Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Third ReadingText is incorporated into the Bound VolumeTaxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Third Reading[Sitting date: 16 February 2016. Volume:711;Page:9034. Text is incorporated into the Bound Volume.]Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) BillThird ReadingHon MICHAEL WOODHOUSE (Minister of Revenue): I move That the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill be now read a third time. This large and wide-ranging tax bill brings together a suite of proposals to support the Government’s work in creating a more productive and competitive economy for New Zealand. The main proposals in the bill are designed to encourage business innovation by dealing with certain obstacles in the current tax rules that can prevent smaller start-up businesses from undertaking research and development.To recap briefly the first proposal deals with a timing problem in the tax rules that prevents innovative start-up companies from being able to use tax losses incurred during their start-up research and development phase. The second research and development proposal relieves the problem of so-called black hole expenditure where some development expenditure is never able to be deducted for income tax purposes. In offering straightforward targeted and pragmatic solutions to these problems the proposals in this bill will support the Government’s wider agenda for business growth and will be welcome news for New Zealand’s innovative start-up firms.The remaining proposals in the bill continue the Government’s focus on fine-tuning and maintaining the tax system. They include new rules to clarify the GST rules for New Zealand’s 13800 bodies corporate to give them assurance on their GST position as well as targeted business-friendly changes to the tax rules such as giving greater flexibility to users of tax-pooling funds.This bill also confirms the annual rates of tax for the 2015-16 tax year. This is a small but important part of the bill that provides certainty for all taxpayers. Other measures are aimed at fine-tuning our social policy settings. These include proposals to reduce long-term child support debt; changes to Working for Families tax credits to clarify certain provisions and reduce compliance costs for recipients of the scheme; and measures to allow greater flexibility to more quickly align the tax exemption criteria for community housing entities with the Government’s HomeStart grant thresholds. Together the proposals in this tax bill make for a much more workable system for tax and social policy payments.Many of the measures I have described are the direct result of public consultation and cooperation with the private sector. This is a crucial part of the way we develop our tax rules. It helps to ensure that the new rules reflect current social and economic practicalities as well as the Government’s broader economic vision for New Zealanders. In bringing this large tax bill to its third reading I thank the policy officials the drafters who worked on the detail of the bill the organisations and individuals who made submissions on the proposed legislation and the Finance and Expenditure Committee for its consideration and recommendations to improve the workability and fairness of the provisions. I commend this bill to the House.STUART NASH (Labour—Napier): What you have just heard there is a very short speech that was filled with political-speak. Let me just translate that for those who were listening and are wondering what they had just heard. Minister Woodhouse talked about fine-tuning. What that really means is tinkering around the edges. Minister Woodhouse said that the bill “provides certainty for all taxpayers.” What this actually means is that it entrenches inequality and inequity. Minister Woodhouse said that it is a “much more workable system”. What that means is: “We can’t be bothered dealing with the really big issues.” And finally Mr Woodhouse says “wide consultation”. What that really means is that we spoke to the big-business end of town to ensure we got their support.Hon Member: So cynical.STUART NASH: Cynical? A realist; a pragmatist. I am going to be very interested in that member’s contribution because he sat on the select committee and he has been a part of a whole suite of tax bills that have come through the Finance and Expenditure Committee that are no more than tinkering around the edges when we have a number of really big issues that we face as a country and an economy.Labour does support the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill for a number of reasons. First and foremost as the Minister of Revenue said what it does is it amends a whole lot of other bills where there are errors and omissions and that is important to maintain the integrity of the tax system. We also support this bill because anything that can be done to improve research and development spend or get firms thinking about research and development we would like to encourage.But I must say that this bill has really missed a trick. The Government has really missed a trick with this. There is something called the Kiwi Dream. We all know about it we have all heard about it we all grew up dreaming about it ourselves. What that Kiwi Dream consists of is being able to afford a house to get a good job and to bring up a family in a society that is fair and equitable. It is what is in our DNA. It is what we like to think of as what makes us Kiwis. It is what we like to think the international community thinks of us as Kiwis.But that Kiwi Dream is fast disappearing and I think the tax system is one of the major drags on our economy that is fast eroding this Kiwi Dream. Let me tell you why. First and foremost the Minister