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

Part 4 concerns the amendments to the Goods and Services Tax Act 1985. Fresh in our minds, of course, for those of us on this side of the Chamber who have constituents struggling at this stage in their lives with the rising costs of living, are the changes that this Government made in 2010 in the so-called tax switch, where 44 percent of the value of the tax cuts went to the top 10 percent of earners, and the bottom 20 percent of earners got just 2 percent of the value of the tax cuts. That was some switch. Any benefit that those who were on low and middle incomes got was very quickly swallowed up in GST and then in subsequent rises in the cost of living.

This change in GST has really affected us as a society. Recently, there was a report that made it clear that we are becoming more and more unequal. In fact, New Zealand is now more unequal than it has ever been in its history, and that is not something to be proud of. When we have an unequal society, we have wasted potential. We have people right now in poverty, falling between the cracks. We have got to ask: was that tax reform the sensible tax reform that should have happened? Is there any better tax reform proposed in this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, that would sort out that problem of widening disparities and the poverty that is eventuating? There is wasted talent amongst our poor people who are not able to put nutritious food on their table in some cases, and who are not able to afford the school books, school shoes, and raincoats that they need for their kids. They have kids getting preventable illnesses because they are living in cold, damp, and overcrowded homes. Those preventable costs are borne by all taxpayers. They are borne by high-earning taxpayers and by low-earning taxpayers.

Really, there is a huge social shame associated with being poor—unnecessarily, and because of this Government—and also with those health effects that go with being poor. Those people who are missing out as a consequence of not having the resources they should have will also not become the taxpayers of the future in the way that they could. I put it that if those people were given the full resources to develop as young children—and we know that early intervention has high rewards—then those children would grow up to be high-contributing taxpayers. That is why we need a tax system that is fair, where everyone pays their fair share, and where those at the top pay their fair share. We know that only 50 percent of the highest earners in New Zealand are on the top tax rate. We know that there is something not fair there, and that is part of the reason we need tax reform. We also know that sometimes people do not meet their tax requirements for a variety of reasons, and we deplore on this side of the Chamber those who do not fill out correct returns. That has been the topic of much debate this evening.

I want to address a couple of specific clauses in Part 4. One clause is clause 151B, the keeping of records, and if we take the first section there, in section 75(3D) the words “name, address, and registration number” are replaced by “name, and address, and registration number or tax file number, as applicable.” This is the kind of change we see in this bill. We see—

💬 Hon Clayton Cosgrove: Radical!

—radical reform—adding the words “and” and “or tax file number, as applicable”. This kind of tax reform is, you know, hard to oppose—it is hard to oppose. I see that. Politically that might be a strategy from the Government of the day, to put up tax reform where the words “and” and the words “or tax file number, as applicable” are added in to the legislation, because Oppositions cannot get up much steam against that stuff. But what it also reveals is a Government that is bereft of ideas, and a Government that is not able to implement the real change that is needed to get New Zealand’s economy back on a track that would grow the pie for all New Zealanders. That is what we on this side of the House believe should be happening. We know that our trading partners over recent years, China and Australia, have been going gangbusters, and we know that during that time real wages in New Zealand have dropped. That is almost unbelievable. What is going to happen when those economies falter? New Zealand is going backwards already. Will we go back further? So we see this tinkering in the legislation where we should see more adventurous change.

Another clause that leapt out at me when I was reading through was the retrospective GST exemption in clause 135 of the bill for “the Auckland Council Independent Maori Statutory [written Statu-tory] Board established by section 81 of the Local Government (Auckland Council) Act 2009”. It was with some relief that I saw that hyphen in there. If it had been an “E” there, the clause may have been restricted—perhaps some might jest—to members of the Māori Party, to the “Māori Statue Tories”, as we have, perhaps, seen them acting in the recent debates on assets sales. I am sure my colleague Rino Tirikatene might have something further to say on that as the debate proceeds.

This kind of change—again, a small change—is something that is difficult to oppose because in and of itself it is worthy, but it really is tinkering, and we are tinkering here with little bits of GST here and there. We are not expecting to see a step change in the economy as a result of these changes to the GST treatment. It would be great if we had a Government that did have a vision, and that did really want to make change that would benefit our economy and that would really get our economy moving, with pro-growth tax reform and policy that promoted savings, perhaps through a universal KiwiSaver. We know that this Government has had more positions on KiwiSaver than the Kama Sutra. We wish that this Government would adopt a position that actually was beneficial for all New Zealanders, not just a position that was all over the place—all over the place. It would be a pleasure, I am sure, if we saw a positive position adopted. Variety is not always the spice of life, as we know in the area of savings policy.

This Government is bereft of these changes and of direction, in terms of GST and in terms of what kinds of changes could be made more broadly, and that is why it is the Government that has the worst growth record of any Government in the last 50 years in New Zealand. That is why 50,000 Australians are leaving annually to make their permanent home in Australia.

