Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill

I am delighted to take a call on Part 2 of the income tax bill—sorry, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, to give the bill its proper name. I am delighted to take a call on Part 2, which addresses changes in the Income Tax Act 2007. There is a lot of meat in this part of the bill. Although, as I have said in my earlier contribution, the really big issues facing the economy are not addressed in this bill—I would not want my comment to be mistaken for saying that I thought they were—it does deal with a number of important issues. Some time was spent dealing with these in the select committee process.

One of the issues was around taxation of bonus shares. We find—there were some interesting submissions from Contact Energy and others on this issue—a concern that a share issued by a company under a profit distribution plan is defined as a dividend. Those who put submissions in on this matter, which appears in clause 7 and other clauses in this part of the bill, raised the concern that this really might lead to a type of behaviour that was the opposite of saving, to dissaving. Whereas the Government currently speaks a big game on saving, in fact, elsewhere in the assets sales legislation we find the Government is actually trying to pay people loyalty bonuses to hold shares—quite the opposite to what seems to be the intention in this part here. We will also note as we go on that in the KiwiSaver area, the Government has been all over the show. It has flip-flopped backwards and forwards on KiwiSaver. All of that indicates that this Government really does not have a plan for savings. It has—

💬 John Hayes: Yes, it does.

It has a plan, in so far as it has a plan one week and then it changes that plan back the other way the next week, Mr Hayes.

💬 John Hayes: Flexible.

It is a “flexible” plan, Mr Hayes says. The National Party has flexible plans, and I think the truth has come out there. The plans do change from week to week according to which way the wind is blowing—

💬 Dr Megan Woods: Just like kids moving out of poverty.

—and probably very similar to the way in which, as my colleague Dr Megan Woods points out, kids move in and out of poverty. Look, we do not accept that on this side. We do not think that these are trivial matters. As I raised in Part 1, we are very concerned about matters of poverty that are created through the current system of unfair tax distribution that we have in New Zealand. We stand for a fairer tax system that is actually pro - economic growth. The Labour Party is keen to see our economy grow, as it did under the Labour Government’s last period of stewardship—25 percent in real terms. The economic cake grew by a full quarter in real terms under the last Labour Government. Under this Government, real wages have dropped. So the issue of taxing bonus shares stands as an interesting little commentary in this part of the bill, because it says that the Government is discouraging savings, as it has done in other areas where it has been paying people in the assets sales area and has had quite different positions on KiwiSaver.

Clause 17 in Part 2 of the bill refers to software development write-offs and the deduction of liabilities for unsuccessful software development. We in the Labour Party support this measure, because it is a way of ensuring that people are not discouraged from investing in this area and from developing intellectual property. We wish to see this proceed, because we need to be earning the really good margins that we get from our intellectual property. There are real big opportunities in New Zealand in the area of information technology. We can play to that weightless economy. We turn out, we are told, the fourth-best students in the world, according to Programme for International Student Assessment rankings, and long may that continue, so long as the Minister of Education does not disassemble our very highly functional secondary sector. As long as we continue to turn out these graduates, we have the opportunity to capitalise on that for the growth of our economy. This clause, which deals with write-offs in the software development area, is surely a good thing.

On clause 96—I am skipping about. There are many more clauses, and I am sure the Minister of Revenue will tell us of the many other useful small changes in this bill. We might classify them as tinkering, but many of them are, indeed, worthy changes. Clause 96 talks about the changes to schedule 28 and notes that 2 percent is replaced with 3 percent. The Minister can correct me, but I am assuming that this refers to the KiwiSaver changes that also appear in the later part of the bill. These changes to KiwiSaver rates are something, again, that we would support. It is excellent to see that the Government is adopting a change of direction in respect of KiwiSaver. This is one of those flip-flops that we would applaud. We only worry that it may be something that the Government may flip back on the other way. If I could just for a minute say why that is a very real risk. If we look at what National did in December 2008, we can see that it cut the minimum contribution rates for employees and employers to 2 percent. It was to have been progressively raised to 8 percent default rate of gross income by April 2011 for employees and 4 percent default rate for employers. National cut that, and now in this legislation it is being brought back a little way, and we will see, no doubt, further changes. We are not sure in which direction. Mr Hayes describes it as a “flexible” policy, so we will look for more announcements next week, perhaps from Mr Hayes, perhaps from the Minister in the chair, Peter Dunne, or perhaps from the member up there at the back, our good chair of the Finance and Expenditure Committee, Todd McClay.