talked about the fact that the tax rates are going to remain the same. When I spoke at the select committee the Minister said: “Mr Nash wants to increase taxes.” Well I can tell you that as the revenue spokesperson I would love to see taxes drop; I really would. But one thing I would like to see more than that is a really equitable tax system: a tax system that is fair that treats every taxpayer fairly—one that if you make money you pay what you can. That is all—no more no less. If it is income coming in then you pay tax.What we really need to do is take a really good hard look at our tax system—take it from a 20th century model which I do not think is working particularly well and drag it into the 21st century. That does not mean that what you do is you whack up income taxes and say: “That’s that all settled it works.” When Mr Woodhouse says Labour wants to increase taxes let me say here for sure: we would love to decrease taxes but what we need to do is we need to get it right and we need to treat income the same no matter where it comes from in my view—no matter how you earn that income. We need to get that sorted but we have not done that.The second thing is research and development. If we want to compete on the global market then what we need to do is harness the intellectual capital that we have as Kiwis. This is how we are going to realise the Kiwi Dream. This is how we are going to get smart Kiwis who were educated hopefully under Labour without coming out with a massive student debt and they have got to go overseas in order to pay it and then not come back if they cannot afford to. This is what we have got to do—we have got to get our companies up and running and creating an environment where research and development is at the forefront of everything they do.The problem we have got at the moment—and Mr Bishop knows this—is our research and development spend is one of the lowest in the OECD and that is wrong. We really need to address that. So although this bill is called the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill there is actually not much in here for research and development.There was a real opportunity here to be big to be bold and to take something to the market that says: “You know what? We understand where our competitive advantage lies. We understand what Brand New Zealand is and we know what we need to do to compete on the global stage.” We have to be smarter we have to be faster and we have got to do it in a way that Kiwis earn decent wages on a sustainable basis and that values the sort of education that we know we have the ability to provide in this country. The way to do that is to provide an environment—a legislative environment but also a business environment—that encourages research and development. I just do not see this bill doing that.I thought that the National Party always held itself up as the party for business but the reality is—if you look at the reality over the last couple of generations the party for business the party under which businesses have really grown is actually Labour. Labour is the party that is aspirational for businesses and under which businesses do well. When businesses do well Kiwis are employed and when Kiwis are employed that Kiwi Dream does not become just an aspiration; it becomes a reality.That is who we are as New Zealanders. That is what I want for my four children and I suspect it is what we want for all New Zealanders growing up. And unless we create the sort of business environment that encourages New Zealanders to be entrepreneurial it will not happen. What will happen is our best and our brightest will head overseas. There are many countries—including one across the Ditch—that actually value research and development in a much greater way than we do in New Zealand.Alastair Scott: They’re all coming here. The Aussies are coming here.STUART NASH: And imagine how many Aussies would be coming here if we had an environment that created and fostered entrepreneurship. They would not even have left in the first place. But imagine how many would be coming back from London if we were talking about a bill now that provides the sorts of incentives that they get in Australia for research and development.I think what we would see is a flood of educated experienced Kiwis coming back and setting up businesses here because they would finally be saying: “You know what? I’ve wanted to come back to New Zealand for so long; now I’ve got a reason to.” But this bill does not give Kiwis a reason to come back and that is a real shame. It is a real shame and it is a missed opportunity.The other thing I would say is Mr Woodhouse—he thought that he had a problem when he left a portfolio where there was a $10 million blowout in the current HR bill and—what was it Mr Robertson about an $80 million blowout in the child support system?Grant Robertson: About $130 million.STUART NASH: About a $130 million blowout in child support—well sorry a $10 million blowout in the police. He has come across to a portfolio where they are in trouble in a lot of their IT projects. A $130 million blowout is a significant amount of taxpayers’ money. Imagine what we could do with $130 million in terms of research and development. Imagine what we could do if we put $130 million into incubators into fostering business growth into saying to our young people: “Come back because we’re going to support you.” But $130 million is not that much when you consider the Business Transformation project which is looking at a budget of a billion dollars—a billion dollars. We have got to get this right.But let me wrap up by just making three points—reiterating my three points. First and foremost the Government really missed a trick with this bill. We would have loved to see