Taxation (GST and Remedial Matters) Bill

Oftentimes when members begin their speeches they say that they rise to do so and so, or they rise to support the bill. This morning I just say that I rise, because with the kind of cold I have I feel like that is an achievement in itself. I am assisted, I must say, by Sudafed, which means I probably would not be on my feet had the Government’s next bunch of legislation already been passed.

In all seriousness I say that I am particularly happy to take a call because we are witnessing today a most grievous abuse of the parliamentary process. The Taxation (GST and Remedial Matters) Bill was an innocuous little remedial bill that was agreed by unanimous consent at the first reading, and by all parties around the table at the Finance and Expenditure Committee. It tidied up a few tax glitches. The only thing that was strange about it was that there was so little in it, which seemed like a bit of a mystery. Zero rating some farm transactions was about as far as it went.

Now the truth is revealed. The whole point of this bill was the 70-page Supplementary Order Paper dropped on the House last night, which is a fundamental change to an area of tax law that involves $2.3 billion a year of tax write-offs.

The Minister of Revenue once stood for the sensible, decent middle. He should be ashamed that he is presiding over an abuse of Parliament like we are witnessing today. For mum and dad out there I say that the Government is introducing most of this bill after it has had its only chance to go to a select committee and after the public have had their chance to have a say on the bill, which affects over $2 billion a year of their taxes. Over $2 billion a year of their taxes is affected, yet this Government would not let them see the bill before steamrollering it through with midnight sittings just before Christmas.

What is the Government ashamed of? I will tell the Committee what the Government is ashamed of. It is the sham that is the look-through company.

I will tell people a little story—a true story. I once looked at renting a boat. I went to a company in downtown Auckland at Westhaven and I was shown around some nice boats I could rent. They were nice, but they were expensive on a per day rate. The salesman said it was easy; I just had to form an LAQC and put it through that. I asked him what an LAQC was. He said it was a loss attributing qualifying company. I said that that could not be legal. He said it was. He said I had to take a client out on the boat only once and I could write off the whole cost as a tax loss against my personal income. I told him he had to be kidding; it was a pleasure craft. He said it did not matter. With a loss attributing qualifying company I could run a loss on the company and write it off against my personal income.

There might have been some good reasons for starting that tax incentive—to be fair, it started under the previous Labour Government—but it has mushroomed, and in 2008, $2.3 billion of tax loss was written off against loss attributing qualifying companies. The tax losses include a massive stock of rental property. Rental property was the main reason the global financial crisis bubble came to New Zealand. The main reason small businesses cannot borrow enough capital is that we have a national private debt equal to 90 percent of our gross domestic product, most of which went through the banking system into rental property. Why did that happen? It was partly because there was a tax incentive. What was the tax incentive? One could run a loss on a loss attributing qualifying company and write off that loss, meaning not only that no tax was paid in the company but that no personal tax was paid, either, because it was written off against one’s personal income. No wonder we had a property bubble.

That problem has been unmasked in the 2 years that this Government has been in office. What has it done about it? It has replaced, effectively, the loss attributing qualifying companies with new creatures, sanitised by the fancy-pants lawyers and accountants who serve their clients and donors, called look-through companies. Those new things still allow people to write off company losses against their personal income, because they look through their personal income tax rate.

How is the Government doing this travesty—this $2.3 billion of tax loss? It is doing it in the dead of night in a Supplementary Order Paper that has not gone to a select committee, that no accountant—

The CHAIRPERSON (Lindsay Tisch): I remind the member that Part 1 is about the goods and services tax; it is not about loss attributing qualifying companies. I remind the member to come back to the substance of Part 1.

Mr Chairman, you will forgive me, I hope, for my genuine outrage about the process that has been employed here.

The first part of the bill is about goods and services tax, and we all know that National—in a terrible, regressive tax move—has been putting up that tax from 12.5 percent to 15 percent. We also know from statistics released by Statistics New Zealand and confirmed this very week by Treasury that as a result of the tax changes in the last year the average household is now $28 a week worse off and the average individual is $17 a week worse off. That is the average; the median is worse than that. But I will save some of my comments about GST, of which there will be many, for some subsequent calls.

I will mainly in this opening call ram home that a terrible travesty of parliamentary process is happening today with this GST bill. It was a train that left the station innocuously and received unanimous support at the select committee until the main carriages were attached last night, in the dead of night, in a 70-page Supplementary Order Paper that does something that is completely irrelevant to the first half of the bill. That Supplementary Order Paper will not go to a select committee. It will not receive public submissions. It affects $2.3 billion of tax income. It has the potential to perpetuate the distortions of the tax system that led to the property bubble and that have absolutely euchred this economy.

National once thought it was the party of business. Well, it does not represent real business, because real business is being screwed over by property magnates in this bill—that is what is happening. The fact that it is happening without proper parliamentary scrutiny is an absolute travesty. I imagine that officials, in their heart of hearts, are deeply ashamed. They know that tax bills go through this House every couple of months and there is no reason on God’s green earth why these look-through company changes could not have been attached to the next train leaving the station and have had proper select committee scrutiny.

This is a very, very serious matter. This avoidance problem is at the absolute heart of what is wrong with New Zealand’s tax system. It is at the absolute heart of the perverse incentives that mean we spend too much bidding up each other’s house prices—

💬 David Bennett: Talk about GST.

—and adding David Bennett’s 2.5c extra to the GST rate. We have an absolute travesty in this bill: a travesty of process, a travesty of substance, and a missed opportunity.

The best that can be said of this bill is that it is a missed opportunity. I say in this opening call that Labour will now oppose the entire bill on the basis of this travesty of process, because what is in this illegitimate Supplementary Order Paper is far more important than the minor technical amendments that were in the so-called main bill. The Supplementary Order Paper changes the whole point of this legislation from decent, remedial tidy-up to the perpetuation of a fundamental structural flaw in the tax system. That is wrong. It is wrong in substance and it is wrong in process, and it is a goddamn shame that the otherwise worthy work, which we all drew attention to in the first reading speeches, has been washed down the toilet by a Government that not only does not care about democracy but is deliberately abusing the democratic process. Why?

We can only ask who was not prepared to be subject to the scrutiny of the profession and the public by a select committee process. Whose interests are being protected? It looks like it is the interests of property investors. It looks like it is the interests of finance companies—the ones that have not yet been charged by the Serious Fraud Office. It looks like it is the interests of the same old corporate elite that cleans up every time and has holidays in Hawaii while ordinary working people get shafted. It is happening again.

GST has gone up to 15 percent and ordinary Kiwi families cannot afford the cost. In most of this bill now there is a gold-plated let-off for people to write off property losses against their income through a thing called a look-through company. It is the same old, same old.

I know it is tempting at this stage of the year, particularly when one has a raspy voice, to try to raise a whole lot of indignation about nothing, but that is not acceptable.

💬 Hon David Cunliffe: No, it is genuine.

Well, let me go through—

💬 Hon David Cunliffe: I raise a point of order, Mr Chairperson. I take offence at the Minister’s remarks, because by implying that I have manufactured a sense of indignation he is effectively questioning my integrity.

The CHAIRPERSON (Lindsay Tisch): Yes, and I am sure we all appreciate that. But that is not necessarily a point of order. I ask the Minister to continue.

I will put the facts before the Committee. The Committee and the public can judge what is actually going on here. This situation was foreshadowed in the Budget in May when we announced a series of—

💬 Hon David Cunliffe: This Supplementary Order Paper wasn’t foreshadowed until yesterday—yesterday.

If the member gives me time, I will come to his points systematically. We announced in May that there would be an issues paper released on the issue of qualifying companies and the future of the loss attributing qualifying company regime. That was done. It was widely consulted upon. We announced in October and released, in draft legislation at that time, the decisions that we made in respect of that consultation process. We released it publicly so that there could be comment, and there was, and then we offered the Opposition a briefing—which it originally wanted to have next week! We approached the Opposition earlier this week or late last week to say, given that this legislation was coming into the House, that we thought it needed to bring forward its time to be briefed. The Supplementary Order Paper was actually released on Tuesday; it was not released last night. It was released before Labour was briefed on Tuesday afternoon. To come in here now and say that it was released late last night is simply not true. Officials had briefed that member and his colleagues on Tuesday at my request, because they originally wanted to be briefed next week, when this bill would have been passed.