💬 Hon Clayton Cosgrove: New Zealanders.

Sorry—New Zealanders are leaving. I was saying Australians are leaving! It has not quite got to that. They are leaving New Zealand too, because this Government is bereft of ideas. One thousand people, we know, left Dunedin, my hometown, last year. They permanently left Dunedin for Australia because they saw greater opportunities there. I am assured it had nothing to do with the local National member of Parliament. It is because the opportunities were better abroad in general under the National Government’s term in office.

It is also true that this Government is failing because, perhaps, it has not addressed the Inland Revenue Department system, which is failing. John Key has pointed out that it is not working and that it needs to be upgraded, because the Government is being held to ransom, effectively, through having a computing system that is out of date and not able to adopt the big changes that would be needed to get our economy back on track. It is perhaps symptomatic of a Government that really is giving up, it appears, and that is not good enough. We think this Government is letting people down, and that is what we are hearing out on the street. People are telling me, those people who did support John Key—and I find that a little challenging—that they supported John Key because they were promised a brighter future, but now they are disappointed because it is not being delivered. In Dunedin we are seeing jobs being cut left, right, and centre. We are seeing our economy slow down, and these people are disappointed. That is the word on their lips. They are disappointed with what this Government has not offered them—has not offered them. And that is why they are leaving New Zealand at a rate of 1,000 people a week for Australia.

We will come, I am sure, to more about the software development. It is not touched on in this part of the bill, so I will leave that conversation for the next part of the bill, but suffice to say that the kind of change that we see in section 151B around the keeping of records is symptomatic of a Government bereft of ideas and bereft of direction. It is now reduced to adding the words “and” and “or tax file number, as applicable”. That is not real change. That is not going to improve our economy.

I want to refer to clause 137 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, which changes the way in which the Inland Revenue Department gathers more tax in respect of late payments. Currently, when someone does not pay an account on time and the person to whom the money is owed adds a late-payment charge, that charge does not incur GST, because it is in the nature of an interest payment. It is effectively a late-payment fee, which is a little bit like interest. So the predominant view within the accounting community has been that it is not a taxable good or service; it is a financial service that is zero-rated for GST purposes. Clause 137 changes that. It says that, for the first time, the Inland Revenue Department is going to be pinging the late-payment fee, and saying “Oh, that’s a GST-able activity.” This is going to be causing all sorts of complexity for people in business. All of a sudden, those—

💬 Paul Goldsmith: Not as much as GST off the fruit and vegetables.

Not as much as GST off fresh fruit and vegetables? Well, actually, I think you might be wrong there, because I think the incidence and the irregularity of this will be far more pervasive than GST off fresh fruit and vegetables, which would have affected supermarkets in the main. But, in any event, let us return to the point here. If that was wrong, two wrongs do not make a right. Mr Goldsmith saying that would introduce further complexity into the tax code is rubbish. We are increasing complexity and compliance costs here.

You know, if you have, let us say, a $100 account, and there is a 2 percent fee for paying it late, that is $2. Do you know that every one of those people who collects that extra $2 is now going to have to adjust their future tax returns and include GST on the $2 financial penalty that they are charging someone who pays their account late? Every person who pays the $2 late-payment fee, in theory, if they are GST-registered—and some of the people in the gallery will understand this point, even if the National Party people on the other side do not—is going to be able to claim a GST input credit in respect of that $2 payment. What a nonsense! This is not a good or service; this is a charge being made for late payment, which is tantamount to an interest payment. In fact, the department often calls it that.

What did we hear in submissions? We had the accounting fraternity coming along and saying that this was wrong in principle. The accountants came along and said “What’s this Government up to? This looks like a tax grab.” It is not grounded in the principle that underlies the tax Act—the Goods and Services Tax Act—which is that financial services are not GST-able. So the Government is ignoring that basic prohibition on charging GST on financial services, and saying that in respect of the late-payment fee that you are effectively charged in lieu of interest for paying an account late—they call it a penalty fee, but it is essentially an interest charge—it is now GST-able. Where is the principle, Minister Guy? Stand up and defend that principle. Stand up and explain why it is wrong or why it is right. The accountants said it breaches the principle that underlies the Goods and Services Tax Act. Why is it that we are proceeding with clause 137 of this bill, which not only breaches that principle but is going to increase the compliance costs of businesses? They will have to be accounting for that little penalty as a GST-able supply, and if they are paying it, they are going to have to have a separate transaction that claims back the GST in a way that they cannot do for interest.

💬 Dr David Clark: What about early-payment discounts? Do they apply to them?

Well, that is interesting. Early-payment discounts—I am not sure, Mr Clark. I do not know the answer to that, but I think we should get the Minister to address that question as well.