something brought to the Finance and Expenditure Committee that really drove innovation and research and development in a way that made a significant difference and was a reason to bring Kiwis back. Research and development is vital to the growth of an economy like ours.Secondly the Government cannot continue to tinker around the edges with the tax system in the way it is doing at the moment because it solves nothing whatsoever. It just ends up annoying people and it just perpetuates that inequality and inequity that exist in our tax system. Again the Minister missed a trick but having said that he did not bring this bill to Parliament so I will be interested to see whether Michael Woodhouse’s legacy is as someone who takes the bull by the horns and drives that innovation forward in the way that most of us know it should be.The third point I would like to make is that Mr Woodhouse does have his work cut out. The Inland Revenue Department is spending a significant amount of money on various IT projects. We are keeping a very close eye on them because we cannot have another blowout to the tune of $130 million on a system that now has a budget of a billion dollars. We are supporting this bill—give me 30 seconds Mr Bishop; your time is coming—we are supporting this bill—Mr DEPUTY SPEAKER: You have got 24.STUART NASH: Twenty-four seconds? We are supporting this bill but we just thought it could have been so much more aspirational. We thought it could have grabbed that Kiwi Dream made it aspirational reached for the stars and made a real difference to those whom we know the tax system could. This does not. Thank you very much.CHRIS BISHOP (National): I am almost—Grant Robertson: Deputy chair’s up the chair’s just arrived—it’s a shambles!CHRIS BISHOP: —reluctant to stand up because as Mr Robertson is pointing out my learned superior David Bennett the chair of the Finance and Expenditure Committee has entered the House but I am going to take a call first. Last time I stood up I managed to spill water all over the Hon Nathan Guy so sorry about that Minister—not a particularly auspicious start for me in the House tonight.We have just heard some words from Labour MPs that I think it is fair to say you do not hear very often. Stuart Nash said to the House: “I would love to lower taxes.” It is quite extraordinary. In the short time I have been in this Parliament—and I am pretty sure I am safe in saying that in the 7 years the National Government has been in charge—I think it would be highly unlikely that you would have had a Labour MP say that he would like to lower taxes. Well what I would say to that is: good luck because the Labour Party’s spending promises at the last election and they are continuing to increase by the day—just 2 weeks ago $1.2 billion extra spent per year on its much vaunted but actually sadly inequitable and regressive tertiary policy—well good luck.This is a reasonably dry but very important bill and you would be forgiven for not knowing that from Mr Nash’s speech because Stuart used it as an opportunity to bewail the Government’s tinkering and how we are not focusing on equity and how we had a missed opportunity to redesign the tax system. Well how would the Labour Party redesign the tax system? Will it introduce a capital gains tax? No because that is not Labour Party policy. Will it introduce a land tax which I know Mr Nash has blogged about in a favourable way? No that is not Labour Party policy either. In fact the only thing the Labour Party can focus on is the answer to all of New Zealand’s economic problems—research and development tax credits. And it is that point I want to focus on because you will not find a bigger proponent of growing high-tech firms in our economy of innovation being at the forefront of the new economy in the 21st century than me.This bill does a couple of very useful things to grow research and development in the New Zealand economy and to grow them in “Technology Valley” which is what I call the Hutt Valley where we have a real opportunity to grow high-tech jobs. Very few people would know that hundreds of millions of dollars of gross domestic product out in “Technology Valley” is based upon maths and science and engineering and technology—great firms out in the Hutt like Pertronic like Tekron International and like Fraser Engineering which makes high-tech fire trucks for almost every state in Australia. So we have got a great opportunity there and that is why this bill is going to be important.So it does a couple of things. Firstly it allows companies to cash out their tax losses within specified limits; and then secondly we have the relief for what is called in the tax trade black hole expenditure. So it allows expenditure to be either deducted over time or taken as a one-off tax deduction upon the write-off for tax accounting purposes. Is this a wholesale massive research and development tax credit like the Labour Party would like? No it is not. Are these useful measures that will help create a pipeline of jobs and growth in our economy through innovation? Yes they are and they come as part of a suite of measures that this Government has implemented in order to grow the innovative and productive capacity of this economy. I could talk at length about the numerous things that we are doing in this regard to grow jobs and grow the high-tech jobs. I could talk at length about the technology—the amazing technology—going on out in “Technology Valley” but I think it is time for me to cede the floor to Grant Robertson. With that I commend this important bill to the House.GRANT ROBERTSON (Labour—Wellington Central): I have heard Hutt Valley High School referred to as “Sweet Valley High” but I am not sure about “Technology Valley”—is it Mr Bishop?Chris Bishop: