake of the type, size, and scale that the Dominion Post suggested today could result in 1,500 lives being lost in the city of Wellington, and the response package from the Government is an absolutely pathetic, derisory $100,000 promotional package and a couple of business mentor advisers—

💬 John Hayes: Well, you spent all the surpluses over 9 years.

The member for Wairarapa is very welcome to stand up and defend that package. He can tell his constituents back in the Wairarapa that he thinks it is appropriate. He can tell them that if the Wairarapa is struck by a 7.1 magnitude quake, they can expect to receive $100,000 to promote their region, because that is what has been given to Canterbury.

The reason that was given for not providing more help and assistance to the Canterbury business community was the fear of creating a precedent. What on earth does that mean? I ask whether that means that if Wellington is struck by a 7.1 magnitude quake, it will not receive any funding because this Government’s priorities are very firmly focused on such measures as introducing another tranche of tax cuts for those at the top end of the income spectrum, and not on delivering assistance for people who are trying to keep businesses going in Canterbury.

💬 Amy Adams: This is pathetic—pathetic, and not correct.

The member for Selwyn is very welcome to take a call and defend that package. I would be delighted to have her solidarity, because I tell members that I have been raising these issues and I have been asking these questions, and I have not heard a peep from members like her, who should be defending their constituents. She should be standing up, taking a call, and saying: “Give us a go, Minister. We are in need in Canterbury.” It is about time that the member did that. Instead of giving eloquent speeches about the impact of the earthquake on her personally, she should take a call and say to the Minister and the Government that this package is not good enough, and that we should not be debating, a week before Parliament adjourns, a bill that simply gives more money to those who do not need assistance.

When we have good employers in Canterbury bleeding jobs and an inner city devastated by an earthquake, all that the Government can do is to come up with a package of $100,000 to promote our city. It is pathetic, it is derisory, and it gives the fingers to Canterbury. It is appalling treatment. It is appalling treatment by this Government, and the Government members stand condemned for it. If they will not stand up, take a call, and criticise their Government, then they should not hold their seats at the next election. The people of Canterbury will judge them on the basis of that package. People will judge those members on that basis, because they have failed miserably to stand up for their constituents and give people what they are asking for. A very modest assessment was proposed by the Canterbury Employers Chamber of Commerce, and $100,000 was given instead of $3.1 million. It was a modest request from a responsible chamber, which is well led and well organised. That is what Canterbury needed, and instead we got this bill.

I rise to speak to the Taxation (Tax Administration and Remedial Matters) Bill. The Green Party will not be supporting this bill. The bill has a couple of elements that we do not particularly like, and I will talk about those briefly. We will obviously be following the select committee process very closely, because during that process our minds might be changed. But we will see.

I will talk about two key elements. The first is information sharing and some of the privacy elements in this bill. The bill enables greater information-sharing, and we have concerns about some of the bill’s privacy elements, and about whether the privacy of individuals will be affected as a result of the bill. The second concern relates to the abolition of gift duty, which has already been canvassed at some length tonight.

I will talk briefly about the regulatory impact statement, because obviously there will be a very lively debate about the extent to which this bill affects tax avoidance. But the officials are telling us in the regulatory impact statement that basically they do not know. Paragraph 64 of the regulatory impact statement states: “Concerns about the potential for income tax reduction as a direct result of gift duty repeal are not possible to quantify, particularly because the extent of protection currently offered by gift duty is speculative.” So the officials are telling us in the regulatory impact statement that if this bill were to proceed into legislation, and if gift duty were to be abolished, it would be very hard for us to know to what extent income tax would be reduced. That is one of the unknowns around the action of gift duty. We know that gift duty acts to some degree to stop various tax avoidance practices. It certainly has done so in the past, and thereby, one would think, the abolition of gift duty would open the spigot to some degree of tax avoidance. To what degree is actually unknown, according to the officials.

