Taxation (GST and Remedial Matters) Bill

The debate on this part includes the schedule.

Thank you—

💬 Hon Trevor Mallard: This is one of the biggest parts of the bill.

It is. Part 7 is a particularly important part of the bill. It is particularly important because it reflects the process that has gone on so far. This is a grab bag. It is entitled “Amendments to other legislation”. How non-specific can we possibly get as to the title of a part—“Amendments to other legislation”? That reflects the shambles of a process that is embodied in this bill. The Government could have done the normal, generic tax policy process, but it chose not to. It could have given the bill the benefit of a standard select committee consideration, but it chose not to. It could have allowed practitioners in the industry, such as the lawyers and the accountants, to make formal public submissions, along with affected businesses and members of the public, but it chose not to. Government members could have subjected themselves to the cross-examination of members on this side of the Chamber, but they chose not to. Instead, they have chosen to bring to the Chamber a Supplementary Order Paper that dwarfs the original bill.

Part 7 is contained in the original bill, not in the Supplementary Order Paper, but it is a grab bag of miscellaneous clauses that reflect the general state of disarray of this legislative process. The first one is clause 105, which covers deductions from joint bank accounts under the amendment to the Gaming Duties Act. This clause, together with clauses 16 and 86, allows deductions of tax from payments due to a defaulting taxpayer. They are amended to allow the Commissioner of Inland Revenue to make deductions of tax from joint bank accounts. The amendments will allow deductions from a joint bank account if the defaulting taxpayer can make withdrawals from that account without the signature of the other person. What that means, in plain language, is that if someone has a joint account and one member has defaulted, then the commissioner can allow deductions to occur without the consent of the other party. That is certainly improving the reach of the tax department. It does raise the odd issue about whether the privacy of another person is involved, but I guess that is the price of having a joint account.

Clause 106, which covers provisional tax relief for the super-city transition, is a matter of some considerable importance because this is the tax implication of the new structure of the super-city. It is specifically designed to accommodate the fact that most of the business of the super-city is not going on at council level; it is going on at the council-controlled organisation level. That has required entirely new tax provisions between the council-controlled organisation and the parent council. This clause amends section 83 of the Local Government (Auckland Transitional Provisions) Act 2010, which provides transitional tax relief on the amalgamation of the local authorities into one council. It provides, for the purposes of the financial arrangement rules in the Income Tax Act 2007, that where the new Auckland Council enters into an acknowledgment of debt with a council-controlled organisation without paying the principal to the council-controlled organisation, the council is deemed to have advanced the amount of the principal to the council-controlled organisation. That is, it is deemed to have advanced the amount, even if it does not actually make a new loan, because it is inheriting a debit from a previous structure. It is probably one of the more sensible provisions in the bill.

As part of the super-city restructuring, certain assets owned by existing local authorities will vest in council-controlled organisations owned by the Auckland Council. There is no problem with that. It is sensible enough. The issue at stake is the balance—of course, this is old territory—of authority and oversight between the parent council and the plethora of council-controlled organisations into which most of the activities of the new council have been devolved. It is of great cheer to this side of the Chamber to see that the new mayor, “Auck-Len”, has ensured good transparency at the council-controlled organisation board level by insisting on the publication of board papers. The New Zealand Herald yesterday of course revealed a very good summary of the first round of board meetings, the notable exception being the transport council-controlled organisation, which saw fit to have its first meeting entirely in secret and not publish any of its papers. So we have the paradox that the largest, most important council-controlled organisation has been hitherto conducting its arrangements in secret. That is not acceptable, and I am very, very pleased that the new Mayor of Auckland, Len Brown, has been able to gently persuade the transport council-controlled organisation board that the expectations of the public of Auckland are for a maximum degree of transparency. So that is excellent.

There are some debt implications that are tidied up in these clauses. In clause 106, the debt relating to the assets owned by local authorities vested in council-controlled organisations will not be transferred to the council-controlled organisations but will be assumed by the Auckland Council. In turn, the council-controlled organisations will then enter into an acknowledgment of debt to the council for the amount of debt attributable to the assets. That is interesting. In fact, despite the locus of control being vested in the board of the council-controlled organisation, the debt is vested in the council. To members on this side of the Chamber this just smells slightly familiar—the old right-wing tendency to socialise the losses and the risks and to privatise the profits. That is exactly what has happened in the global financial crisis.