That’s right.GRANT ROBERTSON: No you will need to go back to the marketing people on that one. I will give the Government this about this tax bill: at least when the Finance and Expenditure Committee looked into this bill and took submissions on this bill we did not have every large accounting firm in the country come to the committee and say that the bill does not make sense that they were professionally confused by the Government’s approach and that they did not understand how it fits together. This bill came throughto the committee at the same time as the Government’s legislation around property measures came through which was a fiasco. That was when it brought in its brightline test we had the whole thing about providing an IRD number and an address and submitter after submitter came and said: “This does not make any sense.”I will let the House and those watching in on a secret. There is a reason why this bill stands out from those other ones: this one has got nothing to do with the National Government. This bill comes from the officials at the Inland Revenue Department (IRD) who do a pretty good job to be honest in keeping the tax system running efficiently—picking up the loopholes picking up the contradictions in the tax law—and they brought in a pretty good bill in that context. But it is because it does not have the real paw prints of the National Government on it that it has actually come to us in a form where we can vote for it and pass it without those who work every day in the tax system being worried that they simply cannot understand what the Government is up to. And that is the tragedy of this from the Government. When it puts its own bright ideas into the tax system it turns into a shambles and that means that all we are left with are the mechanics of the system. As I say good on the IRD officials. I want to thank them for their role in supporting the select committee and Therese Turner the specialist expert adviser whom we have for the committee. They all did a great job in helping the committee work through the issues that are here.But it is just making the machine tick over—that is all the Government has managed here. It has got absolutely no vision for what role the tax system might play in helping New Zealanders build the Kiwi Dream and helping New Zealanders to get ahead and take the opportunities that are out there. Where is the vision from this Government when it comes to how the tax system can do that? All it has got for us is a mechanistic piece of legislation because it does not have the ideas that will help drive innovation and that will help New Zealanders get ahead take the opportunities and build the dreams that they have. So what we have got here in this bill is a piece of legislation that does four or five major things and all of them are a disappointment in one way or another.Firstly there is the setting of the annual rates for 2015-16 which as Mr Woodhouse and others have noted are the same annual rates that we have had. As my colleague Stuart Nash said all that does is entrench the inequalities that are in our system already. All that does is say to New Zealanders that the Government is bereft of ideas for how the tax system might contribute to perhaps reducing inequality. You know I think we would all respect the idea that the Government needs to pass legislation like this which makes the tax system tick over if at the same time it was out there having the discussion with New Zealanders about how the tax system could be made fairer and how we could actually look at the role of the tax system and not only income equality—which is obviously what the rates are about—but also asset and wealth inequality.You know time after time in the select committee we have had the Governor of the Reserve Bank come to us and talk to us about how worried he is about what is happening with asset prices in New Zealand. When we turn that into real life that is actually people lots of New Zealanders—lots of young New Zealanders—being shut out of that core element of what we thought it means to be a New Zealander which is the idea that you could own your own home. That is what we mean by asset inequality over here. When you have got homeownership rates at the lowest that they have been in 60 years that is snatching that dream away from a whole generation of New Zealanders. Where is the bill that says we are going to do something about that in this House? We do not see that from this Government; we see the tinkering. So we see the annual rates staying the same and lots of New Zealanders will be sitting around tonight following this bill closely and wondering whether or not this is the bill that will make sure that everyone pays their fair share in the tax system.Well I can tell them that I have waded through it and I have done the work there for New Zealanders—it is not. This is not the piece of legislation that is going to say that every New Zealander should pay their fair share. Where is the bit in here where the Government decides to crack down on tax evasion? I know that Simon Bridges is worried about this. He has got hard-working New Zealand companies in his electorate in Tauranga that pay their tax and do the right thing. Well stand up for them Mr Bridges. Stand up for them and say that those multinationals that hide their income that shelter away from their tax obligations—stand up for those New Zealand companies and come up with a plan that does that. Do not sit around on your chuff waiting for some international organisation to sort it out for you. Get up and support those companies that do pay their fair share.So we look at the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill but there is no sign of that—no sign of any action to actually make sure that the tax