We know, however, that tremendous activity is currently undertaken to avoid gift duty, and the way that that is done, according to the regulatory impact statement, is through the use of gifting programmes. I quote from paragraph 25 of the regulatory impact statement: “Gift duty is easy to avoid through the use of gifting programmes. Under a gifting programme, an asset is sold at market-value in exchange for an interest-free, on-demand loan for the value of the asset. Legal title to the asset instantly transfers, but no payment is made. The interest-free, on demand debt that the recipient of the asset owes to the donor is then progressively forgiven by the donor at a rate of $27,000 every twelve months.”—which, of course, is the level currently at which gift duty kicks in—“The forgiveness of the debt constitutes annual gifts; however they are within the acceptable levels so as not to attract gift duty. Until it is completely forgiven, the debt owed is legally an asset of the donor and the donor can demand that it be repaid.” Paragraph 26 states: “These gifting programmes are widely used to transfer large assets without attracting gift duty. The fact that just 0.4% of gift statements received by Inland Revenue result in liability for payment of gift duty is clear evidence of the widespread use of these programmes.”, and, finally: “They are most often used by individuals to transfer ownership of their assets to a family trust.”

We are seeing at the moment that gift duty is having a very significant impact. The impact of gift duty is that individuals are structuring their financial affairs to transfer assets into family trusts, but they are doing it in a way that means they do not have to pay gift duty. This is strongly suggestive of a tremendous thirst out there to transfer assets into family trusts. The fact that 99.6 percent of all gift statements do not result in liability for the payment of gift duty shows that in the vast majority of cases, according to the officials, individuals are transferring ownership of their assets to a family trust. If we remove the gift duty, then we will open the spigot on that process.

We could argue that gift duty is not currently working, and I think that would be a fair argument. But there are two responses to a tax that is currently being avoided: the first response is to change the tax so that it cannot be avoided; the second response is to give up, put our hands in the air, and simply say: “Oh well, the Inland Revenue Department gives in because we aren’t going to tighten this rule.” With this bill, the Government has basically adopted the surrender approach. The Government has acknowledged that gift duty has the purpose of trying to find a way to tax the movement of assets into family trusts, but that that tax is basically being avoided so the Government will therefore abolish gift duty. There is another response, which is to ask how we can close the loophole and try to reduce the level of tax avoidance.

The second issue that has come up means that since changes in the tax rates were made, there has been an alignment between the trust rate and income tax rates. Arguably there is lower incentive for individuals to use these mechanisms to try to avoid paying tax, because previously a differential between the highest tax rate and the trust rate meant there was an incentive for people to slowly move their assets into those trusts to try to avoid paying the full rate of tax. One argument would be that with the alignment of these tax rates, there is no longer that incentive.

The problem is that there is a whole problem in tax avoidance that operates in relation to trusts, which will continue to operate even with the alignment of the tax rates. We have a problem with the trust law, essentially, because it is very, very difficult for the Inland Revenue Department—or for anyone else, for that matter—to get a very clear perspective about what is happening inside family trusts. They can operate and it is very difficult to see through them, so they are a classic way that has been used a lot in New Zealand to minimise tax payments or to run tax avoidance schemes.

Currently, even in the worse case scenario, gift duty provides the Inland Revenue Department with a paper trail of what is going into those family trusts, so that the Inland Revenue Department has some record of the money pouring into the trusts. If we were to abolish gift duty—so we would not have any incentive any more for people to arrange their affairs in such a way that over 99 percent of them would not pay gift duty—but at least alert the Inland Revenue Department to that money flow, we would reduce the level of intelligence that the Inland Revenue Department has operating in respect of family trusts. That is, we would make it easier for people who know how to operate these systems to avoid paying their tax. For that reason, the Greens have a concern about this legislation.

This legislation should be put in the context, of course, that a series of tax changes we have had have benefited those at the upper end. It is a matter of public record that of the tax cuts that were introduced, 40 percent went to the top 10 percent of income earners. So we are operating in a context in which we have already made very significant changes to our tax system, which have overwhelmingly benefited people on incomes like those of the people in this room. We are the major beneficiaries, in fact, of the tax changes. Of course, the chief executive of Westpac New Zealand is an extremely major beneficiary of these changes, as are high-wealth individuals. In that context, I ask whether we want to change gift duty, and get rid of this attempt to control this flow of money rather than try to actually tighten it up. That is the challenge before us. I ask whether we should try to close the loophole or just give up and surrender. This bill says that we should give up and surrender.