New section 5(25), inserted by clause 137, which sits in Part 4 of the bill, states: “For the purposes of this Act, an amount charged”—I am reading out the relevant provisions—“for the late payment of an account is treated as being consideration for a supply of services in the course or furtherance of a taxable activity, whether the amount is described as a fee, penalty, or other charge.” So it might be interest, it might be called interest, it might in fact be a late-payment charge that is tantamount to interest, and both the supplier and the purchaser may agree that that is the reality of the transaction, but this legislation says that, no, black is white. It says that it might be that in reality, but it is going to deem it to be otherwise—deem it to be otherwise. There is no principle that lies behind this particular clause in the bill. I want the Minister in the chair to stand up and explain why it is that the accountants are wrong and the Government thinks it is right. Why is it that what is essentially an interest charge, which should not attract GST, is being deemed to be a supply of goods or services, when in actual fact it is a late-payment penalty tantamount to interest? If it is a late-payment penalty tantamount to interest, it should be either zero rated or, one way or the other, outside the GST consequences of this provision.

If we look at some of the other provisions in respect of Part 4, there are some other areas that I would like clarification on in respect of the zero rating of goods. There is a new section 11(8D), inserted by clause 139B, that states: “For the purposes of the zero-rating of land rules,—(a) a supply that is an assignment or surrender of an interest in land, is a supply chargeable with tax at 0%:”, but it is not if “the supply is made periodically;”. We also had submissions about this, about what this is going to do in terms of the effect on the cost of rent-to-buy options. This is going to drive up the cost of low-cost housing in examples where people are getting an option to buy under which, if they exercise it, they can credit towards some of their purchase price, under their purchase contract, some of the payments that they have made as a tenant in the meantime.

We had property developers saying that this change in provision here is going to increase the cost of housing, because irrespective of whether the option is exercised, the developers are going to have to pay GST on the transaction before it is exercised. The purchasers may never exercise this option, but because they have the potential to credit some of their rental payments towards the purchase price, if the option is exercised, the developers are being deemed to be making a supply before the option is exercised. These submitters came along and pointed out that this is going to considerably increase the cost of their subdivisions. From memory, the developer who was giving us this advice was from the Minister in the chair’s electorate, Ōtaki, so he might be interested in this. They were saying that this was going to increase their effective cost, despite the fact that the option might not be exercised. The effect of this is that because they have to return GST at the start, they have the carrying cost of that GST payment that is returned to the Government, they then have to reflect that cost on to the person who may exercise the option, or may not, under the rent-to-buy scheme, that increases the effective cost to the developer, and therefore that cost is passed on to the low-income purchaser, which is therefore increasing the cost of housing in New Zealand.

It is another unprincipled amendment, as I understand it, according to the submission that we had to the Finance and Expenditure Committee, that I would like the Minister to explain. The more important one of them in terms of the number of people affected is this penalty payment now being deemed to be a GST-able supply rather than an interest penalty. I would like to hear from the Minister as to what justification there is for departing from the underlying philosophy of the original Goods and Services Tax Act, which is that financial services are zero rated—do not attract GST.

I want to pick up where my colleague David Parker left off—

💬 Maggie Barry: God, it’s like Clayton’s greatest hits—he’s always on his feet.

—sorry, was there a funny noise over there—and that is in respect of the—

💬 Dr Rajen Prasad: Chattering classes.

Yes, the chattering classes. Sorry, it was that gracious member Maggie Barry, I forgot—the gracious member. What I would like to ask the Minister in the chair, the Hon Nathan Guy, is this. I could not find—it may exist—in the regulatory impact statement or in the report back any quantification of the saving in compliance costs in both the parts and clauses that we have already processed, and in Part 4, particularly clause 137, which I think was the clause that Mr Parker was referring to. Under Mr Parker’s argument—I believe he is correct—actually, against accounting principle and advice the late payment, even a minor late payment, by a small to medium sized enterprise or business will incur GST. So on that basis that is going to be a compliance cost for small business.

I would like to ask the Minister—he might like to interrupt me and take a call—where in the legislation or the regulatory impact statement there is a quantification of the compliance costs that will be saved from having this piece of legislation. Is there an estimate? We are told—

💬 Hon David Parker: The fiscal cost to small business.

And what is the fiscal cost of clause 137 and other clauses to small business?

It may be, and I would also like an answer to this, that the Minister for Small Business, the Hon John Banks, has provided a report, a Cabinet paper, or whatever to this Minister on the issue of compliance costs, because, of course, the Minister for Small Business has the Small Business Advisory Group or task force—whatever it was called; we set it up when we were in Government—and part of that group’s mandate is to recommend to the Hon John Banks, the Minister for Small Business, where savings can be made and compliance costs reduced. Given that we now have a proposition before us in clause 137 that against accounting principles, against private sector accounting advice, and against advice that said that late payment of penalties should be zero-rated, we now have a GST impost on that. So can the Minister tell us, one, how much this bill will save small to medium sized enterprises; two, can he quantify it; and, three, what is the negative fiscal impact on small to medium sized enterprises of clause 137?