system is a fair system where we actually collect the tax that is owed and we have a system that New Zealanders could say once and for all was fair. So the annual rates are set. They are not set the way that we would do them. My colleague Stuart Nash has made the point that there would not be anyone in this House who would not want to see taxes lowered for particularly those on low incomes in New Zealand but we cannot do that at the moment. We cannot do that at the moment because we do not have a system that treats New Zealanders fairly and too many people get away without paying their fair share.As others have said the other core element of this bill is around research and development. Chris Bishop has made the point that there are a couple of measures in here that will be helpful particularly for start-up tech companies and those right at the beginning—there is no doubt that that is true—and again I congratulate the officials on having come up with that. But it is hardly the comprehensive measure that we need to get research and development going. Every single member on the other side of the House knows that if they have been to Australia or if they have gone to countries in Europe a simple straightforward tax credit system for research and development operates there. We could have an intellectual debate about the best kind of system to make that happen but the truth for companies that are operating in New Zealand today is that they can look across the Tasman and they can see a research and development tax credit system that is easy and operable and they ask “Why not go and work in that system?” because New Zealand is failing to do that.I mentioned in my Committee stage speech going to the Lowe Corporation in the Hawke’s Bay with Stuart Nash and Andy Lowe saying to us “Whatever you do get that through.” because it gives the certainty to those companies that they can claim in our case—the policy the Labour Party has put forward—which is 15 percent for research and development tax expenditure. That means they know they can do it. Under this system we entrench the grant-based system—Steven Joyce picking winners and Chris Bishop going through his Rolodex deciding who is going to get that research and development grant. We can do so much better than that if we have a research and development tax credit system that is simple that is easier to use and that everybody can access.I just want to end on the question around child support and the simplification of the administration of the child support scheme that is lauded and claimed in this bill. The truth is what this bill does is it puts in place some of the mechanisms that are required to implement a $130 million blowout. That is actually what it does. In fact it is more than $130 million. It is more like about $160 million more than what was originally forecast. This was incredibly poor planning by the Government. It went against the advice of Treasury the State Services Commission and the Government Chief Information Officer who all said “taihoa; wait until the overall IT transformation package has been put in place”. But instead the Government has thrown bad money after bad money and created a situation in which the child support IT system has now had all this money chucked at it. I have no doubt that at some point the Government will come back and say it does not quite match with the new IT system. More money will need to go in.The child support system changes themselves have had difficulty bedding in. I will not be the only MP in this House who has had people come to me with concerns about how that has happened. It is a difficult area. We want to ensure that people meet their obligations but we have to make sure that people are treated fairly and ongoing cases indicate that the system the Government has put in place is very very creepy.It is a missed opportunity. The Government could have put forward a tax bill that actually made the tax system fair made it part of supporting innovation and made it part of supporting a financial system that New Zealanders could be proud of. It has missed that opportunity as it has so often before.DAVID BENNETT (National—Hamilton East): This is a solid bill unlike the last speaker’s comments—and I will come to those in a minute. But basically this bill has a number of issues that it deals with—such as research and development in start-up companies by allowing tax losses from research and development expenditure to be cashed out through a new tax credit within certain limits.It provides relief for black hole expenditure on research and development.It provides certainty for bodies corporate in relation to GST on services to their members and it sets the annual rate of taxation for the year. There are some administrative changes as well to the child support regime which the last speaker Grant Robertson spoke about. There is the repealing and the simplifying of filing requirements for individuals. Basically this bill covers a number of issues within the tax system.Contrary to that last speaker it is not a bill that does not take into account the needs of our tax system to be continually updated and the need to look at what we can do to make sure that we have the best tax system possible. The last speaker talked about property measures and there being no vision for the role of the tax system. Well that is basically code for the Labour Party telling you that it wants to have increased taxes. That was the message from that speech. That speaker talked about a mechanistic legislation that does not bring about structural change. Well that tells you that the Labour Party wants to make large-scale tax changes to our system and it wants to deal with those people who it perceives are not paying their fair share of tax.The