💬 Hon Darren Hughes: Seen that before.

That is right. The taxpayer around the world has had to underwrite the huge bonuses made by the crocodile shoe brigade on Wall Street. It is an outrage.

💬 Hon Darren Hughes: Don’t call the Prime Minister that.

That is right.

💬 Dr Paul Hutchison: What would have happened otherwise?

Well, if there had been a decent regulatory framework, we would never have had the level of bonuses paid.

💬 Dr Paul Hutchison: No, what would Governments have done otherwise?

I think it is bipartisan that we have had retail—[Interruption] If the member has asked a question, he should have the courtesy to listen to the response. There was bipartisan support for having a retail and wholesale deposit guarantee scheme, before the current Government blew it and extended the retail scheme without sufficient clarity of oversight, as—I have a good bottle of wine resting on this one—it is now going to blow the budget for the underwrite. It is going to blow the budget for the underwrite because not only has it turned down a really good recapitalisation proposal on South Canterbury Finance—and it is going to end up paying a whole lot more by the time it has brought the asset sales to book—but it has had Equitable Mortgages, another $180 million - odd, which has been deliberately put into receivership by the owners before it is anywhere near insolvent. When asked why they did it, they said: “We don’t want to take the risk.” It was the closest thing I have ever seen to an admission by a private board that it suited their shareholders for the taxpayer to bear the risk. It was extraordinary. Yet the Government did not bat an eyelid. It did not even ask the question of whether that was ultra vires to the purposes of the retail deposit guarantee scheme. If Dr Hutchison would like me to go on, I could probably spend two or three calls examining the details of the scheme a little more fully, but I think he probably wants to get home some time tomorrow.

💬 Hon Darren Hughes: No, on Monday!

It could be Monday. Let me move on to section EW 3(2). In this provision—

💬 Hon Trevor Mallard: Bring on the detail!

Well, is it not interesting that Mr Brownlee, the Leader of the House, has not taken a call? We could argue about whether he is in the Chamber; I could not possibly comment.

The CHAIRPERSON (Lindsay Tisch): Members cannot refer to the absence of a member. The member should know that.

In which case, I will not refer to it, Mr Chairman; you are quite right. The general definition of financial arrangements in section EW 3(2) does not apply to the acknowledgment of debt, because no consideration is paid by the council to the council-controlled organisation, and therefore there is no consideration violating standard practice contract law that a contract is not a contract until consideration has been exchanged, and that an agreement to agree is not an agreement in law until such consideration has vested. So here we are, in the dead of the afternoon the week before Christmas, under urgency, doing what? We are overriding a bill making perfectly sensible but necessary tidy-up amendments that was agreed by consensus in the Finance and Expenditure Committee by every party in the House. We had consensus on those points until the Minister brought into the House an 80-page Supplementary Order Paper, which is far more important than the main bill. The main bill was just a tractor put on the trailer. All the hay is in the trailer; it is in the Supplementary Order Paper. The committee did not have the opportunity to investigate.

I raise a point of order, Mr Chairperson. I would like for you to rule, please, as to whether clause 109 in Part 7 of the original legislation, as reported by the Finance and Expenditure Committee, is, in fact, within the vires. It is headed “Consequential amendments to Inland Revenue Acts: ACC change”.

My point is that I have searched back through the bill—I have not, to be fair, searched through the Supplementary Order Paper, but I think that is probably not relevant—and the clause states: “The provisions in the enactments listed in the schedule are amended by replacing ‘Injury Prevention, Rehabilitation, and Compensation Act 2001’ by ‘Accident Compensation Act 2001’.” There is no doubt that that Act has changed, but the point I am making is that this is not a consequential amendment on the legislation we are dealing with, and therefore it cannot be a consequential amendment flowing out of it. I ask you to rule that clause 109 be struck from the bill.