Would Minister Guy like to proffer an answer? I will let him finish his glass of water. No. Silence—silence. So either the Minister does not know—and hey, nobody knows everything, except Maggie Barry—or the Minister could take some advice. He could turn to his right and ask his officials.

In the regulatory impact statements, and there are a number of them—a whole host of them—there does not appear to be any attempt to quantify what the nature is of the saving in compliance costs that this legislation will render unto small to medium sized enterprises or business as a whole.

💬 Hon David Parker: It increases them.

My colleague makes the point. Of course, that we now know, and we have received no argument to the contrary from the chief whip, who, in his own lifetime, and in this Chamber in the last hour, is the resident expert on this legislation. So if the Minister does not know, could Maggie Barry, John Hayes, or the chief whip tell us how much increase in compliance costs clause 137 will have on small—

💬 Michael Woodhouse: None.

None? None. Oh, none, he says. Well, if that is the case, could the Minister, with his officials, concur? Is there any evidence? Or is this another one of the chief whip’s attempts? He attempted about half an hour ago to wax eloquent, and was wrong, on the nature of this bill in Part 3. So now we are going to rely on, and every small to medium sized enterprise in the country is going to hang on, the word of the chief Government whip that there will be no increase in compliance costs for your small business or your medium sized businesses—none.

💬 Dr David Clark: He’s pitching to be Minister for Small Business.

Maybe he is pitching to be Minister for Small Business, that is true. Mr Woodhouse might well be. There could well be—I do not know, I cannot see into the future—a vacancy opening up in that portfolio real quick. It will be real quick, I suspect. So all we have got tonight is Mr Woodhouse, the chief Government whip, who is not the Minister and who does not have access to the advice. Every small to medium sized enterprise in the land can rest easy, because Mr Woodhouse has said that there is no increase in compliance costs from either clause 137 or this legislation. So I invite colleagues, especially those from Dunedin, to write that quote of Mr Woodhouse’s down, etch that into the memory, because that will come back to haunt him.

💬 Michael Woodhouse: I look forward to the haunting.

He looks forward to it, he says. Well, so do we, because we have had no report from the Minister for Small Business—if there is one that exists.

I know Mr Banks is a tad preoccupied with other matters and, in fairness, may not have been able to sign off said report from the Small Business Advisory Group. He may not have remembered to sign it off. He may not have remembered to ask. He may not have remembered that he does have a Small Business Advisory Group. He may have signed it—[Interruption] Well, indeed. He may have signed off the advice from the Small Business Advisory Group, and it could well be wrong. Therefore, the Minister in the chair may have refused to have read it in case, maybe, it was wrong, but he will take Mr Banks’ word for it that all is well in small to medium sized enterprise land. So every small to medium sized enterprise in New Zealand will hang on the word of the chief Government whip that this legislation and clause 137 will in no way increase their compliance costs.

💬 Hon David Parker: That must be wrong.

And that must be wrong. But I know that they will all be sleeping easy in their beds tonight, and as they awake tomorrow morning and proceed to the computer, the ledger, or the journal to do their tax, they will know that this change—against accounting advice, against accounting principle—will in no way impinge on their fiscal position or on the hours they spend doing their tax return. It will in no way complicate their entrepreneurial lives one iota.

Well, all I would like from the Minister in the chair—and I see it is now the Minister of Commerce, Mr Foss, who is probably far more qualified than the last two invisible folks we have had as Ministers in the chair, Amy Adams and Nathan Guy—is that maybe he could turn to his officials and actually ask, and verify or quantify for us, the compliance impact of this clause. We will try again, shall we? Would the Minister like to answer the question? No. The silence is deafening. The silence is deafening.

So we are paying these guys a quarter of a million bucks to sit in a chair so that he can do the crossword or sudoku, or whatever it is. A quarter of a million dollars to sit there, and throughout this taxation debate, which has gone on since about 5.30, I do not believe that there has been one call, apart from the initial call from Peter Dunne, from any Minister to answer any of the questions on this legislation. There have been a lot of interjections—a lot of interjections—and a bit of banter, and a bit of fun from the other side, but not one answer to any question.

Although, colleagues, I did make a breakthrough. Peter Dunne was in the chair, and I asked him whether I could ask a question of the officials. The officials gave me a very diligent answer. I am gratified for that. But the officials, I wager, are not sitting there on a quarter-of-a-million-buck salary with a warrant, with a ministerial office, and with a BMW to boot.

So the question is, if the Minister is not prepared to answer any questions, what is he here for? Could we give him a night off? Could he take an early shower? Maybe it would be a bit more productive. There have been serious issues raised throughout this legislation. Maybe he could go and have a wee lie-down and a wee kip, and a nice little tot of whisky, and that would be far more productive than sitting here, pretending to be sort of a granite statue. Or maybe he could just stand up and say “I am not prepared to answer any questions.”, or “We didn’t answer any on Parts 1, 2, 3, or 4, and we will not answer any on Part 5, so give up.” We will not give up, but that would tell the New Zealand people exactly what they are paying him a quarter of a million bucks for: to do his crossword, have a look at tomorrow’s menu or the breakfast menu, or whatever it is, or work out the diet—

💬 Dr Rajen Prasad: Shopping list.