National in 2008 discontinued the employer tax credit that effectively subsidised employers for their costs in providing KiwiSaver. It discontinued the fee subsidy of $40 per annum, which was aimed at ensuring that accounts with low balances were not eroded through taxes themselves. And, of course, it repealed sections of the Employment Relations Act, which also made it harder for saving. If we contrast that with Labour, which has had a much more consistent view on KiwiSaver, which, indeed, introduced KiwiSaver—the original KiwiSaver model was announced in Budget 2005—we saw incentives for members to save. There was a $1,000 kickstart for each member joining, a fee subsidy that the Government confirmed to $40 per member per annum, and a housing deposit subsidy of up to $5,000. Budget 2007 saw Labour build savings further, investing an additional $3.2 billion in KiwiSaver over 4 years.

Those changes show a consistent policy from Labour of encouraging savings. Indeed, we have heard earlier contributors to the debate refer to the retirement savings system that was put in place by the Labour Government and later repealed by the Muldoon-led National Government. If that system had continued, we would have had several hundred billion dollars worth of savings and had an undoubtedly much higher GDP as a country, as we would have had savings looking for a home and that home would have been in good business ideas. We know that in Australia, which introduced a similar system later, they now have A$1 trillion worth of savings looking for a home.

💬 Sue Moroney: How much?

A trillion dollars. New Zealand has a very low savings rate because it was introduced only latterly in a comprehensive way by Labour, and then National has flip-flopped on that. So clause 96, which replaces 2 percent with 3 percent, is a modest and tentative step by National, which is probably not yet sure whether it really believes it is a good idea or not. It is running out of opportunities to make changes, because it does not seem to have any ideas, but it keeps trying this little tinkering thing here and this little tinkering thing there.

We have spoken earlier about the difficulties with implementing real change because the Inland Revenue Department’s computer system is on its last legs. Mr Dunne indicated that there will be announcements later in the year. I hope we will get some very real progress soon. On Valentine’s Day this year, the Prime Minister said that it was an appalling position that the Government was in—that is a full 6 months ago—where the Government could not introduce real change in the tax system. That has got to be a real, real worry for New Zealand. Most Western economies have a tax system; in fact, I believe that all Western economies have a tax system. It should not be too hard to rebuild our one in line with those that are in operation elsewhere in the Western World. If we do not do that, if we do not get on to that urgently, we will be stuck with a tax system that is falling over, that cannot implement proper change, and that cannot make sure that we have the tax policies that we need to grow our economy, rather than leave it in the stagnant position that it is in currently, where real wages have dropped under this Government, rather than grown, where unemployment has risen, and where we have migration to Australia at record rates.

May I begin by responding to perhaps the last point that the member David Clark made, relating to the Inland Revenue Department’s FIRST computer system. It is a 1991 system. Since it was introduced in 1991 we have bolted on to it, under successive Governments, in no particular order, child support, Working for Families, KiwiSaver, and one or two others as well that will come to my mind as I go through. So we have a very complicated system. But I want to assure the House in Committee that there is no danger of imminent collapse. The system continues to do today what it always has done. Its capacity to absorb new change is what is at issue. I think the Committee needs to be very clear that we are not talking about the imminent collapse of our technology. We are talking about the need to upgrade, modernise, and bring it forward, to enable us to do the things we do now and will go on doing, and also any new initiatives that come along. There will be, as I said earlier, announcements later this year about the plan, and I am sure that the member will be supportive of it when we do announce the whole raft of plans that will need to be taken to upgrade this system.