That is an interesting question from the member. The Parliamentary Counsel Office has drafted this clause into the bill as “Consequential amendments to the Inland Revenue Acts: ACC Change”. If the Committee is not of a mind to support that clause, it can vote it down when we come to vote on this particular part. That is the opportunity to vote accordingly if one does not agree with it. The Parliamentary Counsel Office has included it, which can happen. It is up to members whether to support it, and they will vote accordingly.

I apologise, in part, for disagreeing with your ruling, and certainly the rationale behind it. The fact that the Parliamentary Counsel Office has included something in a bill probably, in fact, should not be referred to by members in the Committee. The responsibility for the bill is the Minister’s—currently that of the Minister in the chair, the Minister for Courts—and the Government has to take responsibility for it. It is not a question of whether the Committee agrees with it; the question is whether it is within the vires of the bill. My clear submission to you is that this provision cannot be consequential.

The provision is in the bill as presented. It has been through a select committee, and it has been deliberated on. It is not an amendment; it is actually in Part 7 of the original bill.

💬 Hon Trevor Mallard: I understand that.

The CHAIRPERSON (Lindsay Tisch): My point is that it has been in the bill from day one. It has been accepted in a first reading, a second reading, and the select committee process, and it is contained here. As I said, if the member is not happy with it, or if a party is not happy with it, they have the opportunity to vote the provision down. I made the point about the consequential amendment earlier on: it is a consequential amendment to other particular Acts, and they are actually mentioned here. It is in order; it is just like the other amendments throughout the bill. It is within the scope of the bill. That is my ruling.

I think Mr Mallard is not pointing to a policy disagreement, in which your ruling would be correct. Members of the Committee vote things up or down depending on their political view about the policy merits of a clause. I think Mr Mallard is trying in a dispassionate way to make the point that there has been an error in the technicality of the way the bill has been prepared. That is not a policy matter. The fact is that this error has just been discovered in a very big bill, and tax bills are very technical. He has pointed out the fact that that error has been discovered only now. Just because it received a first and second reading and select committee consideration, and was not discovered at that point, does not change the fact that the structure of the bill before us now is not in a technically correct form.

When it is technically correct, then we will return to our policy debate. In fact, that is the whole point of the Committee of the whole House, which often finds something that is lost during this part of the process. This is the detail. You will recall that up until a few years ago the Committee of the whole House took a bill clause by clause. It went through it clause by clause in order to make sure that proper consideration be given and any errors found. We now take bills part by part, and perhaps Mr Mallard has shown that by taking it part by part there is the opportunity for these things to be missed, which did not happen when it was a clause by clause assessment.

The purpose of the Committee of the whole House is to scrutinise a bill in detail. Ninety-nine percent of the time there will be policy differences, and we have seen those argued out today. He is not making a policy point; he is pointing out a technical problem with the construct of the actual legislation. I think it would be wrong for us to continue until we have that problem corrected, so we can return to the policy debates we need to have.

I have to say that the points of order, which are hardly points of order, are actually incorrect in substance. This bill, of itself, amends a particular Inland Revenue Act, the Goods and Services Tax Act, and, indeed, other Acts as well. The schedule relates to the Inland Revenue Acts, per se, and thus it is appropriate that clause 109 amends Inland Revenue Acts—or more accurately, amends schedules to Inland Revenue Acts, which is entirely within the scope of the bill. Frankly, I think we know what we are seeing with these particular points of order.

It might be something that can be fixed up relatively easily, because I think most of us are aware that the headers, in fact, do not end up in the legislation going forward. Clause 109 deals with “Consequential amendments to Inland Revenue Acts: ACC change”, and when the Inland Revenue Acts listed in the schedule—the Income Tax Act 2007, the Tax Administration Act, the Goods and Services Tax Act, and KiwiSaver Act—are amended, these headings will not flow into the Acts. I do not think anything would be lost if, by the leave of the Committee, we just took out the inaccurate part of the headers.