💬 Hon David Cunliffe: I raise a point of order, Mr Speaker. I fear it necessary to correct for the record a misinterpretation.

The CHAIRPERSON (Lindsay Tisch): No. That is a debating point.

The member is alleging that Labour members were not briefed on the Supplementary Order Paper. I know from the report I received from my officials that there was a substantial discussion at that meeting about the loss attributing qualifying company regime. So the reality is, and I stand by my original comment, that there is a huge amount of indignation here being raised over very little. We have a large number of interests in the accounting and legal worlds, and in the tax world generally, that need these matters resolved now so that the new regime can take place on 1 April next year.

We have been punctilious in our consultation. We foreshadowed it in the Budget. We released the draft legislation over a month ago, and I have just this to say to the Opposition: with all of the mock indignation now being expressed, I ask whether, in the time since the issues paper and the draft legislation were released, we have heard any comment from the members opposite. Absolutely not! They come in here at the last minute and start to raise all sorts of concerns, when they have had the opportunity to be briefed and when everything has been in the public arena. Their attitude is a complete and utter sham.

I accept the member’s word that briefings were offered. I am assured by people on my left that Supplementary Order Paper 187 in the name of the Hon Peter Dunne was not given to people at that briefing, and that the draft legislation vehicle was not supplied a month ago, as was indicated by the Minister in the chair, the Minister of Revenue. In fact, it was put on the Table of the House, or was first seen by me, late last night. I say to that Minister, who of all people should know better than others that this is not the way to do taxation legislation, that the key point is that we should get such legislation to a select committee and have hearings on it there. Otherwise, if we take this sort of approach, legislation that might otherwise get support from Labour will be rejected and fought over on matters of process and detail right to the end, because of the approach that has been taken.

Part by part, and, if necessary, clause by clause this Taxation (GST and Remedial Matters) Bill will be fought against because National and its stooge Minister will not send the bill to a select committee. National members will not stand up, have hearings, and follow the process. I would have thought that the Minister, who used to be very, very close to Sir Geoffrey Palmer in his approach to legislation, would feel absolutely ashamed about this. This is the fastest lawmaking in the West. I say to Mr Dunne that Sir Geoffrey Palmer would have assumed, even then, that this sort of legislation would go to a committee, because that is the way we do it in New Zealand. We do not bring in Supplementary Order Papers in the middle of the night and, under urgency, expect them to be pushed through with this sort of approach. Maybe this is part of a play for Washington on the part of Mr Dunne. [Interruption] Oh, he wants London. I am sorry; I apologise. He wants London, not Washington. I do not know what possesses the Hon Peter Dunne, who over the years has generally worked with both National and Labour Governments with integrity on tax matters. He was someone who pushed process on both Governments and did things in the appropriate way. He slowed people down, but now he is fronting an approach that is wrong.

Taxation is not an area of absolute expertise of mine, but I have looked at it pretty carefully in the area of policy development, because it is an important area. Getting it right is very important, and much of the stuff in this bill might otherwise have got support. In fact, some of us are of the opinion that the Minister is not going far enough in terms of the things he is doing. Some areas could have been added to this bill, and the Minister might have been able to get broader support for Part 1 and the amendments. But through his approach he has lost the support of Parliament, and legislation that could possibly have gone through the Committee in half an hour after a select committee hearing has turned into a debate that will, I am sure, take the rest of the normal sitting time today to work through.

I will now go back to the very beginning of the Supplementary Order Paper. I will be critical. I do not want to reflect, at all, on the people who are drafting the bill, but I will be somewhat critical of the Minister.

The CHAIRPERSON (Lindsay Tisch): I just remind you that we are now on clauses 3 to 20.

That is what I want to focus on, and in particular, on new clause 10B, which is set out on the Supplementary Order Paper. I want to check, Mr Chairman, that we are talking to the Supplementary Order Paper—the relevant parts of it. And can I check that we are talking about, in this particular case, new subclause (7B) through to new clauses 19B and 19C? Can I check that those are the particular parts of the Supplementary Order Paper that we are talking to at the moment? Can I confirm that is the case?

The CHAIRPERSON (Lindsay Tisch): We are on new clause 10B, and new clauses 19B and 19C.

So not new subclause (7B)?

The CHAIRPERSON (Lindsay Tisch): We are on new clauses 19B and 19C—because those are within clauses 3 to 20.

But can I check, going to the front of the Supplementary Order Paper, that we are not talking about—

The CHAIRPERSON (Lindsay Tisch): No, that amends clause 2.

I am sorry; I apologise. That is one of the problems, I think, when we take this sort of approach. I am obliged to the Chair. I was looking at the subclauses, rather than at the clause. I am obliged to the Chair, because that means that when we get back to clause 2 I can make the points I was going to make on it, but I am sure that that will be at some stage later in the evening.

I would have thought that having a clause on the zero rating question as part of a non-controversial Supplementary Order Paper would be a little stupid and could be described in that way. It gives an opportunity to my colleagues, who I know are very, very concerned that other matters should be zero-rated. Some of my colleagues are very, very concerned about what should be zero-rated and what should not be zero-rated. I am sure that by the time I have finished my speech, my colleague Stuart Nash will have put his name on and signed a Supplementary Order Paper that will be tabled to add to the question of what should be zero-rated, if in fact we are to consider the zero rating of services. In new clause 10B we get to the question of what should be zero-rated and what should not be zero-rated. The member will table a Supplementary Order Paper, and I am sure that over the next hour or so, as we discuss the other parts of Part 1, we will be able to have a debate on the question of zero rating.

The fact is that this matter has been brought into the bill, and I presume that the Chair has ruled that it is within scope. Can I check that there has been a ruling from the Chair on the Supplementary Order Paper bringing in zero rating?

I raise a point of order, Mr Chairperson. I want to check that the Supplementary Order Paper has been ruled to be within scope and that the zero rating question has been ruled to be within the scope of the bill.

The CHAIRPERSON (Lindsay Tisch): It is in scope. I ask the member to continue.

Thank you. Now that it has been ruled that having the zero rating of items is within the scope of the bill, it opens up the question of zero rating for other items. I know there are colleagues on my side of the House who are fiercely keen on having other items zero-rated and will be very keen to move Supplementary Order Papers in order to extend this opening, which the Minister has clearly opened up in the bill.

This is a very interesting bill, as my colleague Trevor Mallard said. Ever single tax bill, except the increases in GST and the drop in income tax, that has come before the Finance and Expenditure Committee has been approved and supported by the Labour Party. Let me run through the process that happens. We get a bill, and it is normally non-controversial, like the original bill was. We did not oppose it at all, and it was referred to the Finance and Expenditure Committee. At the select committee we called for submissions, and we allowed about 6 or 7 weeks for submissions to come in. We ended up with about 27 submissions—I ask Amy Adams to correct me if I am wrong—and we heard from a whole range of experts. These were tax consultants, legal eagles, and ordinary New Zealanders who wanted to have a say on tax legislation. As we know, tax legislation affects a whole lot of people.

We have our own technical adviser on the Finance and Expenditure Committee, because no one on the committee is a tax expert. No one on the committee comes from a legal or a tax consultancy background. So we have our own tax expert, and this is par for the course. We do this for every single tax bill that comes before the Finance and Expenditure Committee. Our adviser’s name is Therese Turner, and she is acknowledged as one of New Zealand’s pre-eminent tax experts. So what happens is that the Inland Revenue Department officials sit down and give us briefings on the bill. We go through it clause by clause, bit by bit, and change by change. Then Therese has a look at it. We ask a whole lot of questions, and there are questions from all members.

National members have a lot of questions and Labour members have a lot of questions. Roger Douglas is on the committee and he asks a lot of questions, and Russel Norman is on the committee and he asks a lot of questions. It is a very, very robust process. Then we all start to support this stuff. After this process, Therese comes in and says that she does or does not agree, or that she has been talking to officials and they suggest this or that, and she agrees or she puts a proposal to officials and they agree with her point of view. We end up with very robust legislation that we all agree with. It is a great process because everyone has their say.