I want to pick up on a couple of other points that the member made, because they are the critical parts of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, although they are by no means the totality of Part 2 of it. The first one I want to talk about is the profit distribution plans—the bonus share issue. The member attempted to draw a little bit of an analogy between what he saw as restrictions in this area and opportunities created for KiwiSaver investment. In fact, the changes that have been made regarding profit distribution plans are simply to prevent what was a potential element of double taxation, had those schemes been applied as they were being developed. As the member may recall, we consulted fairly broadly with those who were affected, before developing the plans that came through in the legislation that the Finance and Expenditure Committee considered. So I do not accept the proposition that this is in some way a restriction on savings opportunities. It is actually preventing a potential element of double taxation, and it is also ensuring that we have a common standard, if you like, for profit distribution plans with similar schemes within the tax system in terms of saving and investment and the tax treatment thereof.

The member also spoke about the amendments relating to the writing off of unsuccessful software development. This is a very important issue, actually, because it is one that occurred in retrospect. There had been for some time an assumption that these deductions could be made. Then we discovered that that was not in fact the case. So what we are effectively doing in the amendment in the bill is making clear in statute what had been a common understanding until such time as there was doubt cast upon its validity. There will be a number of occasions when we make changes like this. They are broadly taxpayer-friendly, and it is appropriate that we do so.

I want to come back to the comments about KiwiSaver. I want to say to the member that he can argue as much as he likes about the relative incentives that this Government and the previous Government have offered to KiwiSaver savers, but the reality is that KiwiSaver membership has more than doubled since this Government came to office. KiwiSaver membership is now three times what the previous Government estimated it would be by 2015. KiwiSaver membership is now not far short of 50 percent of New Zealanders, and it will continue to grow. What the Government embarked upon in 2008 was a programme to ensure the financial viability of KiwiSaver in terms of the Government’s investment, long term. What the changes being proposed from April 2013, in terms of the increase in the contribution rate, recognise are two things: firstly, a recommendation from the Savings Working Group; and, secondly, the fact that because of the nature of the changes made a little earlier, we feel more comfortable about the long-term viability of KiwiSaver. Members need to be reminded—and I think it was a correct decision that the previous Government made—that KiwiSaver individual investments are not Government guaranteed, because they are held in private funds. Therefore, the Government’s responsibility here is to make sure the regulatory regime, the administration of the KiwiSaver scheme, is as sound as it can be, to protect, to the best extent possible, the interest of the KiwiSaver members. I am very proud of the fact, as I say, that we are not too far away from having the 2-millionth KiwiSaver identified. I think that is a terrific achievement and I actually think both sides of the House can take some credit for that.

I want to just draw attention to some of the provisions that are contained in the Supplementary Order Paper that I have moved, because Supplementary Order Paper 98 applies to a number of the provisions of this particular part. These are a number of amendments that are related to the outcomes arising from the Canterbury earthquake. What we have embarked upon quite deliberately since February 2011 has been a series of remedial pieces of legislation, as and when needed, to give effect to situations that arise as a result of the earthquake and the rebuild. These changes in this particular Supplementary Order Paper are all taxpayer-friendly, but they all deal with situations that we could not have anticipated pre-earthquake.

I say to the Committee that although I am very pleased to be bringing this range of measures before the House in Committee today, I do not expect that these will be the last. This is an ongoing work in progress, if you like, as the rebuild gets under way and issues become identified about the nature of some of the arrangements, particularly those between insurers and builders, issues relating to the nature of business activity and the disruptions that it has suffered, pool depreciation rules, treatment of damaged assets that are uneconomic to repair, etc., etc. This is very much new territory. I want to commend the Inland Revenue Department officials who have worked on this, because they have been diligent in identifying the problems that have arisen. We have consulted with the local community in Christchurch, with the business community, and with tax professionals, to make sure that we are addressing the particular problems that are emerging, and we will continue to do so, as and when necessary, until such time as Christchurch is back on its feet. They may not appear to be significant—and taken individually and collectively they are probably not—but they are beneficial to those people seeking to re-establish, particularly, business and other activities in Christchurch.

They are the main aspects of Part 2 of the bill. It is essentially remedial, it is all very positive, and I think, in general terms, it will be regarded as taxpayer-friendly.