The Green Party does not think that that is the way we should be amending our tax system. We do not think that the broader context in which we are operating—which is to make the tax system more hostile to low-income individuals—is really the way that we should be changing the tax system. The Green Party would support, for example, a capital gains tax that excluded the family home. We think that that is an important missing part of the New Zealand tax system, and earlier on Mr Cunliffe talked at some length about the need to ring-fence losses coming out of loss attributing qualifying companies. So there are a number of ways that we could improve the tax system to make it fairer; getting rid of gift duty is not one of them. Although we will be listening closely to submissions at the select committee, we will not be supporting this bill at the first reading. Thank you.

I am pleased to stand to speak on the Taxation (Tax Administration and Remedial Matters) Bill, which amends the Tax Administration Act 1994 to improve the ability of the Commissioner of Inland Revenue to disclose information in the course of furthering good tax administration practice. We support this global goal. We support any intervention by the Government to increase transparency and promote the effective use of Government resources and taxpayer funds. So we actually welcome the move to abolish gift duty, because it no longer raises any significant revenue and it imposes a high level of compliance costs on the private sector. One of the goals that we, the Māori Party, campaigned on was to review compliance requirements so that there was no increase in compliance costs. So, much in the same way, we welcome the changes to the procedural rules around the tax disputes process, which, together with some administration changes to the process, would make for a much more streamlined process.

The Māori Party supports the general premise of privacy law, which is the promotion and protection of individual privacy, and it has commented previously on its concerns regarding the protection of privacy and flows of personal data. We have raised concerns about information held by agencies and how it is used. The bill makes it easier for tax information to be shared with other Government agencies in certain circumstances. These circumstances appear to be ones that are justified, because the asking agency already has the ability and authority to collect the information in its own right. The ability for this information to be shared with credit rating agencies no longer applies. The legislation confirms plans to widen the scope for the Inland Revenue Department to share individual taxpayer information, but only with Government agencies that would have the power to collect the information anyway. So we are very pleased with that. I am really pleased that this legislation does not go as far as it first threatened to, when there was the idea that individual files would be given to credit rating agencies. We are definitely pleased that that idea was abandoned.

Perhaps the only point that we have a question on is the decision that donee status will be granted to some overseas charities. The bill proposes that charities that apply some or all of their funds outside New Zealand must be approved for charitable donee status. Donations to recognised organisations entitle individual taxpayers to a credit of 33.3 percent of the amount donated up to level of their taxable income. We have had a look at the seven charities and we are really pleased with the work that they are doing. We have no question at all about the immense value of social entrepreneurship demonstrated in those seven organisations. Our only question relates to why those seven were chosen, and what was the rationale for including those seven—[Interruption] thank you for that—as opposed to any number of other organisations that may fall into this category. Hopefully, there might be others—that are already doing that work and are not new—that can be added in. But we are very pleased with the way this bill is going, and we will support it at its first reading.

I am pleased to stand up tonight to take a call on the Taxation (Tax Administration and Remedial Matters) Bill. We have already heard in the House tonight discussion on some of the key things this bill does. I commend Rahui Katene from the Māori Party, who addressed the full ambit of what this bill does, rather than focusing on just a single aspect, the removal of gift duty.

I have to start there, though. Frankly, having listened to some of the contributions tonight, I am appalled at the level of absolute claptrap being spoken about the system. I would be very surprised if any of the members who have contributed in the last half an hour that I have been sitting here, with the possible exception of Rahui Katene, have ever been through the process of managing a gift duty application, applying transactions, or setting up these very structures and dealing with them. Listening to some of the speakers, it became very clear to me that they had no concept, in fact, of how gift duty works, what it does, and how simple a matter it is to structure one’s affairs so that it is of no relevance.

We heard from Mr Burns that he will not support the removal of gift duty, because it does not do anything to assist recovery from the Canterbury earthquake. Well, I say good on him, but this is tax legislation. The Canterbury earthquake is, of course, a very serious matter, but life does go on. This is a tax bill that addresses issues with the tax system, and for the member to say that he will not support it because it does not do anything for the Canterbury earthquake recovery efforts is inane.