This is a committed clause and this is an omnibus bill. It makes amendments across all Inland Revenue Acts, as has been identified. I said earlier that it was within the scope of the bill. If it was outside the scope it would have been ruled out of order at a first reading or subsequently at a second reading. The Speaker would have ruled it out as being outside the scope and not being part of the bill. The title that we have here, the way it is presented—

💬 Hon Member: It can’t be ruled out?

The CHAIRPERSON (Lindsay Tisch): It can be ruled out at an earlier stage. As I mentioned, it has been through a first reading, it has been to the select committee, it has had a second reading—

💬 Hon Trevor Mallard: Has the Speaker ruled on it?

The CHAIRPERSON (Lindsay Tisch): It is in order, and I am ruling that it is in order as presented. We will continue on that basis.

I will talk for a moment about clause 106 of the Taxation (GST and Remedial Matters) Bill, which effectively relates to providing some provisional tax relief in the super-city transition in Auckland. I have a question that arises from it, which perhaps the Minister in the chair, the Hon Georgina te Heuheu, or her learned colleague the Minister of Defence, may be able to assist me with.

I do not think any member would have any difficulty about transitional tax relief being provided in the amalgamation of local authorities in Auckland into one council, when we are seeing an arrangement whereby an acknowledgment of debt is entered into by the council in relation to assets held by, effectively, another arm of the council. That is a wholly appropriate thing. But just a couple of weeks ago the House passed the Local Government Act 2002 Amendment Bill, which contained within it a provision that allows any council, should it wish, to enter into a new arrangement, I think from 2012 or 2014, for the provision of services such as water on a contractual basis for a period of up to 35 years. Members on this side of the Chamber view that as effectively constituting privatisation, given the length of time involved. There is the ability for those assets to go into private hands, with a return, yes, to ratepayers’ ownership at the end of the 35-year period. But 35 years is a long, long time between drinks, so we regard that as being, effectively, privatisation.

Clause 106 relates to allowing arrangements around the acknowledgment of debt for the new Auckland Council in respect of taking up assets, and I think this relates mostly particularly to Watercare Services Ltd, and acknowledging the debts created and providing for tax relief in respect of that. But I want to ask about what would happen if in 2 or 4 years’ time a council in Auckland—I am sure this would not take place under the current council led by Mayor Len Brown—wants to effect a change in the ownership structure. What would that mean in respect of clause 106 and the provisional tax relief that is being provided? Would we see a similar arrangement being entered into? What are the consequences for the past forgiveness of debt by the council? Are we creating a precedent here that has some unintended consequences if a council goes down the track of making a new arrangement for the provision of water services, for instance, in Auckland, and putting it into private ownership for a period of 35 years?

The background is that this legislation provides for provisional tax relief and arrangements that are entirely appropriate when we are talking about wholly publicly owned assets and the tax arrangements between them. But when we start to talk about a privately owned company taking over those assets, we should turn to the officials in the Chamber for advice. Obviously the Committee stage is the point at which to do this; this is our last chance to ask questions and gain assurances on behalf of taxpayers. The future management of assets has been a very, very crucial issue, certainly in terms of the other legislation that allows for assets to go into, effectively, private ownership for 35-year periods. So there is an important question in respect of whether clause 106 sets up a precedent with unintended consequences. Should we see a change under a future Auckland Council and a decision be made to move into private control some of the assets for which, under this provision, provisional tax relief is provided—which Parliament is pleased to support, given that we are talking about wholly publicly owned enterprises? What is the situation? I ask the Minister in the chair to please invite the officials to give her a brief on this, or the Minister from the North Shore, who has a keen interest in Auckland issues, to seek advice from the officials, so that we have an answer.

I think this is a very important point, as we go through the final stages of this bill coming into law. This is the last chance to get some clarity around whether unintended consequences will come from this legislation. We obviously have a lot of occasions when we go from having a council that operates with just publicly owned entities to having one that does deals with people outside the ambit of ratepayer-held assets. I am thinking of my own city of Christchurch, where a couple of years ago the Christchurch City Council provided a $17 million loan to a property developer called Dave Henderson. Just in recent weeks that property developer went bust. Obviously the council was using ratepayer funds to bail out a property developer, and that raised a great deal of concern in Christchurch. I can tell members that without any qualms whatsoever.