The Minister of Revenue, who has just resumed his seat, talked about the reality. According to the Minister, the reality was that the savings of the scheme have been more than doubled. By pure mathematics, that more than doubling of the figure would have been doubled further if the National-ACT Government had not cut the contribution by half.

To be fair to the Minister in the chair, the Minister of Revenue, there are good initiatives in this part, Part 2, and in other parts, and we will talk about the new initiatives when we move on. To be equally fair to the general public, the New Zealand taxpayers and voters, I think the Minister would appreciate the difference between the two words “botched” and “ditched”. What the National Government ditched was the compulsory superannuation scheme in December 1975, and what this current National-ACT Government has botched was the KiwiSaver, and it is still botching the scheme. If only Muldoon and the National Government of the day had not terminated the scheme, it would now be worth more than NZ$240 billion and would have transformed the New Zealand economy into a world-beater over the past 30 years. According to Brian Gaynor and other leading economists, Muldoon’s dreadful political decision instead transformed New Zealand from a potential Switzerland of the southern hemisphere into a low-ranking OECD economy. It was the worst economic decision in the past 40 years.

💬 Hon Judith Collins: Tell me about the Crafar farms. What does your party think about the Crafar farms? Sell them to the Chinese—I just remembered that.

Well, the Chinese community would appreciate the dire consequences. The dire consequences and also the ripples of that decision are still being felt to this date. In fact, if the scheme had not been ditched, then New Zealand would be much better positioned economically, would be able to own many more assets, and would not incur that much Crown debt.

Talking about the Crown debt, I enjoyed the questions for oral answer—or Q and A—in this House between the Prime Minister, the Rt Hon John Key, and the Rt Hon Winston Peters in May. According to those Q and A, at the end of 2008 Crown debt was at $6 billion, it increased to $50 billion in 2011 under the National-ACT Government, and it is expected to reach $75 billion by 2015.

To go back to the superannuation scheme ditched by the National Government in December 1975, based on the $240 billion projection—

💬 Dr David Clark: $240 billion?

—$240 billion—each worker would have had $111,200 of superannuation assets, compared with the current—how much—$6,300, and A$86,821 in Australia. The scheme would have represented 146 percent of GDP, whereas Australian superannuation, which is considered to be the benchmark for the world, represents only 82 percent of its GDP. That is according to Brian Gaynor, and that is a 2007 projection. As a result of the Australian scheme, the average 30-year-old Australian is expected to retire with superannuation savings of about A$400,000 now—that is according to Devon Funds Management in 2010.

Australia started its superannuation scheme much later than the New Zealand scheme that was ditched by the National Government in 1975. The Australian scheme has since accumulated assets of over A$1.3 trillion—growing at over A$100 billion per annum. So based on this, Australian banks were able to recapitalise during the depth of the global financial crisis.

💬 John Hayes: That was a good benefit for us, too.

Indeed, Mr John Hayes. Australia now intends to lift the current contribution to compulsory superannuation from 9 percent of wages to 12 percent. It is also interesting to note that in Singapore the contribution is 20 percent of wages. When National came into power in 2008, as a couple of my learned colleagues mentioned in previous contributions, the National-ACT Government cut KiwiSaver, which is a similar scheme to the compulsory superannuation in 1975, from 4 percent of workers’ contributions to 2 percent.

💬 Hon Judith Collins: But that was 37 years ago—37 years ago. I thought that member wasn’t even born then.

Well, for the information of that Minister, Judith Collins, for the first time in 13 years—for the first time in 13 years—New Zealand’s credit rating was downgraded in September 2011. Worse still, the lower credit rating is likely to increase the costs of borrowing for the New Zealand economy under that National Government, and because of New Zealand’s poor savings record, thanks to the National Government and thanks particularly to Prime Minister Robert Muldoon, we cannot source these funds domestically but have to rely on offshore markets, making our position even worse during the global financial crisis.

The current National-ACT Government has obviously realised that it has done something wrong. So through this bill—

💬 Darien Fenton: Something? A whole lot of things.