Then Mr Caygill—sorry, Cunliffe—said that he does not support it because, guess what, it is a tax cut for the wealthy. Talk about a one-trick pony! That man cannot give a speech in this House without claiming that the Government is giving tax cuts to the wealthy. But let us look at this. Gift duty is not a tax cut. It creates almost no revenue for the country. Do members know what this bill is doing? It is removing a nice little earner for lawyers and accountants up and down the country. If Mr Cunliffe is concerned because we are removing this nice little revenue stream from lawyers and accountants up and down Herne Bay, then he should say so and not pretend that it is some sort of tax cut package for the wealthy. Either the man is disingenuous in the extreme or he has no clue, and I suspect that it is possibly both. He is probably a little out of sorts because his leader does not know who he is.

But let us be really clear. Gift duty does not stop assets from being transferred. Gift duty has never stopped assets from being transferred, and, as anyone who is familiar with the sector knows, its removal will not suddenly open up the way for assets to be transferred into family trusts. Gift duty has been the simplest thing to structure one’s affairs around for years and years and years. In fact, its abolition recognises that it is a nonsense. Rather than create an industry of fee charging for the professional sector, let us be up front and say it is not achieving anything of note for the public purse, it is not stopping assets from being moved into other structures, and it simply creates a compliance cost burden that is far from justified. I think the arguments referred to in the House in respect of this measure have been pretty poor, and I hope we will have a better discussion at the Finance and Expenditure Committee.

I end my contribution tonight by picking up the other two key elements of the bill, which are quite important. They are the changes to the secrecy and information-sharing rules, which are critical to making our tax system work well and, frankly, deserve a lot more debate on them than we have heard tonight, and the changes to the tax dispute system. That is where the real meat of the bill is, and I hope we have a better discussion on them at the select committee than we have heard this evening. Thank you.

I too look forward to hearing what the submitters actually say when the Taxation (Tax Administration and Remedial Matters) Bill wends it way to the Finance and Expenditure Committee. I will not say a great deal about the gift duty portion, as my colleagues have traversed that field, but there will inevitably be a debate as to whether the removal of the gift duty obligation improves or worsens the situation in terms of people’s entitlement to various social benefits.

Today a report was put forward by Diana Crossan in which, essentially, she warned parliamentarians about the burden of our ageing population and the welfare cost associated with the changing nature of our population.

I acknowledge part of the contribution that came from Minister Dunne. Without doubt there are very large challenges before us as a country and as an assembly as to what the balance is, how we raise our revenue, how we dedicate revenue to those who need it, and at what point their need should be assessed. In one small respect he says he is raising a remedy to that, but that is an innovation we will not be agreeing with.

I want to talk about something that did concern a number of us at the select committee when we received an earlier briefing about some of the changes the Inland Revenue Department officials were looking at. I found very helpful the Inland Revenue Department officials’ outlining some of their thinking and the responses that came to us from the public. One of the concerns—and I am glad that the Minister of Revenue is in the House—is whether the State agency, the Inland Revenue Department, ought to be simplifying the transfer of information to private credit agencies. I understand and fully support the opportunity for the public to come and tell us what it thinks in relation to the sharing of data and information between State agencies. Given that we are in the business of improving efficiency and trying to lessen the administrative burden, I can get my head around that. But the next step relates to whether people who either owe debt or are endeavouring to pay back debt, and who are negotiating the final quantum, etc., with other State agencies, ought to have that information disclosed, if it involves child support and student debt, to private credit agencies. I digress slightly, but it is an issue that impacts on the administration, efficiency, and integrity of the information that the Inland Revenue Department keeps about us as citizens. This bill does not include those provisions, but I have no doubt—through you, Mr Deputy Speaker, to the Minister—that this will remain a live issue. It is as much a privacy issue and a justice issue as it is a tax administration issue, but it is something that bothers me considerably.

The new framework for sharing Inland Revenue Department information provides that the manner in which that information is exchanged or provided is, at the same time, shared with the citizen it pertains to. There may be some circumstances where investigations are under way and privacy is required in terms of what information can be revealed to the person who is suffering the not inconsiderable powers of the State to investigate his or her affairs, but I think that the best way, if this is ever to work—and I look forward to hearing what the submitters have to say—is to ensure that the citizen concerned is not overwhelmed or feels that he or she is in some sort of Orwellian experience.