That is what happened with the original bill. It was a technical bill, but it had some very important provisions in it. It got rid of something called phoenix fraud. It was leeching revenue out of the Government accounts, and we needed to close it down. Everyone agreed that this was important legislation. There were other bits, remedial matters, in the bill, and we all agreed they were good provisions, but they needed tweaking. There has not been a remedial matters bill that has come before the select committee that all parties have not agreed on. However, they have been made better by the select committee process. Every single bit of tax legislation that has come before the select committee has been improved by the process. There is not an example outside of this.

Labour members agreed with this tax legislation through the first reading and the second reading, because it was good legislation. The select committee made it even better. Then Supplementary Order Paper 187 was put in front of us. It was tabled last night. We had a briefing, but we talked about only loss attributing qualifying companies in that briefing. There was a general discussion, organised by David Cunliffe’s office, on changes to loss attributing qualifying companies. We did not know that this Supplementary Order Paper was going to be put on the Table.

When I look at this Supplementary Order Paper, I think that there are some not bad ideas in it. In fact, there are some very common-sense ideas that would get the support of the Labour Party and probably the vast majority of New Zealanders. But I cannot say that without listening to Ms Turner, listening to officials, and listening to a whole lot of New Zealanders out there whom this affects. There are 130,000 active loss attributing qualifying companies. This affects Māori trusts and a whole lot of stuff. I think New Zealanders deserve the right to have their say on this. The bill would have got support from the select committee. I have no doubt about that. However, we needed to make sure that it was very robust legislation. That is what the select committee would have done, and a great piece of tax legislation would have been brought before the House and we would have agreed on it.

As my colleague the Hon Trevor Mallard mentioned, the bill probably would have been passed, if necessary, even under urgency—after the select committee process—within an hour.

💬 Hon Trevor Mallard: Not under urgency.

Urgency is not a good way to pass tax legislation, but the bill would have been passed within the hour. I know that the Minister wants to get this out there for 1 April 2011, and it would not have been a problem if we had followed a robust process. But this process is not robust.

As Labour’s revenue spokesperson, I cannot comment on the 70-page Supplementary Order Paper, because I have not time to read through it. I have been at a prize-giving at Napier Girls High School. It was a fantastic prize-giving last night at the high school, and I congratulate the headmistress, Mary Dixon and the rest of the crew there. But I cannot say that I support this Supplementary Order Paper.

💬 Hon Trevor Mallard: Was Chris Tremain there?

No, Chris Tremain was not there. He does not care about the people of Napier.

I come now to the issue of zero rating. As my colleague Trevor Mallard mentioned, this bill proposes to zero-rate land transactions between two parties that are registered for GST. But now that we have this Supplementary Order Paper, it has opened the door for a whole lot of other amendments.

The amendment I have tabled recommends zero-rating fresh fruit and vegetables. The Minister of Revenue and members of Parliament cannot say that they did not know this was coming. We have discussed this in open forum for a number of months. We have spoken to tax experts and we have spoken to supermarkets. This is a very robust provision. New Zealand is the third fattest nation in the OECD, and this measure will address that. We have to do something; we have to send a signal. We have to say to the people of New Zealand that we care about their health and welfare. This is not hard to do. It is a very easy amendment. It is not 70 pages; it is not even 70 words. But if it becomes part of this bill it will make a difference to New Zealanders.

There are over 130,000 active loss attributing qualifying companies, and the amendment that has been introduced will affect more than 130,000 people. But my amendment will affect 4 million people, and I urge the Minister to take it on board and support it. It is a very good provision. It will allow all New Zealanders to buy fresh fruit and vegetables cheaper. Our calculations show that people on the median wage will get more in their back pockets from this amendment than they did from the Government’s tax cuts. This amendment is fair.

Minister Dunne used to be a Labour member of Parliament. He was elected as a Labour member of Parliament, so deep down somewhere there still must bubble the philosophies and the principles of social democracy, which are about working for all New Zealanders, working for everyone—

💬 Iain Lees-Galloway: I wouldn’t be so sure.

Well, I have my doubts as well. But I am hoping that somewhere there might be the flicker of social democracy. I urge the Minister to take heed of what New Zealanders have said. Our polling shows that about 80 percent of New Zealanders think this is a great idea. Eighty percent of New Zealanders want to be able to buy apples, pears, and bananas.

Let me give members an example of good policy: Fruit in Schools. That Labour policy allowed all decile 1 and decile 2 schools to have fresh fruit, and if members talk to some of the teachers and the headmasters about the impact of fresh fruit on children they will see that it is amazing. One principal said to me: “I can’t quantify this, but I can see the difference in the skin colour of the children.” That was from children eating one or two pieces of fruit a day.

Another school said it had to roll the bananas in icing sugar for the first week so the kids actually liked them. Now the children are going home and telling mum not to buy chips but to buy fresh fruit. But how can they afford to buy fresh fruit when chips are cheaper? This amendment allows parents to act on their children’s advice. This allows parents to go to the supermarket and buy fruit instead of chips. They can buy apples, bananas, and pears. They can buy any fresh fruit and vegetables.

I have a few questions to put to the Minister of Revenue regarding process. The reason that I will concentrate on process is straightforward. I think I am entitled to say that I have worked enough with the Minster over the years on enough legislation to know that he has a certain style when it comes to the development and promulgation of policy and legislation, and as far as I can tell that style is not at play today. I could, however, be wrong. It seems to me that the Minister, who has already given an explanation to the Committee about how these things have come about, may like to rise and give us some further detail.

I wonder whether the Minister would tell us why it is that when the changes were announced in May, there was not time for a select committee process to be put in place for legislation that comes into being on 1 April the following year—so about 10 or 11 months later. Why was that not possible? That is the first question. I would be grateful if the Minister would take us through the consultation processes to see how the time got eaten up, to see whether a select committee process was possible, to see what could have been done in parallel to ensure a select committee process, and to ask the question why, if it was able to be done in parallel, it was not done—all of those sorts of things.

The second question I have for the Minister is whether anyone knew. I do not have the revenue spokespersonship in this party so I could not be expected to know, but those who do or who have finance or other interests in select committees that might have dealt with this—my own colleagues—seem to have been caught short. So they did not know, and that makes me wonder who did. Who did know that this would not go to a select committee? Who knew that we would have a large Supplementary Order Paper that was not subject to the ordinary scrutiny of the parliamentary process? Did the various experts who were contributing to the discussion paper and did the people who were responding to the draft legislation that was put out into the public arena know that that was instead of a select committee process? I ask whether the Minister would be good enough to give us some indication on that—I think I see some body language to suggest the Minister will get to his feet, in which case I happily yield.

I am happy to respond to what I think was a very considered set of questions from the member Pete Hodgson, who has just resumed his seat. Let me go through the process very clearly and very calmly. In the May Budget certain announcements were made about the future of loss attributing qualifying companies. In the attached Budget papers we announced that an issues paper would be released canvassing various legislative proposals to address the concern that had been raised in the Budget. That happened within a day or two of the May Budget being released. I can recall having a series of public meetings, mainly with tax-related audiences, in the month after the Budget—give or take—where the issue regarding the future of the loss attributing qualifying company regime was constantly raised. They were large meetings, up and down the country. I know that others, such as the Minister of Finance and officials, had similar discussions.

At the conclusion of the consultation period—and the date by which the issues paper process ended escapes me for the moment—the usual Cabinet process followed, papers were developed, and a proposition was put to Cabinet, which was accepted. It was announced and we released draft legislation at about the same time, roughly at about the beginning of October. The timing of that was important, because a major tax policy conference sponsored by the Institute of Chartered Accountants was coming up at the end of October. That is the normal venue at which these things are canvassed. It was clearly understood by all parties that the Government would pass legislation before the end of the year to implement those decisions and the draft legislation, because the implementation date for the new regime was 1 April 2011. That point was understood—[Interruption] I tell the member David Cunliffe, who is interjecting, that the criticism I have received from those in the tax community has been not about how quick the process has been but about how slow it has been. They wanted certainty earlier on. That is why we went through the quite deliberate step of releasing the draft legislation. Comments were invited upon that; some were made. Essentially, the changes in Supplementary Order Paper 187 reflect the outcome of that.