Well, I tried to be polite. Through this bill it intends to raise workers’ contributions from 2 percent to 3 percent. National has been flip-flopping all over the place on KiwiSaver, but, in general, it has not been consistent in its objection to superannuation schemes similar to the one that it ditched over 30 years ago and the one it is botching now. I am curious whether that attitude is driven by ideology or is purely for the sake of it.

Muldoon’s decision over 30 years ago has had dire consequences. Like most Western countries, our population is ageing. By 2050 the ratio of workers per retiree will have fallen from 5:1 currently to 2:1, and superannuation costs will have grown from 4 percent to over 9 percent of GDP. Thanks to Muldoon and his successors, the gap between rich and poor has grown wider in New Zealand. While a small group of rich and privileged are becoming wealthier, New Zealand as a whole has become poorer and is gradually becoming an economic backwater.

I would like to bring us back to “Planet New Zealand”, away from “Planet Labour”. Before I speak about Part 2 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill and the changes in Part 2 that we are debating at this point, I think we have to look at the global reasons as to why we are making these changes and why we are introducing this bill. We are doing it because we want to make a more competitive and productive economy. With reference to the previous speaker, Raymond Huo, I have got to say to you that I did not ever feel that Mr Muldoon was about making a more productive economy or, certainly, a competitive one. It is only by lifting our economic performance that we can create jobs, boost incomes, improve living standards, and provide world-class services for the people in my electorate, the Wairarapa electorate. That is what we want to deliver to them.

I would like to reinforce comments made by the Minister of Revenue. Before we made changes to KiwiSaver the scheme was costing the Government $1.2 billion a year and rising in subsidies and tax breaks. We had to borrow that money from overseas. As the Minister said, that was not sustainable. So what we have done is we have kept the $1,000 kick-start payment from the Government. That has not been changed in this bill. It is not changed in Part 2. We have reduced the Government’s borrowing and increased private sector contributions to KiwiSaver. Why are we doing that? To increase national savings. So for the year ended 30 June 2012 and beyond, the tax credit was halved to 50c for every dollar contributed by members, up to a maximum of $521 a year. That is what this bill provides for.

From 1 April 2012 employer contributions are being taxed at a rate broadly equivalent to an employee’s marginal rate, and then from 1 April 2013 this bill provides for the minimum employee contribution to increase to 3 percent. The compulsory employer contributions will increase to 3 percent as well. That is not a flip-flop. It is about saying that we managed to get the scheme under control. It is now sustainable. We have to give Kiwis confidence that future Governments can afford to maintain KiwiSaver. They will be future National Governments, of course. The Government is going to spend, as a result of these changes, $2.6 billion less over 4 years on member tax credits. We will encourage private savings, and the employer and Government contributions, including the $1,000 kick-start, will continue as an attractive savings option.

The changes in Part 2 are creating a simpler and fairer tax system that rewards hard work. That will be a foreign concept to many of the people across the Chamber, despite the protestations of the ex - Families Commissioner, who delivered nothing in his period of tenure—

💬 Hon Judith Collins: Absolutely nothing. Spent $9 million a year for nothing.

—and spent $9 million a year for no delivery, no outcome whatsoever. What we will be doing through these changes is protecting the vulnerable—the very people he professes to be concerned about.

We have delivered across-the-board tax cuts and we are delivering more money to working New Zealanders. Two-thirds of the cuts to income tax went into reducing the bottom two tax rates. So now we are in a situation where the changes in Part 2 of this bill will mean that three-quarters of earners are paying no more than 17.5 percent in personal income tax. We have cut the company tax, in this bill, to 28 percent, ensuring our businesses remain competitive. When you are concerned about families—or you profess to be—you will find that a family with two children can earn up to $50,000 for that family and pay no tax at all when you take Working for Families into account. [Interruption] I would just like to repeat that, because I was being rudely interrupted. I want to stress in response to the concerns—or the professed concerns—across the Chamber that a family with two children can earn $50,000 a year and pay no tax at all. Zero tax. How much is nothing, zip, zero? That is the tax a family with two children will pay. So what is going on in this community and our families, and certainly my constituents in the Wairarapa know this, is that after-tax wages are increasing faster than prices under this Government.