—or work out the shopping list.

This is actually serious stuff—serious stuff. I have been a small-business person. A very limited small business it was, and reasonably successful, but pretty limited. I had the luxury and the resources to put all the receipts into a briefcase, hand it to the accountant, and say: “Can you untangle spaghetti junction and make sure I comply with my obligations?”. The truth is that for most small to medium sized enterprises it is the other half—either the husband or the wife—who sits there at night under dim light, doing the Government’s work for it, working out the GST, the provisional tax, and all these things. I would have thought that we could do something in this legislation to give them back a couple of minutes of their life—maybe an hour—because if you put a dollar rate on that, a dollar value on how many hours they spend behind the desk as opposed to in the workshop or behind the counter growing the business, that is actually a real cost to a small business. They cannot charge out their hourly rate to do the Government’s work for it. They have just got to do it. They have just got to eat it, and take it. So I would have thought that at the very least, they require some sort of basic assurance or explanation.

Mr Goldsmith has written a few books on this sort of thing, I suspect. He might be able to give us some assurance. Somebody from the Finance and Expenditure Committee—Mr Hayes, I am sure, who is a resident expert on many things, might be able to give us an assurance in respect of compliance costs and fiscal impact. Maggie Barry? No. We will move on. So they are the questions before the Minister.

I rise to continue this debate on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, because it is shaping into quite an interesting debate. I personally find it to be quite shocking that the Minister in the chair, the Minister of Commerce, has not taken a call yet on this matter. It is consistent, again, with the issue of the paper boy tax. I want to draw a parallel here, because there is a pattern emerging in this legislation. I have said many favourable things about this legislation. I have said that there is little to disagree with. I have been appalled at the level of tinkering as opposed to real change, but I have said, on many occasions through this debate, that it is hard to oppose the Government on much of this, because a lot of it is common sense.

Well, here we have another example, as my colleagues have pointed out, of additional compliance costs on business. It seems that this Government truly does not like small business. This Government increases red tape on small business. The report we had in respect of the paper boy tax—the legislation that was more comprehensively dealt with earlier—made the point that there was expected to be increased compliance costs for many businesses. We are talking here about people who have cleaning jobs in schools for a few hours a week and do not earn much money. Businesses are now expected to keep their tax affairs close at hand, and monitor them, and likewise in this we are talking about the registration requirement for GST and penalty payment in respect of late payments.

Here there is a clear parallel. There is increased compliance costs on business. The interesting point is not just the increased compliance costs that National seems to be putting on business. National is also, at the same time, reducing compliance costs in some other, parallel areas. So it is actually increasing the grey economy. It looks like National is trying to increase compliance on some businesses—it is not clear which or why—and there is a cost in that, but it is also encouraging people to avoid paying tax.

In the case of the paper boy tax, we saw that those who had home lawnmowing jobs, babysitting, or other similar jobs where there was not a record of their payment on an electronic system were exempt from the same tax that those who were on a system were expected to pay. So we have a growing grey economy and an encouragement for people not to be registered with the tax system. Likewise here, what the accountants said at the Finance and Expenditure Committee—and I recall that Mr Parker raised the issue of what happens with an early payment discount—in their advice, as I recall it, was that, in fact, GST will not be charged in respect of an early payment discount.

So here you have an early payment discount not being charged for GST, but then you have late-payment penalties being charged for GST. What do you think businesses are going to do? They are going to shift their model, to avoid this unnecessary—as they will see it—additional burden of compliance that the Government is putting on through this legislation that we are passing through the Committee right now. Some will get trapped by it, and some will have additional compliance costs. This is just a higgledy-piggledy mess in terms of this particular clause in the bill. It has not been well-thought-through. We have got early payment discounts, on the one hand, for businesses that change their paperwork, so, basically, the Government is encouraging businesses to shuffle their paper. Then we have late payments attracting a GST penalty and extra compliance costs.

We can see the parallel with the paper boy tax, where there was a stingy tax grab from those who are on systems where the tax is carefully measured out, and encouragement for people to have businesses where they are private contractors, working in the grey economy, and are therefore rewarded for that behaviour in future. It all adds to a pattern, obviously, of a Government that does not like business.

The other point that I mentioned earlier on in respect of clause 151B, “Keeping of records”, was the kind of tinkering approach. There is a similar one in clause 150. This is the level of interest in this legislation. We see that it is a broadening provision, so it is hard to oppose in this respect. I move on from the appalling encouragement of the grey economy in the previous clause, but clause 150(1) says: “In section 55(1)(a)(iii), ‘multi-rate PIE’ is replaced by ‘multi-rate PIE or a look-through company’.” Again, that is a worthy change, probably, and I would suspect that we are broadening the tax base a little bit. We are blocking the odd loophole here and there, but that is effectively unpicked by the changes in clause 137, where we have actually got a new loophole being created at the time. We are creating a loophole clause, and why would you do that?