I will draw one other point to the Committee’s attention. Opposition speakers—not the previous speaker, but other Opposition speakers—have run the line that when they were briefed by officials on Wednesday they were unaware of the Supplementary Order Paper’s existence. I will make two comments in respect of that. First, the Supplementary Order Paper was released to the public, including this House, at 1 o’clock on Tuesday—some 24 hours in advance—so the question I have to put to the Opposition—

💬 Hon David Cunliffe: As if that’s good enough.

The member opposite says that is not good enough. What am I supposed to do—come to him on bended knee, proffering him the document? It is in the public arena. It is on the Table of the House. That member of the Opposition—I very Freudianly nearly referred to him as the Leader of the Opposition—says that is not good enough. The document was in the public arena.

But I can go one better. I have checked the content of the discussion that took place at the briefing meeting on the Wednesday. The Opposition now says that it was unaware of the existence of a Supplementary Order Paper, but I am assured that at that meeting both the MPs present and officials talked about the Supplementary Order Paper. Those members cannot have it both ways. They cannot say they were not told, when actually the document was in public existence and its very existence had been foreshadowed since 20 May, and they cannot go to a meeting where they talk about it, then say afterwards that they were not aware of it and had got it only the night before, 24 hours after the briefing meeting had occurred.

I accept that the Opposition may not like some of the provisions in this measure—that is its prerogative; that is what we are debating this morning. But let us debate on the basis of the facts of what happened. I have been quite deliberate in ensuring that every step of this process in terms of the need to make decisions by a certain time and to engage the professional community has, in fact, occurred. As I said to the member, the criticism that I am subject to from the profession is that the measure has taken as long as it has, and that is the balance one has to strike in these matters. We indicated an implementation date, certain details need to be put in place, we need to pass the legislation about now to achieve the 1 April date, we have been absolutely public all the way through, and we have had no indication until this morning that the Opposition had a different view.

I raise a point of order, Mr Chairperson. This is a serious point of order, and I would not have expected to have to make it in regard to the Minister in the chair, the Minister of Revenue. Under Standing Order 106, “Misrepresentation”, paragraph (1) states: “A member who has spoken to a question may speak again to explain some material part of the member’s speech …”, but paragraph (2) requires that to occur after the member has completed the speech. I am now taking the first possible opportunity to say that I am sorry, but the Minister has misled the Committee. I have been misrepresented—

No. The member brought up a point of order earlier on and I ruled on it at that stage, much earlier on in the proceedings—

💬 Hon David Cunliffe: Before the Minister had spoken.

The CHAIRPERSON (Lindsay Tisch): The Minister had spoken. After the Minister spoke first, you brought up a point of order, and I ruled it out of order at that time. The Minister has now spoken again, and my question to the member is whether this is a new point of order related to what the Minister has said just now.

💬 Hon David Cunliffe: Yes.

The CHAIRPERSON (Lindsay Tisch): OK, and we are looking at Standing Order 106. Give me time; I will just see what the Standing Order says.

I apologise if I did not make myself clear: this is a new point of order on a new matter of substance with regard to what the Minister has just referred to. It is subsidiary to the general point that he made earlier. It is absolutely true that the Minister was generous enough to provide to Opposition members of the Finance and Expenditure Committee access to his tax officials in respect of the issue of look-through companies. The meeting occurred at the request of the Opposition and the Minister was kind enough to assent to it.

I am sorry, I have misread the relevant Standing Order. Misrepresentation does not apply during the Committee stage. The member can take a call, so I will give the member the call.

I seek leave to make a personal explanation.

The CHAIRPERSON (Lindsay Tisch): Leave is sought to make a personal explanation. Is there any objection? There is no objection.

In his previous submission the Minister said that members of the Finance and Expenditure Committee, including me, were briefed by his officials on the existence of a Supplementary Order Paper. That is not the case. We had a general discussion with officials on the issue of look-through companies, which are the subject matter of Supplementary Order Paper 187, but at no stage was the Supplementary Order Paper presented, discussed, or referred to. I have in my possession a copy of the briefing note that was the substance of that meeting. I have re-checked it, and there is no mention of the Supplementary Order Paper, nor any reference to it. The Minister has, unfortunately, been ill-advised. This matter was not raised with us in the terms that he suggests, and I feel compelled to clarify that misrepresentation.

I thank the Minister of Revenue for getting to his feet a second time, and for giving the House further information and a better understanding of the issues that he faced, the process he went through, and the timing of it.

💬 Hon Paula Bennett: Think about misusing the personal explanation.

I am not sure what the Minister for Social Development and Employment, who is running a rapid commentary across the Chamber, has to add to the debate, but I thank the Minister of Revenue for that.

A couple of things arise. The first is that I recall a tax committee coming up with the need to make progress on loss attributing qualifying companies, and I think I remember the Government stating in the Budget that it would not make such progress. I wonder whether what has happened—and it would be no big deal if it had—is that the meetings the Minister attended in the month immediately after the Budget were where he and his officials were convinced that revisiting loss attributing qualifying companies would not be a bad idea. I welcome any comment the Minister might want to make on policy, as opposed to process, and if he does not want to make any comment, that is fine.

On the narrower issue of process, however, I do not want to put my point as a statement, so I will put it as a question. Was the relevant select committee aware of the fact, when it was looking at the primary legislation, that a significant Supplementary Order Paper was in the wind, or was it led to believe that it was not in the wind? I must say that that becomes rather an important question.

💬 Hon David Cunliffe: No idea.

I have my own colleague saying that the committee had no idea, and of course every colleague is to be taken at his or her word. What does the Minister say? If the Minister’s answer to me is that the select committee was not apprised of the fact that there would be a significant Supplementary Order Paper, I think that matters.

I also, on the Minister’s behalf, acknowledge his comment that there is a bit of a trade-off between timeliness and process. The folk in the tax world were saying to him time and again that they needed him to move faster, not slower. I acknowledge that. I am sure that that was the case, and I am sure the Minister was feeling constrained by it. That might be how this process conundrum has come about, but I want the Minister, if he would be good enough, to let me know whether my colleagues are correct in saying that they, on the select committee, had no idea that a Supplementary Order Paper of this size was coming. The Minister might like to assist by getting to his feet for, probably, the third and last time to tell us how that might have come to be. That is not the way that this particular Minister would ordinarily operate, I would think.

On the assumption that the member who has just resumed his seat, the Hon Pete Hodgson, is trying to be helpful, I am happy to respond. I cannot comment on what was in the minds of his colleagues in terms of their expectations of what would come by way of the changes that have been announced.

I refer the Committee to a statement I made on Tuesday, 7 December. It states: “Proposed new tax rules released today … Mr Dunne today released a Supplementary Order Paper (SOP) that will introduce several Budget 2010 tax measures to the Taxation (GST and Remedial Matters) Bill, which is nearing its final stages in Parliament.” That is the bill we are debating right now.

I go back one point and say that there is a certain language that people in the tax community, and this includes politicians, talk and understand. We talk of bills not necessarily in terms of their titles but by the month in which they are introduced. It was always the assumption, and I think it was broadly accepted, that a number of the changes that were foreshadowed in the Budget—to loss attributing qualifying companies, to the definition of “income” for social assistance purposes, and to some aspects relating to depreciation—would be passed by the end of this year. When we looked at the available vehicles to achieve those changes, we saw that there was the August bill, which is this bill, and the November bill, which is the one I introduced last week or earlier this week. That was it.

I come back to the point the member made. Because these things need to be in place in time for the new tax year on 1 April next year and allow for the lead time for that, any reasonable assessment by people who knew about how these things work would lead to the conclusion that legislation to give effect to the changes would be passed in November. It was obvious, I think—certainly, it was the intention—that a Supplementary Order Paper would be attached to this bill. That is why the process that I described earlier was open and transparent to those communities. I accept it was not a process that the general public was widely engaged in, because the general public is not interested in the intricacies of fit-out regimes, loss attributing qualifying companies, or the point at which full flow-through treatment is provided for. But the relevant tax communities in the legal, accounting, and broader business professions were well aware of what was intended.