I have heard various speakers on the other side of the Chamber slandering Richwhite and Fay, and I want to point out to them that they have not read the changes that we are proposing in this bill. What the bill does is take steps to tighten the private property tax rules by eliminating depreciation, removing the loss attributing qualifying companies rules, and improving Working for Families and integrity measures. The Inland Revenue Department’s funding for audit and compliance—and I congratulate the Minister of Revenue for his work in this area—has been increased, and we expect that to generate substantial revenue in the 4 years to 2014-15. But, of course, under the people from the Opposition who are criticising this legislation, their alternative would be to bring in a capital gains tax. They want to more than double the employer contribution to KiwiSaver costs, and they want a big gap between the company rate and the top personal rate, which encourages tax avoidance. We do not, on this side of the Chamber, stand for those changes.

In Part 2 we will see that the application date for changes to profit distribution plans, under which bonus shares issued by a company will be treated as a taxable dividend, will be deferred from 1 July 2012 to 1 October 2012. If you were to read the bill and the parts of the bill that we are making changes to, you would see that it is very straightforward. Other changes to GST provisions have also been made, such as clarifying the definition of “land”, and where new apportionment rules for zero-rating supplies can be used. The foreign investor tax credit scheme will be extended to investors in foreign investment portfolio investment entities, with application from 2013 and 2014. And, as several speakers have noted tonight, Part 2 provides for the deductibility of unsuccessful software development costs. That will apply from the 2006-07 income year, rather than from 2007-08. As the Minister said, these are very taxpayer-friendly changes.

The KiwiSaver membership start date will be clarified for persons who joined through their employer. The start date determines when a person is able to withdraw their savings after 5 years of membership if aged 65 years or older. I would think that that would apply to the former Families Commissioner. Further amendments allowing certain shareholder employees of close companies to receive the in-work tax credit will also apply from 2011, rather than 1 April 2012, to enable eligible individuals to claim a tax credit for the 2011-12 income year. Finally, I should say that in Part 2 the bill is going to clarify the tax position of insurance companies where there is a transfer of business during the income year.

I congratulate the Minister on bringing to the House this bill and a series of very coherent changes to the bill, and a series of coherent tax policies that will ensure that all New Zealanders will be better off and that people will be better in work, will get more money in their bank accounts, and will be able to save more through the policies that are being introduced by the Minister. I commend this bill.

What an interesting, fully read speech from that member, John Hayes, who has been in this House long enough to have at least short-term memory recall not to have to read his speech. But there you go. I thought the last part, congratulating the Minister, was from the heart, which was very good, but most of it was read.

We actually support Part 2 of this particular bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. There is very little in there that we would have difficulty with, because, as the Minister in the chair, the Minister of Revenue, said, this has gone through—as the officials have done—those things that would make the operation of the tax system better. As members on this side have said, we support those changes that are being made in Part 2. Whether it is the higher purchase definition, which has been parked, or unsuccessful software development, these are all good provisions. But I would have expected that member who just sat down to at least—

💬 Darien Fenton: Who is it?

Mr Hayes, I think his name is—Mr Hayes. I would have expected him to be at least fairer about a number of things. Mr Hayes, it is your party that changed a very good KiwiSaver scheme. Now this is going back up again, and perhaps the member might simply acknowledge that and say: “Ah, we made a mistake. We’re going to move it up there. This is the best we can do.” When the Helen Clark Government passed that particular bill, that member’s party did not support it—did not support it at all. It is very, very interesting that the member now owns it, calling it a great scheme, etc. Well, remember where it came from. Remember what the genesis of that was.

I think Raymond Huo made a very good point, reminding that member and those opposite—and I know the Hon Judith Collins is bored by this because it was not recent enough, but sometimes the facts of history have to be repeated, Mr Hayes, so that others do not repeat the mistakes of the past. Some elements in Part 1 do do that, but in this part, no.