💬 Hon Clayton Cosgrove: It’s a “John Banks clause”

My colleague calls out that it is a “John Banks clause”, and he may have a point. We actually see illustrations very clearly before us of why the law needs to be tightened. Indeed, in respect of local campaigning and local elections, the donations law definitely needs to be tightened up. I do not think there is much doubt about that. If we needed an illustration of that, we have had one today that is playing out slowly and painfully as the Prime Minister tries to excuse one of his Ministers from his so-called high ethical standards by way—I will come back to the point—of excusing that Minister for having not read a report. You can see that what has been happening there is an encouragement of loophole behaviour, an encouragement to look at a particular piece of law and look for the ways out. That is not a healthy way to have a democracy running.

What we need if we want our economy really to get back on track is big, proper change that will actually be a gear change for our economy. We have had this tinkering approach from the Government for the 4 years that it has been here. We have seen recently that the median wage has dropped 3 percent. The median wage has dropped 3 percent. This is ridiculous. We have seen the minimum wage dropping in real terms, we see costs going up, and we see people falling between the cracks. This is not a Government that is making big change; it is tinkering around with GST in this part. It is blocking a few loopholes, but at the same time it is creating new loopholes.

We could be spending our time here better by looking at things like pro-growth tax policy, which would really encourage our economy to get ahead and encourage money to flow towards businesses—rather than towards the activities of compliance, as we see in Part 4 of the legislation—and towards actually getting on with smart investment decisions that would gear up our economy and help it to succeed in conditions that, up until now, have been better than for most people. The Labour Government left many years of surpluses. Our trading partners—

💬 Hon Clayton Cosgrove: Nine years.

Nine years of surpluses, Mr Cosgrove reminds me—9 years of surpluses under the Labour Government. The economies of our trading partners China and Australia, our main trading partners, have been going well, yet in New Zealand our economy is going backwards. It is because the big changes are not being contemplated in legislation like this.

I have talked before, in respect of a previous part of this bill, about the excuses that might be made for change not happening in respect of the Inland Revenue Department computer system, which is struggling and limping along. It is able to deal with small changes that close the odd loophole here and there, and, as we are seeing now, open the odd loophole. It closes one with one hand, and opens one with the other. But we are not seeing the really big changes, and that is because the Inland Revenue Department computer system, we are told, is not up to it. Those big changes that are needed in the New Zealand economy cannot actually be made because we do not have a computer system capable of dealing with really big changes.

That is why the Prime Minister, on Valentine’s Day this year, made his Valentine’s Day promise to address the Inland Revenue Department computer problems. He said that we should not be held hostage, in terms of Government policy, by an outdated computer system. But we have not yet seen the evidence that anything has been done about that. We have not seen a policy announcement or a timetable as to when that computer system will be upgraded, or when it will be able to make the really big changes that we need as a country to have a modern economy that can get ahead.

We know that Australia and our other trading partners have, for example, a capital gains tax, which would push money towards the productive sector to support our export industries. We need export-led growth as a country. But we have in National opposite a party of “cannot”, a party that says “no, that’s too hard.”, a party that refuses to make the big changes necessary, and a party that is merely closing one loophole with one hand and opening another with the other hand.

I move, That the question be now put.

I have come into the House to listen to this debate. I guess taxation, for the National Party, has always been really important. The National Party has focused a lot on it in its campaigning, saying that lower taxes are nirvana and higher taxes are outrageous and will cripple the economy. How, then, can National bring into this House a bill that increases taxation by 50 percent? This bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, increases the KiwiSaver default contribution by 50 percent—from 2 percent to 3 percent. Is that a 50 percent increase? Yes. Is that going to cripple the economy? Well, on the basis of arguments we have heard in this House for years from the National Party, any increase in taxation will cripple the economy. That is what it says. That is why—[Interruption] Part 2. That is why—[Interruption] Part 4. Part 4. That is why—

The CHAIRPERSON (Lindsay Tisch): Order! We are actually on Part 4. Some of the things you have been talking about are in Part 5. [Interruption] I am giving the member the opportunity. Part 4.

Thank you very much. It is about GST, and I appreciate the Chairman’s guidance on that. I will stick to the issue around GST and the one of late-payment fees.

I guess the issue is that this is the party—the great party of National—that wants to slash all taxes because that is going to provide a way forward. So what we have—

💬 Dr David Clark: It’s a tax grab.

It is a tax grab all right. So we are now going to have GST on late-payment fees. Do we pay GST on fines? When I get a parking fine, do I pay GST on that?

💬 Hon Clayton Cosgrove: Or a speeding fine.