Dave Henderson is a close friend of the Minister of Local Government, Rodney Hide. He is a very close friend. They have publicly described each other as being close friends. Obviously concerns arise when a council is able to provide a sweetheart deal to the private sector, using ratepayers’ money. I understand that not only did Mr Henderson receive $17 million in ratepayers’ money but he did not pay back the GST on the deal to the taxpayer. So the ratepayers of Christchurch subsidised a personal friend of the Minister of Local Government, and then that person did not pay to the Inland Revenue Department the revenue that was due. Perhaps the officials might clarify that matter for us, as well. What revenue was due to the department from the GST on that deal? In effect, there has been a double whammy to ratepayers and taxpayers in respect of that issue.

That is why we do not want to see such arrangements being entered into under clause 106. We want to see the Auckland Council enter into sensible tax arrangements in respect of the super-city transition. That is wholly appropriate; it is wholly appropriate to see that happen. We want to see those sorts of arrangements be effected between wholly publicly held and accountable ratepayer-owned organisations and institutions. That is wholly appropriate. But when we go down the track, as the Local Government Act 2002 Amendment Bill did, of providing for entry into contracts that effectively privatise such important assets and utilities as water supplies for 35 years, I think the Committee demands to know whether this clause has any ramifications for those kinds of long-term, actually intergenerational arrangements—35 years is across generations. The people of New Zealand would like to know whether we are setting ourselves any precedent here.

Allied to that issue is the question of whether we have seen, in my city of Christchurch a deal whereby ratepayer funds were used to bail out a property developer. I would really like to know, in that instance, whether any revenue went back to the Inland Revenue Department. The very clear understanding I have is that not only did the ratepayers of Christchurch fund a property developer’s bail-out in the wake of the crash—that property developer has now gone bust—to the tune of $17 million but the Inland Revenue Department base has not received the GST owed to it on the $17 million paid by the ratepayers of Christchurch to Dave Henderson. I think we deserve to be given some clarity on that important issue as we progress through the final stages of this bill.

Clause 106 provides for provisional tax relief in the super-city transition. We have a very good Mayor of Auckland in Len Brown, and I cannot see any possibility that we would see the currently publicly held assets vested in Watercare Services going into private hands, which is the issue at the heart of my concern about this clause. But the Committee deserves to receive some assurance from the officials to the Minister that no precedent is set by this measure. If those assets are later transferred into private ownership, what tax ramifications are we creating in clause 106 this afternoon? Clause 106 obviously provides for tax arrangements that are basically neutral in respect of the debt that is being on-passed and picked up by the new Auckland Council, as it absorbs the assets of Watercare Services. It is a wholly appropriate arrangement, but I think the Committee deserves to know the answers to the questions that I have posed here in the final stages of the Committee stage of this important bill. This is a very important clause. It may have some ramifications that are truly long term, and I think that the Committee deserves to have an answer to those questions this afternoon.

It might be slightly unusual, but I would like to work backwards through the clauses in Part 7. Starting off with clause 109, I say that on its own we probably would not vote against it, but there is a mis-description in the header. It is all very well to blame parliamentary counsel, but I do not think that that is very fair; the Minister in charge of the bill should take responsibility for that. Otherwise, it is clear that it is tidying up things that should have been cleaned up years ago when the primary Act was amended. It is consequential on that rather than on this.

💬 Sandra Goudie: They had 9 long years and did nothing.

I am sorry. Did the woman with the brain of Paul Quinn and the voice of Judy Keall just comment? Working backwards, I am seeking from the Minister an assurance on clause 108 with regard to the Health Entitlement Cards Regulations 1993, and it is an assurance in two parts. First of all, I seek an assurance that this regulation needs to be changed by primary legislation and cannot be changed within the regulation itself; normally when we change a regulation, that is the case. Normally, if we go back to primary legislation, then there is something serious going on, and that gets to the second question I have. I am very concerned about clause 108(2), which makes the change to the health entitlement cards regulations retrospective. Again, I do not mind whether the Minister nods or winks at me to indicate whether there is an actual change here. She winked and nodded at me. I wonder what the implication of that is.