Labour Party talks about income inequality and asset inequality. The last speaker was worried about our asset prices in housing. That all relates to a capital gains tax and that is something that the leader of the Labour Party has dismissed. He has said that it is not a policy. We know that Grant Robertson and Stuart Nash want to bring that policy back. They are working within the Labour Party to bring that policy back as we speak. They have said that in their speeches tonight. That is the true Labour Party policy going into the next election. There will be a capital gains tax hidden in Labour Party tax policy. There will be higher tax rates for individuals hidden in Labour Party tax policy. That is what the last speaker said in regard to this tax bill.The last speaker spoke about the annual rates staying the same. Labour wants to increase the annual rate of taxation on New Zealanders. No New Zealanders should not be under any illusion when we go into an election next year when the Labour Party does not put out its tax policy and when it does not give any information on how it intends to raise money for grandiose promises—they now know that the Labour Party definitely intends to increase taxes and to bring in a capital gains tax. That is the message from the last speaker from the Opposition.This is a good bill that does work well in our tax system. It is a bill that adds on to the tax system in regard to research and development. It helps new companies that are looking to get ahead. It gives them a specified ability to get tax losses cashed out through the new programme. It deals with that black hole expenditure which is something that is a continual process within the tax system. These things are not set in one moment. They take time to refine to develop and to provide the right answers for New Zealand taxpayers. The bill provides certainty for other taxpayers through the legislative changes made. This is a good bill for our tax system. It reflects a strong tax system where we work to make sure that we make it even stronger each time rather than having what the Labour Party wanted which was higher taxes and a capital gains tax. Thank you.JULIE ANNE GENTER (Green): The Green Party will be supporting this bill because there is actually quite a small but important win for the Green Party and the Labour Party in this in that National has finally realised after 8 years in Government that it was wrong to cancel the research and development tax credits. So it has started to bring them back a little bit in this bill and we can support the bill for that reason.It is a large and wide-ranging bill. We do not agree with everything in it. But before I get to the substance of this bill I need to clarify and correct some of the statements made by previous speakers from the National Party. We hear from the National Party all the time a number of misleading comments about Green Party policy and about Labour Party policy.I hear over and over again from David Bennett and I think Chris Bishop said this as well that the Opposition is going to raise taxes. I think it is really important to point out that every time National says that the Green Party and probably the Labour Party as well is going to increase spending and increase taxes it is actually making that up. Any of you who are watching this at home can go and look at the Green Party website and see our fully costed programme. Before the last election we showed how we were going to pay for every policy we proposed. We also showed how we were going to give a tax cut to 97 percent of income earners.The reality is that National members find it easier to go around being misleading about Opposition party policies than debating the actual merits and issues. The reality is their party is not delivering the results for New Zealand that they claim it is. I also heard in speeches tonight that National is very serious about innovation and a high-tech economy. If that is the case and if it is implementing policy that is going to deliver that high-tech innovation-based economy why is it that our exports have declined as a percentage of GDP since National has come to power? They have actually declined. National set a target of increasing them and they have declined—right back down to 28 percent of GDP.If it is the case that National is serious about innovation why is it that our exports have become even more focused on simple commodities unrefined commodities like milk powder and raw logs? That is the reality. If you go and look at Statistics New Zealand our imports have been increasing our exports have not been diversifying at all and the proportion of research and development spending—the proportion of the economy that has been put into research and development—has started to decline as a proportion of the overall economy.Everything that we need to do to create a competitive sustainable economy that is going to thrive in the 21st century is not currently happening. The National Party is so blinded by ideology and a focus on delivering for a few big vested interests and protecting the status quo that it cannot see that its policy is not working. It is unwilling to look at the evidence and actually deliver policy that would be better for all New Zealanders.There was recently an IMF country report—very very recently the International Monetary Fund or the IMF did a country report on New Zealand. It made a number of recommendations. It said that we need to address our low savings rate by increasing incentives for KiwiSaver. What has the National Government done? It has actually been decreasing the incentive for KiwiSaver. The report said that we need to reform the current tax incentives around housing and property.Credit where it is due despite David Bennett’s previous