A speeding fine, no. I have had the odd one of those. But the question is, do we pay GST on fines? That is not a late-payment fee; it is a late parking fee.

💬 John Hayes: It’s a service.

It is a service. Oh, you see—GST. The question is that if we are going to place GST on late-payment fees, which most people would see as a penalty or a fine—

💬 Hon Clayton Cosgrove: Against accounting advice.

That is right—against accounting advice, against all the advice to the Government. If we are going to start charging GST there, then will the Government have in this House a piece of legislation to put GST on parking fines, or on fines imposed by any part of the court system? I am guessing that that would open the way for some interesting constitutional issues. The Government could be honest and say that it is just increasing the fine, but what part of that fine would then come back into the GST pot? If the accounting advice on this change to the legislation is that it should not occur, then I am guessing that maybe the Government is not going to move on fines. But we want, and I think most New Zealanders expect, some kind of consistency in legislation.

💬 Hon Clayton Cosgrove: That’d be too much to ask from this mob.

Well, it might be. On one hand, the Government has championed the lowering of taxation on its mates. That is if you own $100,000. If you earn high incomes, we have to cut—and, of course the GST argument, the GST that this Government through this change is now going to impose on late payment fees, that extra GST is just like the increase in the GST charge it put across the whole economy. It put it across the whole economy, but did not mention it, though. I guess the question that we must ask of the Minister is, if this is going through against good accounting advice, what else has the Government got in store for people? The one thing that it has consistently done is made it easier for people at the top, who spend a lower portion of their income on GST-liable goods, and made it harder at the bottom for the average New Zealander, who spends the vast majority of all their income on GST-liable goods. They do not have much opportunity to move into the financial sector or to spend their money offshore, because most of them are struggling to survive.

This is, in my view, just another odd proposal by the Government. I am advised by my colleagues that it has been advised against by the accountancy industry, and the Government is determined to push through with this in the same ridiculous, idiotic way that it is pushing ahead with its asset sales. The consistency of that is that we have good advice that these are both bad things to do. We have professional advice—

💬 Hon Clayton Cosgrove: History proves you right.

History absolutely proves us right. Clearly, there are no students of history over there. In spite of that advice that GST on late-payment fees is not good accounting practice and selling State assets is not good economic practice, why is it that this National Government, partnered by the ACT Party, partnered by National’s mate John Banks, is determined to push ahead with stupid things where the advice it has received from professional people is that it should not happen? Well, I guess people will make their own conclusions, hopefully, in 2 years’ time. I am happy to take—

💬 Dr David Clark: Hopefully sooner.

Sooner? There is the opportunity and those members should be very aware of that. That is right.

💬 Hon Clayton Cosgrove: “Banksie” will be out to grass.

Sure, he will be. What kind of animal eats grass? No, we cannot say that.

This is just one component of this bill here that clearly exposes—and I will have the opportunity later on to talk about the increase in taxation at a rate of 50 percent—that the imposition of GST on late-payment fees does raise the possibility that we will have GST imposed next on parking fines, on speeding fines, or on any kind of penalty that can be imposed on anyone. The question must be around the fee that the National Government imposed on people in the courts. What was that fee? The $50 fee, is it, or something—it has got a standard fee on everyone going through.

💬 Dr Rajen Prasad: Victims of crime.

Victims of crime, that is right. Will there be a GST component to that payment?

💬 Dr Rajen Prasad: The Minister will tell us.

The Minister perhaps will hop up and tell us that. No. There is silence. OK.

The thing that people expect of Parliament, as I have said before, is consistency, and fair and reasonable law.

💬 Hon Clayton Cosgrove: Oh, he’s consistently quiet, the Minister.

Consistently quiet. Consistently inconsistent would be the way I would put it. The only thing we do know is that if you are poor and you are paying these things, you are going to pay more under the National Government, and if you are wealthy and you can get out of paying them, you will not. So late-payment fees will generally be imposed upon people who struggle to pay their bills. They struggle to pay their bills for whatever reasons, but mainly because they do not have enough income to cover all their costs, and there are hundreds of thousands of New Zealanders like that. We have got the level of child poverty in this country. What will this additional GST charge do for those people who are already on the breadline or who are, in fact, below it?

In summary, this is just another Tory piece of legislation that makes it harder for people at the bottom and makes it easier for people at the top. Thank you.

I move, That the question be now put.

I will hear from Clayton Cosgrove.

Thank you, Mr Chair, and it is great to see you this evening. We have missed you. I would like to turn to another groundbreaking clause within this legislation. It is another huge reform from the National Government, which I believe my colleague David Clark in his opening address referred to. This is what we are down to. We are down to minutiae. The Government is out of ideas—have another drink. It is out of ideas and out of strategies. So this is what we are now down to. If you have a look at clause 151B(1)—

💬 Maggie Barry: He’s recycling.