In relation to the deeper question of whether other changes could have been made, members on our side of the House have recited, some might say ad nauseam, the reasons we did not agree with the distribution of winners and losers in the recent tax changes. We are told that $250 million a week is being borrowed by the State. I think that once we shrink the Crown’s revenue, we can get revenue from only one of two other sources: by raising it through debt or by shrinking—and I would say savaging—our cost structure so that rather than put our revenue up, which would be to restore some of the taxes that have been lessened, we are left with the problem that the Government currently has. So we did not agree, and we will be not agreeing, that the recent tax changes have enriched the country. That key ideological point defines the different approaches between the two parties.

We heard from the co-leader of the Green Party about his enthusiasm for a capital gains tax. Earlier this year the Tax Working Group out of Victoria University did not embrace a capital gains tax model. It is certainly not something that we have been trumpeting loudly on this side of the House or racing forward as a key feature to the tax change. This bill shows us that if we continue to treat the tax system so that it rewards only a narrow category of people and worsens the burden of the majority, we should not for a moment think that that narrow category of taxpayer, as a consequence of having more dough at their disposal, will somehow act as a new agent of dynamism to unleash economic growth and represent a new threshold for investment, new firms, new jobs, etc. That is something that probably lies behind, as my colleagues were saying, why we will not be agreeing with the changes to gift duty.

The member from the South Island, Amy Adams told us, I presume as a consequence of her unsurpassed knowledge of being an accountant, about how easy it is to circumvent the current rules, etc.—

💬 Hon Christopher Finlayson: She’s a lawyer.

Oh, sorry, a lawyer. I feel that she needs to change the tune in terms of how she addresses the select committee, because she has left us with the impression of being not only a highly qualified legal beagle but also a very skilled accountant. That may be the case but that does not necessarily lead her colleagues to conclude that she is a fine parliamentarian. In fact, I think Hekia Parata is a fine parliamentarian. I have yet to enjoy the opportunity to acknowledge that she has ascended the ranks. She now occupies a position that is possibly the most junior position but one that is quite a lofty spot to occupy. I too was once there. So along with my colleague Parekura Horomia I want to congratulate—

💬 Hon Member: In what?

I have had slightly different positions this year, and I have heard enough from “Ngāti Wāhine” at the back. I might have to call on the Deputy Speaker’s support. I acknowledge the contribution that Hekia Parata has made. I look forward to hearing more of her in the House.

We will not be supporting this bill. However, we do look forward to hearing the submissions. It lays out some important challenges. Mr Dunne and I will never agree on everything but I would like to say one thing: he is clearly outlining the fact that revenue is brittle. When we have brittle revenue, we have to find innovative ways to justify not only the cost but the purpose of running ongoing programmes. No doubt part of that will come from the submissions and it may only be as a segue, because part of the debate about the gift duty was always a concern as to whether clever people with access to Amy Adam’s unsurpassed knowledge would be enjoying an entitlement to certain services of the State that we may not feel they deserve by dint of wealth that they putatively own but technically have handed on to another. So we do look forward to the submissions. Thank you very much.

That was a very interesting speech from the previous Labour speaker, Shane Jones. Following a little bit of a different format from other Labour members, he actually talked about the capital gains tax and, in his words, he “circumvented it”. He went around the issue. He did not say that Labour would not have a capital gains tax. He tried to distance himself from it. But, at the same time, he left open the option for having a capital gains tax. I think that is what Labour is thinking. If Labour wants to use the change in respect of gift duty to enable it to advocate for a capital gains tax, I recommend that Mr Jones have a look at the numbers in this regard. He will realise that it is only lawyers and accountants who will gain from it. For Government revenue of about $1.5 million, we spend over $400,000 in costs in getting that revenue. Businesses, communities, individuals, trusts, and the like pay about $70 million in tax advice in making that happen. There is a huge compliance cost, which is not matched by revenue for the Government.

In the end, this is a very practical measure. It is not a measure that Labour is saying is for the rich. This is a practical measure to make sure that we take out some of the costs that are associated with doing business and that do not deliver benefits to either a business or the Government. There is no benefit to the Government that is of any consequence here, and there is no benefit for the business community or the individuals involved. All it does is help lawyers and accountants make more money by charging more fees. We are making business and individuals able to perform their duties in a much more constructive and economically friendly way. It cannot be used as a reason for having a capital gains tax, as the previous speaker intended. Thank you.