scaremongering about a capital gains tax the National Government has implemented a very baby version of a capital gains tax with the brightline test. The sad thing about it is that it is so full of loopholes that it will not actually be effective. It applies only to residential land—god knows how we are going to define that because any land in New Zealand can be used for residential property—and it only counts for 2 years so it is not going to disincentivise property speculation in the Auckland housing market which is already rampant. The IMF country report actually does recommend extending the brightline test to at least 5 years which is something the Green Party proposed when we put forward an amendment to that effect.Also in the IMF country report recommendations was a boost in the research and development spend. So it is great that this bill finally finally brings back some tax breaks for research and development because that is the most efficient way to incentivise research and development. But we need to do more than that. We actually need public investment in research and development if we want to be as competitive as other small countries like Denmark Finland Israel and Singapore. They are all countries that are similar in size to us but they are doing much better—they are much richer. Part of the reason is they have much more diversified economies. That is because of Government policy that is actually evidence-based and effective and all of them are investing three to four times more in innovation.Before the last election the Green Party proposed a big public investment in research and development in addition to bringing research and development tax cuts because that is the best way to get the private sector to step up and invest in innovation. We know this from research. You can look at the book Get Off the Grass by Shaun Hendy and Sir Paul Callaghan which recommends a whole range of policies that demonstrate that what New Zealand needs to become more successful in the world is not to cut taxes; it is not to liberalise regulations to make it easier to do business—we are already one of the easiest places in the world to do business. What we actually need is more public investment in our people and better protection of our competitive advantage which is our pristine natural environment.That is why the Green Party actually has the most realistic sensible economic policy of just about any party in this Parliament. I will say that we hear a lot of sensible policy coming from the other parties on this side of the House but not so much from the party that is in Government. What is really really important to us in the Green Party is that we protect our natural heritage not only because it is going to be good for the economy which it will be but because we love it and we know that New Zealanders love it. We cannot get richer by selling off our land or our seas to overseas mining companies and allowing them to potentially spoil our pristine natural environment.Hon Simon Bridges: If only I could!JULIE ANNE GENTER: It would not make much money anyway Mr Bridges so you do not need to worry.The way to be successful in the 21st century is to address the challenges that are facing New Zealand and the world and we know how to do that. We have the evidence for how we are going to do that. The two biggest challenges facing New Zealand and the world are inequality and climate change. Those two challenges are actually interconnected and we could address both of those through our tax system by developing a high-value clean green economy that works for everyone in New Zealand not just for those at the top.We do not need to increase taxes for 97 percent of New Zealanders but yes those who are on the highest incomes—over $140000—can afford to give a little bit more back. It does make sense to tax income from property the same as income from work is taxed. Any economist in the world will tell you that.In fact I was at a meeting at the OECD in Paris where they were pretty shocked that New Zealand was not doing that. I think that this particular bill although it is a tiny tiny step in the right direction demonstrates the limit of the vision of this National Government. It is ultimately here to govern for those who already have the most to protect the status quo and to avoid dealing with the great challenges that we are facing. We on this side of the House have practical costed policies that will address the real issues facing New Zealanders and ensure that our children have every opportunity to grow up in warm safe healthy homes; to go to school where they can learn because they have access to healthy food; and to grow up and have an opportunity to find meaningful work that pays them a living wage that does not rely on destroying our pristine natural environment but actually makes the world a better place. That is the New Zealand we stand for.FLETCHER TABUTEAU (NZ First): Thank you for the opportunity—and I would like to take the opportunity—to welcome the Minister of Revenue Michael Woodhouse to his new role. His speech left something to the imagination though. It left a lot to be desired really and truly. It has kind of said to us on this side of the House: “What happened Minister? Did the legislation come up too quick and all your staff had gone home?”