But the member John Hayes did begin to talk about things he knows nothing about. That member knows nothing about the Families Commission and nothing about its achievements. In fact, he actually tells things not the way they were, but he makes them up—that member has made them up. For the benefit of that member—because the challenge was direct, and named me and named my former position—what did the Families Commission achieve? The Minister in the chair is very familiar with this. All of the work in the family violence prevention area had the imprint of the Families Commission under my leadership, Mr Hayes. Is there any piece of that that his Government would take away? There is not one. That member acknowledges that there is nothing that that member knows anything about. So, Mr Hayes, if you do not know about something, do not say anything about it; rather, read your speech. I would put up with that.

Does that member know that most of the thinking around paid parental leave was done by that commission? That was probably the best piece of work on paid parental leave. The member looks surprised. The member did not know about that. The jaw dropped just then. I think the member knows nothing about it, yet the member is very quick to criticise.

Going back to family violence, it was that member’s party when in Opposition that actually stood aside from the task force, from the ministerial group that worked on family violence prevention. That party stepped aside from it. That member’s party had no interest in that. There is a whole bunch of areas around parenting, but I say to the member that if the member is defending this part of the bill, it needs no defence, because this side agrees with most of it.

We do have some criticism about how the changes around KiwiSaver have come about. In Part 5 it comes up again, if the member has read the bill right through. But there are reasonable parts of the bill. This side of the Chamber will always be reasonable if things come up. Part 2 of this bill addresses many of those things in our taxation system that need to be tidied up. We are supporting it, and we are supporting it very, very clearly and unequivocally.

But this side will not take an approach like Mr Hayes just took. He was accusing members on this side—

I am very happy to take a call on Part 2 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. I want to touch on a couple of areas specifically, and talk about some of the reasons why Labour is supporting this part of the legislation. I want to first of all touch on Supplementary Order Paper 98 and the provisions that are there to support Canterbury businesses, and to thank the Minister in the chair, the Minister of Revenue, and the select committee that looked at this legislation, the Finance and Expenditure Committee, for a very pragmatic and very common-sense—if I can use the term—set of measures that will be put in place to help Christchurch and Canterbury businesses get through.

These are some very technical taxation issues that will make a real difference to the viability of so many businesses in Christchurch, and they do deserve to be commended. These are things that we never thought we would have to deal with in our taxation system, such as how it is that we treat depreciation on assets or even land that has been damaged and then paid out on, and how it is in the taxation system we are going to deal with such massive amounts of insurance receipts and income, and where that sits in terms of financial years. There are a lot of very technical issues that need to be dealt with for Christchurch businesses, and we in Labour support those measures that are being put in place and can see the real difference that they will make to so many businesses in Christchurch.

The other piece of the legislation, in terms of the shopping list that Part 2 does, that I want to touch on—and a couple of colleagues have already touched on this, as well—are the provisions around unsuccessful software development. I think this is a provision that actually shows the potential of what the taxation system can do, in terms of the kinds of levers it can offer beyond mere revenue generation and collecting of revenue in our economy. What we have here is a provision that is intended to provide for expenditure on software that needs further development to become depreciable property. That is, if it is going to need further work on it, it can be depreciated.

What we are seeing here is the use of the taxation system to encourage businesses to take some risks, to innovate within their business processes, and to look at software development that might be used. What we are seeing here is that there is actually going to be a way in which the taxation system can offer those benefits for projects that do not actually make it—for unsuccessful software developments—because we do need to have the courage to innovate, and we do need to have the levers and the mechanisms in place that do that.

I guess one of the things that has been talked about, and the Minister talked about it tonight, is that this is one of the things that can make us a more competitive and productive economy. This is a very small start, but I think it really draws into sharp relief for me and my colleagues on this side of the Chamber what a real opportunity we lost by getting rid of the research and development tax credit, using the taxation system in a real and meaningful way to be able to innovate.

Progress to be reported presently.

House resumed.

The Chairperson reported progress on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, and no progress on the Trade (Safeguard Measures) Bill.

Report adopted.

The House adjourned at 9.55 p.m.