💬 Hon Darren Hughes: It’s Friday night.

We will be here Saturday night as well! The point I am making—and it is a serious point—is to ask whether there is a reduction in the entitlement as a result of the redefinition of income that has occurred in this clause, and, if there is a reduction in entitlement, whether it should be backdated to 2008-09. If people have their community service cards and they have their entitlements, is it on for them now to be getting bills for health care that occurred in July 2008? If there are changes, people who took their community service card to the doctor and used it then are now losing their entitlements for that time. We are told that this applies for that year and the later income years, and we want to know what the revenue effect of this is—what the change is that flows from that. That is question No. 1 to do with that.

Working backwards, I would like to ask Mr Flavell whether he has any comments on clause 107, because it has to do with the renaming of Volunteer Service Abroad, and that is changing within the regulations. The organisation has adopted a new name, a named based on te reo, and it is a question of whether that is appropriate. Again, I ask whether he thinks it is a suitable name, because he will no doubt be able to give his view on that. But, more important, I ask whether primary legislation should be used for this. All we are doing is changing the student loan scheme regulations. People who are offshore doing what my generation knows as volunteer service abroad have some special student loan arrangements and, as this change of name occurs, I want to ensure that we have to use the primary legislation as opposed to the Minister using the other legislation.

I have two more clauses to which I would like to refer. Unlike my colleagues, I have a relatively simple question on clause 106. I am certainly not an expert on the Auckland local government legislation, particularly the taxation parts of it, but if one looks at new subsections (19) and (20) of section 83, which go in the transitional provisions part of the legislation after section 83(18), section 83(19) states that if “Watercare Services Limited is liable for a debt to the Auckland Council … for the purposes of the financial arrangements rules as defined in section YA 1 of the Income Tax Act 2007, the Auckland Council is treated as paying to Watercare Services Limited … consideration equal to the debt.” The question I have is whether that is the right way round. If the money is owned by Watercare Services to the council, might we have that the wrong way round? I am sure the Minister in charge of the legislation currently, Georgina te Heuheu, is right on top that; I am pleased that she is seeking answers.

Similarly, and I think it is fair to say that this is one of those clauses put together by a word processor, there is section 83(20), which relates not to Watercare Services but to council-controlled organisations. It is not quite the same, but I have a similar question as to whether the debt is the right way round. The money is owned by a council-controlled organisation to the council, but the council is treated as paying an amount equal to the debt to the organisation. I am not sure. I am happy to defer to my colleagues if they tell me that they have carefully examined this part of Part 7 of the bill and that they are satisfied it is not as it appears at first glance. I would not want to describe complicated tax legislation as arse about face, but it looks as though it has the debits and the credits mixed up, and who owes whom, and which way it is being paid. I know very well, as a Minister who sat on committees in the office of the Minister of Finance far too often, that every now and again in taxation legislation things are got wrong and we end up coming back to correct them. I am just trying to save the Government a bit of time by checking to see whether this one is the right way round.

I do not want to make any comment about clause 104, but I want to talk about the Gaming Duties Act 1971 and the deduction of duty from payments due to defaulters. I cannot remember whether you, Mr Chairman Tisch, were in the Chair at the time I raised concern over a parallel arrangement to do with the Taxation (Tax Administration and Remedial Matters) Bill, but I am very concerned at the idea that the Inland Revenue Department can dip into a bank account just because it has someone’s name on it and they are a signatory of it. They might not have dealt with the account for 20 years. The money in it might belong to someone else completely. It has nothing to do with gaming money. Just because someone has their name on a bank account and is a signatory, as I am for a few of my relatives, and which has worked and was there for purposes in the past—maybe I was a guarantor or some other similar arrangement; for example, it might have been used as a trust arrangement but is not any longer—it does not mean that they own the money in the account.