Well, if anyone was recycled and close to the old compost in here, it would be that member Maggie Barry over there, but we will not go there. If we look at clause 151B(1), we see that it states: “In section 75(3D), ‘name, address, and registration number’ ”—get this—“is replaced by ‘name, and address, and registration number or tax file number, as applicable’.” I am not an accountant. I think Mr David Bennett is an accountant is he, or somebody? I am not sure.

💬 Maggie Barry: Ebenezer Scrooge.

Oh, Ebenezer Scrooge. Well, if anybody would know about that, it is the old ginger nut over there.

When you look at clause 151B(2), we see it again: “In section 75(3E), ‘name, address, and registration number’ ”—get this—“is replaced by ‘name, address, and, if the principal is a registered person or expects to be a registered person, the registration number’.” This is ground-breaking! This is minute-of-silence stuff! This is huge tax reform! Again, this is what we are down to now. In fact, it would not even meet the status of tinkering. This is changing a word here and there. It would not even reach the high threshold this Government puts on tinkering with legislation.

I would like to know from the Minister exactly what clause 151B(1) accomplishes. That is, for the Minister’s benefit, on page 89. What does that accomplish in terms of record-keeping? It is a one-word change—one word. This is almost as dynamic as the small business Minister’s Regulatory Reform Bill, which expunged 31 Acts that do not exist. So we have a one-word change in clause 151B(1), and in clause 151B(2) a one-word change as well. There may be a good reason for this. I do not think it was to correct a typographical error. David Clark could help my memory; I am not as bad as Mr Banks, but I do not think there were any reports from the drafters as to why this change was put in place or whether it was a drafting error. But could we get some explanation?

💬 Dr David Clark: We didn’t get any explanation.

We did not get any explanation, at all. Could we get any sort of explanation as to why there is a one-word change, whether it is germane, what it will do, and either how it will assist the Inland Revenue Department in terms of its collection, registration, and recording-keeping procedures or how it will assist, clarify, make clear or take away ambiguity for those taxpayers, small businesses, and others that are required to keep records? Could we get an answer to that? Maybe the Minister in the chair is drawing a shopping list of the many questions—perhaps, a couple of hundred—that have been put to him and his colleagues throughout this debate, and maybe he is going to, in sort of a turbo-boosted way towards the end of this debate, answer all the questions for us. That would be great, to be charitable, if that is going to occur. I doubt it, because—and Mr Damien O’Connor talked about consistency—the only thing that has been consistent from each Minister who has acted as the Minister in the chair at any time throughout the late stages of today is complete silence.

I will say this. If the Minister of Revenue is in the chair, he does tend to answer, generally speaking, many of the questions that members raise as we move through the Committee stage of legislation. I do not know whether the Chair can assist. I suspect he cannot assist. I am sure he would if he could, if the Standing Orders allowed him to, or maybe he could, you know, keep it between friends, elbow the Minister in the ribs and say “Hey, why don’t you answer a few questions?”. That might be in the unwritten Standing Orders. I know it is not within the written Standing Orders. But it would be good if we could get some answers to these questions.

We have already talked about clause 137 and about the GST rating issue. We have had three or four speakers, I think, on that and still there is no answer to that question, nor to questions on clause 151B(1) or (2). We are going to get on in Part 5 to some other—

I move, That the question be now put.

A party vote was called for on the question that the question be now put.

I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Lindsay Tisch): No. No, I am—

Sure.

The CHAIRPERSON (Lindsay Tisch): Unless it affects the result.

It may do. It is a question.

The CHAIRPERSON (Lindsay Tisch): Well, we are doing the vote. You can bring your point of order up after I have finished.

OK, no problem.

I raise a point of order, Mr Chairperson. Could you advise me as to the status of proxy votes? I assume the following is correct. Where, generally speaking, a minor party is unavailable—shall we put it that way—to vote, another party would carry its proxy.

Well, I can answer that very quickly. Parties have arrangements between their whips who casts party votes for the respective parties, and that is the end of the matter.

I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Lindsay Tisch): I have ruled on that one, so—

No, no—absolutely.

The CHAIRPERSON (Lindsay Tisch): The Hon Clayton Cosgrove.

Thank you for your clarification; I appreciate that. Could you also advise in what form that has to take—whether it is a written form—

That is an arrangement between the whips of the parties. It is not a matter that the presiding officer takes account of.

I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Lindsay Tisch): The member is trifling with the Chair.

No, no—I have one last question.

The CHAIRPERSON (Lindsay Tisch): The Hon Clayton Cosgrove.

Thank you. Given that is the case, if I could just seek clarification, are you saying that that does not have to be in a written form or a form that is signed between parties?

Like I just said, that is a matter between the whips.

The question was put that the amendments set out on Supplementary Order Paper 98 in the name of the Hon Peter Dunne to Part 4 be agreed to.

Amendments agreed to.

Part 4 as amended agreed to.

Part 5 Amendments to other Acts and regulations