Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16101] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to take a specific call on new clause 10B on Supplementary Order Paper 187 which inserts after clause 10 in Part 1 the opportunity for zero rating of services. It replaces section 11A(1)(u) with the following: “(u) the services are supplied to or by the Crown as consideration for a supply—(i) for which there is no payment of a price; and (ii) that is chargeable at the rate of 0% …”. The Minister of Revenue earlier deemed that matters of zero rating are in scope and therefore the amendment proposed in the name of my colleague Stuart Nash regarding zero rating the supply of fresh fruit and vegetables is in scope and we appreciate that. I think it is important for the Committee to take some time to discuss that issue. 
There has also been a lot of debate so far about process issues. What is accepted now I think on all sides of the Committee is that this 71-page Supplementary Order Paper did not go to the Finance and Expenditure Committee and there was no notice given to the Finance and Expenditure Committee that it was coming. It was presented the Minister says on Tuesday. I did not see the actual Supplementary Order Paper until yesterday and I was out of town for part of yesterday so my statement that I saw it last night was true. Although there was a discussion which we appreciated with officials on look-through companies that discussion did not turn to the substance of the Supplementary Order Paper itself nor were copies presented to the Opposition in that meeting. 
So the question raised by my colleague Brendon Burns and by my colleague the Hon Pete Hodgson remains. The Minister in the chair is a Minister who perhaps more than some others is regarded by all sides of the House as being an honourable member and a stickler for process. It is a surprise to us that this Minister of all Ministers would bring such a substantial Supplementary Order Paper to the Committee in such a shoddy fashion bypassing the best part of the generic tax policy process bypassing scrutiny by the Finance and Expenditure Committee bypassing the opportunity for independent tax advice and bypassing the opportunity for members of the public or the profession to have their say on record through the submission process. 
New clause 10B explains in part why that exceptional action has been taken by the Minister because clearly the Government did not want to debate in the select committee zero rating GST. That must be one part of the reasoning because when one starts that debate and opens submissions on a matter that as Mr Chairman has ruled is within scope the public can submit on other things that they want to see zero rated. The Labour Opposition has taken a fairly fine point on that debate. We have acknowledged the issue of definitional overhead—[ 
Interruption 
]—and we have focused on something that is very easy to know. Everyone knows what a fresh fruit or vegetable is—even Tau Henare probably could guess. It is for that reason that we are able to deliver relief through our policy which is a gold-plated election promise costing $270 million of forgone revenue a year. Labour will deliver $6 or $7 a week to hard-working New Zealand families—that is for a family of four or five. That promise has been extremely well received by New Zealanders up and down the country. 
The reason that it is important and it goes to new clause 10B is that New Zealanders are doing it extremely tough in the recession. I say “in the recession” advisedly because we are still in one. The small-business people in my electorate of New Lynn are telling me that this year is tougher than last year. This year is tougher than last year for small-business people. They have been hanging on by their fingernails mortgaging their homes and just trying to keep the staff paid and the businesses ticking over. This year is tougher than last year because they are running out of equity with which to do that. The interesting thing is that talking to the big end of town—and Labour members have been out and about talking to the corporate sector quite a bit lately—the message we are getting to quote one chief executive officer last week is never has so much popularity been used by so many for so little. “What is this Government doing?” they ask; “What were they thinking during 10 years in Opposition that they have so little new to contribute to public debate?”. Those questions are relevant to this bill because one of the key areas of economic structural reform that are needed is the rebalancing of the tax system to avoid the blowout in property investment. 
Mr Chairman I see your finger poised on the button and I remind you that I have one call still to take.  
The CHAIRPERSON (Lindsay Tisch) 
: The Hon David Cunliffe. 
Hon DAVID CUNLIFFE 
: Thank you Mr Chairman. This will be my final call on Part 1—but it is going to be a long day—which would include new clause 10B “Zero-rating of services” and I have offered a short call in support of Labour’s amendment to zero-rate fresh fruit and vegetables and I thank colleagues for that amendment. I bring the Committee back to the issue of process. Whatever the merits of that amendment the select committee should have had the opportunity to discuss it alongside the issue of whether it was propitious to zero-rate other services. 
The economic context into which this Supplementary Order Paper falls as I have said before is particularly important because the rebalancing of the tax system has been said by the Government to be one of its most core objectives. The Government set up the Tax Working Group which it lauded and hailed but then it refused to implement most of its recommendations. If we thought about the recommendations in terms of a menu in a restaurant the entrée would be things like building depreciation and the main would be things like a land tax the risk-free return rate or some variant on a capital gains regime that rebalanced the capital income boundary—in particular in relation to the property sector which is the subject of this matter. But the Government refused to make the structural changes. It is very very interesting that this Supplementary Order Paper which is a very timid step forward in respect of reform of loss attributing qualifying companies which are the main legal vehicle for holding property assets—this timid step forward small as it is capturing only around $100 million of revenue as it does—could have gone through a select committee process and we could have checked whether the definitions could be broadened or the scope could be broadened or look-through companies could be made more effective. And it would have been in the context of a bill that up until this point has had the unanimous support of all parties—all parties. This Minister has single-handedly torpedoed the consensus of the House which could have smoothed this bill through by not putting the most important amendments which are contained in this Supplementary Order Paper before the select committee. 
It really is a surprise to see that coming from that Minister whom we have had a high degree of respect for across successive Governments because forgetting the politics he has always had a detailed and fair handle on revenue issues.  
Moana Mackey 
: He needs to answer my question about boarding houses too.  
Hon DAVID CUNLIFFE 
: He needs to answer the question about boarding houses. I hope he will take a call. I apologise to my colleague for interceding as I did but I felt it was very important to come back to the issue of zero rating before we lost the opportunity of the debate on Part 1 to commend the amendment that I believe the Hon Trevor Mallard had a hand in— 
Hon Trevor Mallard 
: I had no hand in this—maybe a finger.  
Hon DAVID CUNLIFFE 
: —with my colleague Mr Nash. So it was a team effort on the Labour side of the Chamber as always because we do operate as a collective. 
Zero rating of goods and services is important. One of the reasons it is important is that it will provide relief to hard-working Kiwi families. The other reason is that it gives us an opportunity if we look specifically at the property sector to rebalance some of those bubbles at the income capital boundary. The fact is they are pumping air into the property balloon which has popped. The thing about bubbles is they pop lots of people go broke and lots of people get hurt. Strangely enough it is always the poor who get hurt the most. They socialise the losses while the rich privatise the profits most often. Then about 7 to 10 years later we come back and have another bubble. How long will it be before the next property bubble occurs because this Government at this point in history did not have the fortitude to take the structural steps that were needed to prevent it from recurring? 
It would have been good for the select committee to be able to address itself to those concerns by the Supplementary Order Paper having been tabled in the normal way. It could have been done. The Minister says he was consulting the profession. I find it reprehensible then that members of the profession were told things that members of the Opposition and other parties were not because the bill was not put before the select committee. There is no way of changing that. I invite the Minister to take a brief call to explain again why the Supplementary Order Paper did not go to the select committee and to address the concerns raised by my colleague Moana Mackey in respect of particular technical question around the GST consequences in respect of boarding houses.