We have hidden absolutely nothing. There was an opportunity to make submissions on the issues paper. We have attempted to consult as widely as we can and bring those submissions into play in terms of the final amendment that was adopted.

I released the Supplementary Order Paper earlier than would have normally been the case for the release of Supplementary Order Papers—again, in that same spirit of openness. Members would, I think, concede that major Supplementary Order Papers often are released hours before the bill comes to the House, because they are probably still being drafted. In this case we have gone through a very deliberate process. The drafting was out there in October; we are now into December.

Although I hear the criticisms that are being made, I do not accept them, because we have been very deliberative over the last 6 months in ensuring that all of the changes we are making have been widely consulted upon and fully understood. Where change has been proposed, it has been accommodated. I observe the fact that at no point until now have we heard anything from the Opposition.

Before we proceed, I want to say that members have spent quite some time talking about process, and I have allowed that to continue, but I remind members that loss attributing qualifying companies are covered in Part 2 and we will deal with them at that stage. We are on Part 1, clauses 3 to 20, and any amendments on Supplementary Order Paper 187. I ask members to concentrate on Part 1 from now on. I have given a fair range in terms of process, but we are on Part 1.

I raise a point of order, Mr Chairperson. There are two parts to my point of order. The first is in respect of the ruling you have just given. Respectful as we are, we draw your attention to the fact that Part 1 includes clauses 2, 10, and 19, and those clauses are all amended by the Supplementary Order Paper.

The CHAIRPERSON (Lindsay Tisch): No, clause 2 is not in Part 1. Clause 2 is clause 2. It is not part of Part 1. Part 1 starts with clause 3.

Further to my point of order, Mr Chairperson. I apologise for that slip, but clauses 10 and 19 surely are in Part 1 and therefore are within the ambit of the Supplementary Order Paper, which the matter of process goes to. The second part of my point of order is to note that the Minister of Revenue has very generously given further information in his most recent call about the process that he believes was employed. In doing so, he has raised further questions of process that it is incumbent on members of the Labour Opposition to address. Mr Chairperson, I am sure you will bear that in mind.

I will judge the merits of that during the course of the debate. But we have been going for over 45 minutes now on Part 1, and there has been very little debate on Part 1.

I take your comments in the spirit intended, Mr Chairperson. I first say, however, that the Minister of Revenue talked about a spirit of openness attached to the Taxation (GST and Remedial Matters) Bill, yet here we are, considering a Supplementary Order Paper that is bigger than the primary bill that the Finance and Expenditure Committee spent considerable time discussing. There was no signal to the select committee, of which colleagues and I are members, that a Supplementary Order Paper of this scale and consequence was coming; there was no such signal. If that is an indication of the spirit of openness, I hate to think what the Minister would do if he wanted to put through a bill without any openness attached to it.

This process is absolutely contrary, I suggest, to the way the Minister has operated for more than 25 years in this Parliament. He has been known as “Mr Common Sense”, but this is not common sense. Supplementary Order Paper 187 is bigger than the original bill. It includes dozens and dozens of complex technical changes that will inevitably involve some issues that will have to come back to the Finance and Expenditure Committee. The history of rushed tax legislation is always that we make legislation in haste, and repeal it at leisure. That will inevitably be the consequence when a Supplementary Order Paper is 13 pages longer—13 pages longer—than the original bill that was referred to the select committee in August.

We have given patient consideration to the bill. Labour supported the bill and worked in the select committee to see it through. But without any reference to the select committee or any indication to us, out of nowhere, in the supposed spirit of openness, comes this Supplementary Order Paper, which is bigger than the bill that we initially considered.

I also refer to the fact that the amendment tabled in the name of my colleague Stuart Nash supports zero-rating GST on fresh fruit and vegetables. I note that this amendment would go some way to taking some of the impacts of the most recent increases in GST off those hard hit New Zealanders, such as retired New Zealanders, of whom one in two—or more—are already saying they are worse off as a result of the GST changes and tax changes that were introduced in October. They are worse off as a result of those changes. Zero-rating the GST on fresh fruit and vegetables would be a very great assistance.

I note also that food inflation in the year to date is around 8 percent; there has been 8 percent food inflation. That is why New Zealanders are saying they are no better off as a result of the increase in GST. Zero-rating fresh fruit and vegetables, a very sound policy initiated by Labour, would go some way to taking that pressure off. I also note that the projections for food inflation next year are even higher than this year’s 8 percent increase. I think they are nudging into double figures, and my colleague Stuart Nash will confirm that for me. That is why I very strongly support this amendment in the name of Stuart Nash to take GST off fresh fruit and vegetables.

I noted last night on television that the Minister of Health, Tony Ryall, wearing a typically florid shirt and tie combination, was at a supermarket. One of the supermarket chains is introducing a healthy food regime, and the Minister was there for the photo opportunity. Of course, he is the same Minister, the very same Minister, who has allowed unhealthy food and Coca-Cola back into tuck shops so kids are now able to eat pies and sweets and drink Coca-Cola by the litre. He has also cut the healthy food in schools programme, but he wants to be associated with a programme promoted by one of the major supermarket chains to try to offset some of the damage that he has done in terms of healthy eating for kids. I hope the Minister of Health will come to the Chamber and support the amendment in the name of my colleague Stuart Nash, which would zero-rate GST for fresh fruit and vegetables. It is a very sensible initiative, with a whole range of health benefits for children.

I will look more broadly at the Supplementary Order Paper introduced by the Minister as it relates to various clauses in Part 1. I think it relates to clauses 10 and 19, if my memory serves me right, in terms of zero rating. Labour supports the idea of some changes across zero rating. We supported the original bill in terms of zero-rating land transactions; that was sensible. But Labour’s support has been lost because of the way this Supplementary Order Paper has been introduced.

The Supplementary Order Paper goes into other clauses around Working for Families and changes there. We have some suspicion, I have to say, in respect of some of the Government’s statements on that programme. We recall the Prime Minister’s view that the Working for Families programme was “communism by stealth”; I think that was the phrase he used. That is why we say that this Supplementary Order Paper needs to go back to the select committee for scrutiny.

With all due respect to the Minister and to his officials in the Inland Revenue Department, with all of this host of technical, complex changes they are not likely to have picked up all of the fish-hooks that emerge when we pass under urgency, sitting on a Friday, a complex Supplementary Order Paper that is bigger than the original bill. More important, we want to make sure that we get it right. Working for Families is a very important component. It is one of the wonderful policies implemented by the Labour Government. After the Prime Minister described it as “communism by stealth”—that is how he described it—he seemed to come to the view that it was helping ordinary New Zealanders to get through life much better than they would without it.

We want to know what changes are proposed. Sure, there will be some sensible changes, and there is the odd person who pushes the boundaries. As happens with any programme, there are always those who try to take advantage. But we need the scrutiny of the select committee. We need the process of input. It is all very well for the Minister to suggest that he has been working with the tax industry and they want these changes. But the tax industry does not necessarily always have the best interests of the taxpayers at heart. Some people in the tax community are obviously there to try to ensure that their clients are able to minimise, shall we say, their tax obligations. That is why it is important we have the scrutiny of the Finance and Expenditure Committee, the watchdog committee of Parliament, which is in charge of revenue on behalf of taxpayers.

I would like to know what some of the other parties will do in respect of this Supplementary Order Paper. I know that Sir Roger Douglas has always been concerned about the complexity of tax law—the complexity of tax law. Here we have a 70-page Supplementary Order Paper with dozens and dozens of complex technical amendments, which the Government is proposing to push through under urgency without any real scrutiny whatsoever.

I ask Sir Roger and ACT—and the Māori Party; I put it into the same category—whether they felt they were briefed appropriately in respect of this huge, complex Supplementary Order Paper as it relates to Part 1 of this bill, clauses 3 to 20. I would like to know whether they felt they were given the appropriate briefing, whether they knew that a 70-page Supplementary Order Paper was coming, and whether they are comfortable with the fact that Parliament, under urgency on a Friday, is going to push through this complex, technical Supplementary Order Paper without any real scrutiny, without any reference to the Finance and Expenditure Committee, and without any capacity for tax practitioners, ordinary members of the public, academics, and others to take part in the usual sort of scrutiny that has been a hallmark of this Minister.