The idea is that the Inland Revenue Department can go to what is effectively a third party and take the third party’s money out of a bank account in settlement of a debt. I do not want to show any sympathy at all to people involved in the gaming industry who do not pay their debts to the Inland Revenue Department, but that we should go to the point of saying that if they happen to have an arrangement with someone else, where the debtor’s name happens to be on the bank account holding money that is not theirs, and that the Inland Revenue Department can take that third party’s money out of the account without any notice whatsoever—no pleases, no thankyous—I think is something that is not right.

I move, That the question be now put.

I will talk about a couple of clauses in Part 7. They include clause 105, which my learned colleague—sorry, not my learned colleague, because he does not like the title “learned”. Does it really apply only to lawyers?

💬 Hon Trevor Mallard: Someone is learned if they are a lawyer.

Is that right? How can they say lawyers are learned?

💬 Hon Trevor Mallard: It’s part of the British tradition.

I did not realise that. I will talk on clauses 105 and 106. I will start with clause 105, and I will take the Committee through the process the Finance and Expenditure Committee went through when deliberating on this clause, because it caused quite a bit of debate. Mr Norman and Mr Cunliffe will remember this clause, and Sir Roger Douglas will certainly remember it, because it created a lot of debate within the select committee around how we should do this and whether we should be able to do it.

I remember bringing up a case that is very close to me. I have a very good friend who married someone she thought was a very nice gentleman. He was an osteopath, and was very respectable and very charming. She did not know at the time of the marriage that he had problems. He had gambling and drinking problems, he certainly had a problem with lying, and she suspects he might have had drug problems. But that does not matter; the bottom line is that he had problems.

She entered into the relationship pretty much owning a house—not all of the house, because she had a small mortgage—and some investments. The gentleman whom she married—I should not call him a gentleman, because he was not—entered the marriage with not much at all. She was a little naive, but in love, and often when we are in love we can be a little naive and tricked by the lies told by partners—

💬 Hon David Cunliffe: It’s a chemical thing.

It is a chemical thing. It is irrational. He ended up—

💬 Hon Trevor Mallard: It’s actually hormonal.

Hormonal, chemical—whatever love is, it is a wonderful thing at times, but it can cloud the judgment. He ended up taking her to the cleaners. She did not know that he was signing away guarantees against the house, going to the bank, and taking money out of the joint account. He left, and then the bank said to my friend that it was foreclosing on her loans. She said: “What loans? I don’t have any loans.” The bank said that she did, and that there was a guarantor against the joint bank account, who was her husband. She threw up her hands in dismay and said that she did not know anything about it. The bank said that there was nothing at all that it could do about it. At that stage, she had no assets. She either declared herself bankrupt or went through a no-asset procedure because this guy ripped her off and told her a whole lot of sweet nothings when she was in love with him.

I brought this case up with the Inland Revenue Department and asked whether this sort of thing could happen. The Inland Revenue Department said that it could not, because it was talking about the Inland Revenue Department, not banks. I will clarify this matter. Mr Burns also brought up a case in which one of his constituents had been ripped off in this manner. The Inland Revenue Department explained what was happening under current law—that is, people who owed tax were simply transferring tax to a joint bank account, and there was no way the Inland Revenue Department could get hold of this money.

I am not talking about the average New Zealander who owes $1,000. I am talking about people who, according to the Inland Revenue Department, owe significant amounts of money. This was a loophole. These people were simply transferring money into the account of Mr and Mrs John Smith, and it was completely untouchable. There was nothing the Inland Revenue Department could do. The people who owed significant amounts of money were sitting there and saying it was not their money, so the department could not touch it. They had no assets that the department could touch. The Inland Revenue Department said that all it was doing with clause 105 was bringing it in line with other tax legislation.

💬 Hon Trevor Mallard: But this doesn’t show that the money has actually gone into that account. Nothing in here requires the money to be followed from the defaulter into the account. It could be someone else’s money completely, and it could have been there for 20 years.

Yes, it could be. This is the point that the select committee brought up: how can we make sure that this person has control of this money? It said that there needs to be an element of control of that money. The Inland Revenue Department made a couple of assurances.

I move, That the question be now put.