Tēnā koe, Mr Speaker. Kia ora tātou, nō reira e te Whare, e ngā iwi, e ngā reo, e ngā hau e whā. Tēnā koutou, tēnā koutou, tēnā koutou katoa. This bill, the Taxation (Tax Administration and Remedial Matters) Bill, will be referred to a select committee, as the Government has the numbers to do so. There will be a debate on whether the removal of gift duty will assist or hinder social interaction, but that is only one part of this legislation. It is wide-ranging legislation. It is taxation. I know that the Minister of Revenue has spent a number of years in this field, and one would expect him to be well versed in how the system works.

The explanatory note outlines that the bill amends the Tax Administration Act 1994. The reasons are: “to improve the ability of the Commissioner, in defined circumstances, to disclose information in the course or furtherance of good tax administration practice.” The explanatory note goes on to state: “Some information may be disclosed, in circumscribed cases, if it is in the interests of government efficiency. The bill also provides for other matters, including the abolition of gift duty, improvements to the tax disputes process, and improvements to tax pooling legislation. A number of minor issues are also remedied as well.”

It is the job of the Opposition to hold the Government to account. As a result, the Opposition will oppose the bill. The reason is that the bill is seen as a tax break for the top 10 percent of wage earners and salary earners, who have already benefited substantially from the two previous tax cuts. We are told by the Government that the bill abolishes gift duty. We are also told that gift duty no longer raises any significant revenue and that it imposes a high level of compliance costs on the private sector.

I am all for the cutting out of waste and the reduction of compliance costs, because this is an issue that has always concerned small business. I well remember campaigning throughout New Zealand as the small-business spokesperson some years ago, when I was last in Opposition. I remember walking into a small business in Winton. It was a grocery store. As I walked in, I saw the owner of the business sitting at a desk, behind a mountain of paper. That has not changed; we still have compliance issues. When I told him that we were looking at the whole issue of compliance, he said “Hallelujah!”, and he threw all his papers into the air.

Although I can understand, from the Government’s point of view, the need to cut compliance costs, the question has to be asked of the Minister—and this is of interest to me—whether this bill might lead to additional compliance costs. The Minister shakes his head, but I do not know. When we are talking about trusts, all sorts of things can happen.

💬 Peseta Sam Lotu-Iiga: You don’t know.

H V ROSS ROBERTSON: There is Sam Lotu-Iiga. I tell him to get up on his hind legs and take a call. But he has not yet, because he has no answer to this. He has no answer, and he does not know.

The Minister said today, in answer to a question in question time, that people were using trusts to avoid taxation. Yet this evening we see that people who have trusts will no longer have to pay gift duty, which in itself is a tax. This afternoon we have had it laid out to us in the House that there are those who use family trusts to avoid taxation, in order to access family support, so the indication was that those tax loopholes had to be closed—and rightly so; they will be. But tonight what we have here is robbing Peter to pay Paul—robbing Peter to pay Paul. What happens now is that those who have trusts will no longer have to pay gift duty.

The member over there, Sam Lotu-Iiga, will take the next call. I challenge him to get up and answer those questions, because that is what the member should do. The member should be answering those questions, and I expect him to. Here are the questions that I will put to the honourable member, and here are the reasons why Labour will oppose the bill. We want to hold this Government to account for anything that it does, and it needs also to justify what it does. We look forward to the select committee process. Obviously—

💬 John Hayes: Being in Opposition is what you look forward to.

H V ROSS ROBERTSON: No, I tell the member that we will be swapping sides in 1 year’s time. It will not be too long now. Labour members will not support this bill, but we look forward to the submissions to the select committee so that Labour members will have the chance to challenge the Government. Here are a few reasons why Labour opposes this bill.

💬 John Hayes: That is why you are still in Opposition.

H V ROSS ROBERTSON: No. Scrapping gift duty represents a tax cut for the wealthiest New Zealanders. Labour is about fairness in taxation, and that was one of the problems with the recent increase in GST. We know that the top 10 percent of those who received the benefits of the GST increase received 42 percent of the tax reduction. That is not fair. We also oppose the bill because scrapping gift duty is yet another tax break for some of the 10 percent of people who have already received a significant increase in their income as a result of the tax cuts.