We have to ask what on earth is going on when this legislation is pushed through in a most unusual fashion for this Minister. I have to say that across two different Governments he has been in coalition with, he has been exemplary in the way he has put through tax legislation. Until today he has been exemplary in the way he has acted, and we have to ask what is behind this. Often, as we know, there can be issues behind an action, and we want to know why the Government wants to push through this legislation.

I ask the Minister to respond to that question, but also I really hope that the ACT Party and Māori Party will take a call—I am sure our colleagues the Greens will have a view—because I would like to know how they feel. The Minister has asserted—and we have rejected his assertion—that there was a signal that the Finance and Expenditure Committee was consulted, and that a briefing was available on these issues. We did not get that briefing, and I would like to know whether other members of the Finance and Expenditure Committee, including Government members, felt they got the appropriate briefing.

I move, That the question be now put.

I will talk about a different topic in Part 1 of the Taxation (GST and Remedial Matters) Bill. I will talk about the provisions in relation to accommodation, and will seek some clarity from the Minister in the chair, the Minister of Revenue.

I understand that clause 4 amends the definitions of “commercial dwelling” and “dwelling”. I believe there has been some expansion of what the term “dwelling” was originally meant to apply to, and that it now includes more than was originally intended, so the definitions of “commercial dwelling” and “dwelling” have been clarified to better determine which types of accommodation fall within the ambit of them. Of course, the importance of doing this is that we do not want to create too much disparity between people who own their own homes and people who rent their homes. I note that the definition of “commercial dwelling” has been amended to mean “a hotel, motel, homestay, farmstay, bed and breakfast establishment, inn, hostel, or boardinghouse:”. I understand that it would apply to student accommodation; I am not sure whether it does. I imagine it would, in which case the cost of GST being payable on that service would be passed down to the students in that accommodation. The definition also applies to a serviced apartment, nursing home, rest home, hospice, and camping ground, but excludes a hospital without a residential component, and retirement villages in certain circumstances.

The part I question is the inclusion of boarding houses in the definition of “commercial dwelling”. I have read this bill, I am taking it at face value, and I just want some clarification. I may be finding some mischief that is not there, but my concern is that as a member of the Social Services Committee that worked on residential tenancies legislation I know that the issue of boarding houses was very, very complicated with regard to where they fell within even that legislation. So when it comes to whether such an establishment would attract GST, I question the propriety of including boarding houses as commercial dwellings. We know that people who live in boarding houses are basically in a rental situation. They are, by and large, the most vulnerable rental tenants we have in this country. I know that the housing Minister, who is in the Chamber, agrees that there are a lot of issues in relation to boarding houses. The select committee that worked on residential tenancies legislation worked very hard to try to find out how we could protect those tenants. The understanding of that select committee in looking at tenancy legislation was that those people are in a rental situation. They probably need more protection than the average tenant who rents, because they often live in substandard accommodation, they tend to be people who have significant mental health issues or drug and alcohol issues, and they are not the kinds of people who will speak up or speak out if they believe they are being unfairly treated or the law is not being applied. So the inclusion of boarding houses in the definition of “commercial dwelling” worries me. It may not be a big deal at all, it may not be an issue, but when I saw that boarding houses were included in that definition it really jumped out at me, given the extraordinary amount of work that went on this year in terms of the definition of a boarding house.

Added to this is that I also note that throughout the bill it references definitions “as defined in section X”—or Y or Z—“of the Residential Tenancies Act 1986”. Well, this year Parliament passed the Residential Tenancies Amendment Act 2010. I seek some kind of assurance that, despite the fact Part 1 references tenancy law from the 1980s, it is still appropriate, because we have actually made significant changes to residential tenancy law. A lot of those changes relate to boarding houses and boarding-house tenants. The definition of a boarding house under the 1986 Act and how it was treated in tenancy law changed significantly in the Residential Tenancies Amendment Act 2010. I know that this might not seem like the kind of issue people would expect to be discussing when debating what started out as a technical tax bill but has now become a more substantial one, but whenever I see the issue of boarding houses, as the housing spokesperson for Labour I am concerned. I want to make sure that costs will not be passed down to boarding-house tenants because that particular type of dwelling attracts GST, when in another rental situation that would not be the case.

I rise to take a specific call on new clause 10B, on Supplementary Order Paper 187, which inserts after clause 10 in Part 1 the opportunity for zero rating of services. It replaces section 11A(1)(u) with the following: “(u) the services are supplied to or by the Crown as consideration for a supply—(i) for which there is no payment of a price; and (ii) that is chargeable at the rate of 0% …”. The Minister of Revenue earlier deemed that matters of zero rating are in scope, and therefore the amendment proposed in the name of my colleague Stuart Nash regarding zero rating the supply of fresh fruit and vegetables is in scope, and we appreciate that. I think it is important for the Committee to take some time to discuss that issue.

There has also been a lot of debate so far about process issues. What is accepted now, I think, on all sides of the Committee is that this 71-page Supplementary Order Paper did not go to the Finance and Expenditure Committee, and there was no notice given to the Finance and Expenditure Committee that it was coming. It was presented, the Minister says, on Tuesday. I did not see the actual Supplementary Order Paper until yesterday, and I was out of town for part of yesterday, so my statement that I saw it last night was true. Although there was a discussion, which we appreciated, with officials on look-through companies, that discussion did not turn to the substance of the Supplementary Order Paper itself, nor were copies presented to the Opposition in that meeting.

So the question raised by my colleague Brendon Burns and by my colleague the Hon Pete Hodgson remains. The Minister in the chair is a Minister who, perhaps more than some others, is regarded by all sides of the House as being an honourable member and a stickler for process. It is a surprise to us that this Minister of all Ministers would bring such a substantial Supplementary Order Paper to the Committee in such a shoddy fashion, bypassing the best part of the generic tax policy process, bypassing scrutiny by the Finance and Expenditure Committee, bypassing the opportunity for independent tax advice, and bypassing the opportunity for members of the public or the profession to have their say, on record, through the submission process.

New clause 10B explains, in part, why that exceptional action has been taken by the Minister, because, clearly, the Government did not want to debate in the select committee zero rating GST. That must be one part of the reasoning, because when one starts that debate and opens submissions on a matter that, as Mr Chairman has ruled, is within scope, the public can submit on other things that they want to see zero rated. The Labour Opposition has taken a fairly fine point on that debate. We have acknowledged the issue of definitional overhead—[Interruption]—and we have focused on something that is very easy to know. Everyone knows what a fresh fruit or vegetable is—even Tau Henare probably could guess. It is for that reason that we are able to deliver relief through our policy, which is a gold-plated election promise costing $270 million of forgone revenue a year. Labour will deliver $6 or $7 a week to hard-working New Zealand families—that is for a family of four or five. That promise has been extremely well received by New Zealanders up and down the country.

The reason that it is important, and it goes to new clause 10B, is that New Zealanders are doing it extremely tough in the recession. I say “in the recession” advisedly, because we are still in one. The small-business people in my electorate of New Lynn are telling me that this year is tougher than last year. This year is tougher than last year for small-business people. They have been hanging on by their fingernails, mortgaging their homes and just trying to keep the staff paid and the businesses ticking over. This year is tougher than last year because they are running out of equity with which to do that. The interesting thing is that talking to the big end of town—and Labour members have been out and about talking to the corporate sector quite a bit lately—the message we are getting, to quote one chief executive officer last week, is never has so much popularity been used by so many for so little. “What is this Government doing?”, they ask; “What were they thinking during 10 years in Opposition that they have so little new to contribute to public debate?”. Those questions are relevant to this bill, because one of the key areas of economic structural reform that are needed is the rebalancing of the tax system to avoid the blowout in property investment.

Mr Chairman, I see your finger poised on the button and I remind you that I have one call still to take.

The CHAIRPERSON (Lindsay Tisch): The Hon David Cunliffe.

Thank you, Mr Chairman. This will be my final call on Part 1—but it is going to be a long day—which would include new clause 10B, “Zero-rating of services”, and I have offered a short call in support of Labour’s amendment to zero-rate fresh fruit and vegetables, and I thank colleagues for that amendment. I bring the Committee back to the issue of process. Whatever the merits of that amendment, the select committee should have had the opportunity to discuss it, alongside the issue of whether it was propitious to zero-rate other services.

The economic context into which this Supplementary Order Paper falls, as I have said before, is particularly important because the rebalancing of the tax system has been said by the Government to be one of its most core objectives. The Government set up the Tax Working Group, which it lauded and hailed, but then it refused to implement most of its recommendations. If we thought about the recommendations in terms of a menu in a restaurant, the entrée would be things like building depreciation, and the main would be things like a land tax, the risk-free return rate, or some variant on a capital gains regime that rebalanced the capital income boundary—in particular, in relation to the property sector, which is the subject of this matter. But the Government refused to make the structural changes. It is very, very interesting that this Supplementary Order Paper, which is a very timid step forward in respect of reform of loss attributing qualifying companies, which are the main legal vehicle for holding property assets—this timid step forward, small as it is, capturing only around $100 million of revenue, as it does—could have gone through a select committee process and we could have checked whether the definitions could be broadened, or the scope could be broadened, or look-through companies could be made more effective. And it would have been in the context of a bill that up until this point has had the unanimous support of all parties—all parties. This Minister has single-handedly torpedoed the consensus of the House, which could have smoothed this bill through, by not putting the most important amendments, which are contained in this Supplementary Order Paper, before the select committee.

It really is a surprise to see that coming from that Minister, whom we have had a high degree of respect for across successive Governments, because, forgetting the politics, he has always had a detailed and fair handle on revenue issues.

💬 Moana Mackey: He needs to answer my question about boarding houses, too.

He needs to answer the question about boarding houses. I hope he will take a call. I apologise to my colleague for interceding as I did, but I felt it was very important to come back to the issue of zero rating before we lost the opportunity of the debate on Part 1 to commend the amendment that I believe the Hon Trevor Mallard had a hand in—

💬 Hon Trevor Mallard: I had no hand in this—maybe a finger.

—with my colleague Mr Nash. So it was a team effort on the Labour side of the Chamber, as always, because we do operate as a collective.

Zero rating of goods and services is important. One of the reasons it is important is that it will provide relief to hard-working Kiwi families. The other reason is that it gives us an opportunity, if we look specifically at the property sector, to rebalance some of those bubbles at the income capital boundary. The fact is they are pumping air into the property balloon, which has popped. The thing about bubbles is they pop, lots of people go broke, and lots of people get hurt. Strangely enough, it is always the poor who get hurt the most. They socialise the losses, while the rich privatise the profits, most often. Then about 7 to 10 years later we come back and have another bubble. How long will it be before the next property bubble occurs because this Government, at this point in history, did not have the fortitude to take the structural steps that were needed to prevent it from recurring?

It would have been good for the select committee to be able to address itself to those concerns by the Supplementary Order Paper having been tabled in the normal way. It could have been done. The Minister says he was consulting the profession. I find it reprehensible, then, that members of the profession were told things that members of the Opposition and other parties were not because the bill was not put before the select committee. There is no way of changing that. I invite the Minister to take a brief call to explain again why the Supplementary Order Paper did not go to the select committee, and to address the concerns raised by my colleague Moana Mackey in respect of particular technical question around the GST consequences in respect of boarding houses.

I move, That the question be now put.

The CHAIRPERSON (Lindsay Tisch): I will take two more calls.

I would like the Minister in the chair, the Hon Peter Dunne, to focus on clauses 15B and 16 in Part 1 of the Taxation (GST and Remedial Matters) Bill, as opposed to Supplementary Order Paper 187 in his name. If it is all right with you, Mr Chair, I will take one of the calls and my colleague will use the next one. I am not sure whether he will speak on this issue as well.

I just go to clause 16, “Deduction of tax from payment due to defaulters”, and I will focus on the arrangements where money is held in a joint bank account. It occurs to me that a number of people have joint bank accounts or arrangements—for example, trust lawyers. There are a number of circumstances where individuals are signatories of a bank account and money is paid into it, which theoretically as a trustee they can draw out, and it might be that only their signature is required. According to new subsection (1B)(b) of section 43, in clause 16, money can be withdrawn on their signature. But what happens if that money, despite being in a joint bank account, is actually the property of the other signatory of the bank account?

The Minister proposes that notwithstanding the money belonging to someone else, the Inland Revenue Department is able to go into a bank account—an account that does not contain money that the department has put in but contains money that is absolutely independently there. I am looking at some of my colleagues and slightly blaming them here. How come there was a proposal that we would support legislation to allow the Inland Revenue Department to go into an account and take out money that does not belong to the tax defaulter?

I want to know why Sir Roger Douglas is supporting legislation that would allow the Inland Revenue Department to take money that belongs to a third party out of an account, to satisfy the debt of a defaulter whose money it is not. The Inland Revenue Department goes into an account, which is not solely in the name of the defaulter—it is in two names; the money held in it belongs to a third party—and Roger Douglas is supporting legislation that allows the Inland Revenue Department to go into that account, with no notice to anyone, with no pleases and no thankyous, and confiscate that cash. [Interruption] The member says “rubbish”. The member has not read the bill, because that is exactly what clause 16 of this bill does. That is exactly what clause 16 of this bill does. I want to know whether Roger Douglas, who is meant to stand for freedoms, for the integrity of bank accounts, and for not having State involvement, thinks that is an appropriate thing to do.

I do not want to say there are an excessive number of tax-defaulting lawyers, but there are a few lawyers around who are signatories, as trustees, to bank accounts. Like Chris Finlayson, they are not currently operating them. The accounts are nothing to do with them, but there is money in those accounts that does not belong to them. I just ask why the Inland Revenue Department should have the remedy of going into those accounts, which might not have been used for 20 years by the tax defaulter, and take money from those accounts. What can be right about that? What are the ethics of that situation, whereby we are giving an enormous power to the State to confiscate money to satisfy a tax debt by taking money from someone who is not the defaulter? Confiscating money from someone who is not the defaulter is something that I think needs to be looked at.

Another area, which I am not sure whether my colleague will pick up on as he takes a call in 5 seconds’ time, is the question of clause 15B, on credit and debit notes.

My colleague Trevor Mallard brings up a very good point, and I will tell members why I think it is such a good point. It is because the bill as originally put forward was quite wide. It was quite wide and we had major concerns about that. Sir Roger Douglas spoke at length about it. I did, David Cunliffe did, Brendon Burns did—everyone expressed outrage that this could actually occur. In fact, it was quite a long and robust debate. Roger Douglas became animated, the tax officials were sent scurrying, and they came back with a suggestion that was not good enough for the select committee. They went away again and came back with a whole lot of assurances. But the point that the Hon Trevor Mallard has brought up is very relevant. What happened with this bill is that it went to the select committee, and members sitting on that committee had a whole lot of questions about it. So the members presented those questions to the tax officials and the tax officials said: “We hear what you are saying, let’s go out and consult and come back with suggestions.” And do members know what? The changes were made. The changes were made to this legislation because Sir Roger Douglas, the Hon David Cunliffe, Brendon Burns, I, and the National members of the Finance and Expenditure Committee scrutinised this very robustly. We said that we had the same concerns that Trevor Mallard has brought up. We had exactly these same concerns, so it was altered. That is what the select committee process allows. It allows bills to be scrutinised with other eyes, with different eyes, and the necessary changes to be made.

One thing I would like to talk about is the amendment to insert new clause 10(2) that I tabled with regard to zero-rating the supply of fresh fruit and vegetables. Mr Cunliffe asked Tau Henare a very interesting question as to whether he was a fruit or vegetable. Some say he is a fruit, I suspect he is a vegetable, but that does not really matter. The bottom line is that this is quite easy to ring-fence and clarify. People asked about the lettuce in a McDonald’s hamburger. That is pretty obviously not covered because it has been processed in some way, shape, or form. One cannot put a huge, big, fresh lettuce between two buns and not call that processed. It is a very easy distinction to make. When a member or any New Zealander goes into a supermarket, if they can see a fresh apple in an unprocessed form sitting there, it has not been processed. If they go in and see a can that has apple quarters in syrup, that has been processed. It is pretty simple. That is why we have drafted the subclause like this, because it is very much common-sense legislation. It is very much a common-sense amendment that we are asking the Minister to include. I would like to ask the Minister, first, to let us know whether he will support this, because it is common sense. It is very much common-sense legislation that will help all New Zealanders from the cradle to the grave—from the cradle to the grave. It is about providing them with cheap options to allow them to live a healthy lifestyle, and we all want that.