💬 Hon Peter Dunne: Could the member explain how that is the case?

H V ROSS ROBERTSON: We have just had the GST issue, and we saw the top 10 percent of salary earners and wage earners receive more than 40 percent of the tax reductions. The bottom percentage of people saw very, very little. That is the problem we have.

Politics is all about priorities, but scrapping gift duty underlines the fact that this Government is focused on delivering tax cuts for the wealthy. The Government has again justified its decision by saying that gift duty raises only $1.5 million a year and it costs half that amount to administer. I challenge the Minister to table the information that indicates that although the Government receives only $1.5 million a year, half of the cost goes on administering the scheme. That is a considerable amount, so I ask the Minister to front up to the select committee and justify that figure.

The abolition of gift duty allows the wealthiest New Zealanders to structure their affairs by transferring income and assets into trusts, and to their children, to reduce their tax liability. That is not good enough. Labour is concerned that there be fairness in the tax system. We say there should be equity for all, not just for the wealthy. The fact that people currently spend $70 million on gift duty compliance in order to avoid paying their fair share of tax is no reason for removing it. It just shows potentially how valuable this free lunch is for wealthy New Zealanders. I ask Mr Sam Lotu-Iiga, who will take the next call, to get up on his hind legs and justify the abolition of gift duty.

💬 Peseta Sam Lotu-Iiga: Sit down, then.

H V ROSS ROBERTSON: I have not finished. I challenge that member to get up and justify the Government’s stance, because members on this side of the House will continue to hold this Government to account to justify everything that it has to say about this legislation.

We welcome the bill going to a select committee, because that is where the debate will take place. That is where we will find out whether the Government can justify what it wants to do. At present Labour members are not yet convinced of the arguments that have been put forward by the Government to justify its removal of gift duty. Although we accept there is a need to cut compliance costs, and I am all for that, there is a need for the next speaker to justify everything the Government is doing.

It is a privilege to speak on the Taxation (Tax Administration and Remedial Matters) Bill. I will answer a couple of the queries that were raised by the member for Manukau East. What shocked me about his speech was that although we were at the same small-business conference, all of 3 months ago, and he heard the concerns, issues, and problems that are faced by small-business owners, in his speech he neglected the concerns that were expressed to us as a group of MPs that day. Those concerns were red tape, bureaucracy, and the compliance costs that constrict and restrict the ability of business people to get on with their business, make money, and employ people.

It is incredible that he talked about a tax cut when we know the facts are on the table. We know that the gift duty scheme provides just $1.5 million a year in revenue but imposes $70 million a year in compliance costs—$70 million. For the benefit of the member, the amount of compliance costs is approximately 47 times that of the revenue it generates for our Government. In anyone’s language that is a travesty and something we have to get rid of.

I do not take the approach of some of my colleagues to lawyers and accountants, having been a former lawyer and financier myself. Those people are merely doing the job they have been asked to do in terms of the regulations and the laws in place at the time. That is why we are in the House: we are here to reform the law in order to remove those compliance costs so that individuals, their families, and their communities can get on with making a living. In my own electorate of Maungakiekie business people and individuals tell me that those burdens really impact their on lives and their families’ lives.

Last week the Prime Minister and I were at the opening of a furnace plant. I say that because it was the biggest investment this year by a corporate. Owens-Illinois poured $125 million into that business in Penrose in my electorate. Really, it is about providing jobs and opportunities. When I asked the chairman of that global corporation why it was doing business in New Zealand, he responded by saying that it was because the corporation saw New Zealand as an investment, it saw the people involved in New Zealand, and it saw New Zealand running well. It saw a business-friendly environment and a business-friendly Government. That is why it is in New Zealand.

The bill is about continuing that vein of providing business opportunities and jobs and minimising red tape and bureaucracy. That is why I recommend the bill to the House. It is part of the overall package that this Government is implementing to provide jobs and opportunities for New Zealanders. I look forward to the select committee process where we will be better able to discuss the finer points of this bill. Thank you.