At the moment the only group leading the healthy lifestyle charge is the private sector. As my colleague Brendon Burns mentioned, the Hon Tony Ryall turned up at a supermarket that is promoting healthy lifestyles. Why cannot the Government be seen to be promoting healthy lifestyles? Is not one of our roles to send signals out to the public about what we believe is right? Is it not part of our role to actually do what is right for the people of New Zealand? Well, this is right for the people of New Zealand. It is right for the people of Christchurch, and it is right for the people of Waikato. My friend on the Finance and Expenditure Committee the honourable David Bennett says that the people of Waikato are suffering because of a drought up there. I heard a man last night say that people there want some special assistance. All they want to do is provide fruit and vegetables on the family table. That is what that south Waikato farmer said. This amendment will help that south Waikato farmer.

Mr Chairman, I move, That the question be now put.

The CHAIRPERSON (Lindsay Tisch): The member has to actually quote exactly what the closure motion is.

I apologise to my colleagues who did not recognise the fact that Tau Henare made yet another error—

💬 Hon Tau Henare: I raise a point of order, Mr Chairperson. I want to quote to you what I said.

The CHAIRPERSON (Lindsay Tisch): I have already ruled.

💬 Hon Tau Henare: It was “I move, That the question be now put.”

The CHAIRPERSON (Lindsay Tisch): I have ruled. I have ruled. Sit down. Sit down or you are out.

I think we had a chocolate-covered banana, did we not? That is what we got for Tau Henare in the end. We could not get something that was brown on the outside and yellow in the middle other than a chocolate-covered banana—and a chocolate-covered banana with very poor literacy skills. That is the party of national standards. That is the party of national standards and Tau Henare cannot even read out a simple bit of paper. No, to be fair, Aaron Gilmore might have written it down for him and he read it accurately. Aaron Gilmore wrote it down for him and he read it accurately. I apologise to Tau Henare. His literacy skills might not be a problem for him; he might have read exactly what Aaron Gilmore wrote. But then Aaron Gilmore is perfect. He tells us all the time. Aaron Gilmore drafted this Supplementary Order Paper in his sleep.

💬 Rahui Katene: I raise a point of order, Mr Chairperson. This speaker has been going for about 1 minute and I have yet to hear anything on the bill.

The CHAIRPERSON (Lindsay Tisch): I am the judge of that. I ask the member to speak on Part 1.

The discussion that Tau Henare had on Part 1 was pathetic. It was absolutely pathetic. He tried to say “I move the question be now put.”, but he did not even get it right. That was his sole contribution. Did Aaron Gilmore make a speech? He is the expert! No, he did not make a speech. He got the closure motion right, to be fair. He got it right, but I do not know whether he misread what he wrote down and got it right that way or whether he read it accurately. His contribution on the bill was—[Interruption]—I agree, Aaron Gilmore’s contribution was very limited. There was a very limited contribution from Aaron Gilmore on this particular bill. [Interruption] No, I think it is fair to say it was one of his better contributions. It was one of the biggest contributions that he has made in Parliament.

I say to my colleague Stuart Nash that I was not convinced by his speech. There was one point that was absolutely valid, and that was that clause 16 of the bill was improved by the select committee. There is no doubt. One only has to look at the addition of “or other authorisation”—although that probably modernises it slightly—and, more so, new subsection (1C), which states that subsection (1B): “does not apply when the joint bank account is an account of a partnership that files a return …”. But that does not cover a trust arrangement. A trust is not a joint partnership.

💬 Stuart Nash: A loan trust. The taxpayer does not own the trust.

That is absolutely right; it does not stop the money coming out of it, because it is a bank account. A trust has a bank account. The person does not have to own it. The person does not have to own the money, according to this bill; all he or she has to do is be a signatory or a name on a bank account. There is no question of the ownership of the money being in the person. This can take money out of trust accounts of defaulting lawyers that actually belongs to third parties, just because a lawyer happens to be a signatory on the bank account—just because a lawyer happens to be a signatory. That is an absolute outrage. I do not know why Stuart Nash is defending the Government. I do not know why Stuart Nash and my other colleagues are supporting the Government in this—

💬 Hon Members: We’re not; we’re voting against it.

We are voting against it now but probably for the wrong reasons. I do not know why he was going to support it. I wonder about the whole economic team on this side, frankly. I wonder whether they have been duped by Peter Dunne and this legislation into allowing a sneaky way for the Inland Revenue Department to go into lawyers’ trusts accounts and take money out that does not belong to the defaulting lawyers but to third parties, only because the person—the lawyer, the defaulter—is a signatory on the account. That is all that is required. Clearly there is an exception under new subsection (1C), but that is a relatively minor exception.

I move, That the question be now put.

I seek leave to adjust the Green total from 9 votes to 8 votes.

The CHAIRPERSON (Lindsay Tisch): Leave is sought to change the vote of the Green Party from 9 votes to 8 votes. Is there any objection to that course of action? There is no objection. The new vote results are Ayes 69, Noes 51.

The CHAIRPERSON (Lindsay Tisch): Stuart Nash’s typescript amendment to clause 10 is ruled out of order as it does not meet the 24-hour rule under Standing Order 320.

I raise a point of order, Mr Chairperson. Can we have an assurance that the Minister’s Supplementary Order Paper was on the Table 24 hours before. If our amendment is ruled out then his Supplementary Order Paper should be ruled out as well.

The Supplementary Order Paper was released on Tuesday. This ruling is about an amendment from Stuart Nash. The 24-hour rule under Standing Order 320 applies. I am ruling on that basis, not on any other criteria. It is ruled out of order under Standing Order 320.

I raise a point of order, Mr Chairperson. Although I reserve the position to recall the Speaker on that question, the assurance I was looking for was not the time of public release but the time of the tabling of the Minister’s Supplementary Order Paper, and whether it was, in fact, tabled 24 hours ago. I first noticed the Supplementary Order Paper late last night.

I am advised that Standing Order 296 is the relevant Standing Order. The Supplementary Order Paper was lodged in the public domain on Tuesday. That is the operative date, so it meets the question that the member is seeking.

💬 Hon Trevor Mallard: Sorry, which Standing Order was that, Mr Chairperson?

The CHAIRPERSON (Lindsay Tisch): Standing Order 296. An amendment has to be lodged on the Table only if it has not been in the format of a Supplementary Order Paper.

I raise a point of order, Mr Chairperson. Can you please relate Standing Order 296 to the 24-hour rule. That Standing Order appears to be a rule about how one lodges, not how notice is given. I think all of us know that there is a difference between lodging and releasing. As a former Minister, I know well that there is a big difference between lodging and releasing. It is the releasing that counts as far as the notice, and not the lodging.

There are two issues. With respect to the large Supplementary Order Paper, it was tabled and released at about 1 o’clock on Tuesday, which is well outside the 24-hour rule. There is a drafting change, which is the second amendment, but that is covered by the provisions of Standing Order 320(1) in that it is a technical drafting change that does not have an impact on the Government’s fiscal passages. My submission to you, Mr Chairperson, is that not only is the Supplementary Order Paper well and truly in order but also the amendment is in order.

I take on board the Minister’s comments. The Supplementary Order Paper was lodged and released on Tuesday. The bill was on the Order Paper on Tuesday, ready for the Committee stage. That is the operative time line concerning the question that the member asked.

The question was put that the amendments set out on Supplementary Order Paper 187 in the name of the Hon Peter Dunne to Part 1, and the following amendment in his name to clause 4, be agreed to:

to omit from subclause (5) “21G(2) and (5)” and substitute “21G(2B)”.

Amendments agreed to.