. It was a 2½ minute contribution where he talked in inanities and lovely political rhetoric. It was lovely to listen to. But what he did say was that in the consultation process in the Finance and Expenditure Committee the National Party members very much listened to the submissions from industry. I have made much of that in my contribution for this evening which I will get to very shortly but I do again welcome the Minister to the role and I look forward to supporting efforts such as this one where there are fixes made as dismal and arguably ineffective as they can possibly be.I would point out to the Minister that the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill is a large piece of unwieldy legislation evidenced by the fact that since the select committee we have had alterations—I am not going to grab the piece of paper—almost as large as the original bill itself. The Supplementary Order Papers have been huge they have been vast they have been highly technical and they have not necessarily been in response to all of the submissions from those who took time out to provide clarity around what could work and what is not going to work with this legislation. There has been a big amount of change and it has not really gone back to industry for consultation and so it sits heavily on this side of the House to work through those changes to work through the permutations and try to reconcile them with the stated objectives of making it easier for business around tax and encouraging research and development through those credits.We get there. New Zealand First acknowledges that we get there with this legislation but it certainly does not go anywhere near far enough. What we have also been saying is that from the very beginning of the process we have in the main supported what the Government is trying to achieve but the reality is that what we have been seeing from these post select committee submissions is so much alternation. In support and in conjunction with that at the same time we saw industry say to the select committee: “Actually what you need to do is get this draft legislation out a lot quicker to industry. Actually get it out before it is even going into the first reading process and before it even comes to the House. Put out drafts of what you are thinking.”This piece of legislation which the submitter was specifically speaking to at the time is a great example of how the legislation process could benefit from that kind of submission because what we would see then is the experts go through like I said the permutations of this incredibly complicated legislation. They are working with it every day and they are willing to come back to the Government and say: “You have not thought this part through. This may work. This will work only so far.” You know they were willing to come back with real contributions in terms of making legislation meaningful and doing what it intended to do from the outset. So we have these stated objectives in terms of what the legislation is trying to achieve. We get there in some part with this but the reality is that all too frequently the fix-ups in these remedial bills will require fix-ups in the not too distant future. What we have seen and I know it will happen is that this particular piece of legislation has gone through the House quite quickly and the process has been there but as I have said twice already there have been substantive changes to the legislation post select committee. There has been no public review of those changes and so we are here now and I still ask the question “Is it possible now to go back and say ‘Well you have had all these changes. They need the public to submit on them. Where do we go to from here?’.”What we suggest—and I think it is fair and reasonable; examples from tax experts are being borne out all too often—is more of a comprehensive analysis from the Government in terms of the unintended consequences. There were some submissions on this. Although they were positive in the main some of the submissions pointed out that actually what we will find if these fixes are not doing what they are supposed to do will actually be counter-productive add to the level of complexity and actually create the complete opposite of the intended consequence of the objectives stated. That was submitted on this piece of legislation. What I would further suggest is that it is really not unreasonable to ask for the Inland Revenue Department to go back and reflect post implementation and to review what has been undertaken in say 5 years’ time—for the Inland Revenue Department itself to go back and do a review so that we can actually measure the effectiveness of this legislation. Submitters highlighted this in their submissions and made sensible calls highlighting the level of complexity as I have said and I agree with them. This possibility would help flatten out and minimise those complications. Tax should not be complex. New Zealand First says—and would insist in fact—that it needs to be as simple as it can possibly be. The reason for that is basically for compliance.Clayton Mitchell: And so David Bennett can understand it.FLETCHER TABUTEAU: And so the chairman of the Finance and Expenditure Committee can understand it. But if it is simple compliance is high and businesses will struggle to either avoid or evade their tax obligations. We know for a fact that some big businesses out there are running rings around our legislation and are avoiding their tax obligations. This bill does not even begin to address some of those bigger issues.I do want to point out that in some parts this is not even a remedial bill. New Zealand First is highly concerned that this Government and this Minister have taken the opportunity to make substantive changes to the child support reform. For those in our community looking for cues as to how they can talk to legislation the title of this bill certainly gives nothing away as to suggest that this Government is making not just fixes but quite substantive changes. I want to point out for Kiwi businesses—it has been said on this side of the House quite emphatically so I will add New Zealand First’s voice to that—that the research and development tax losses section fails. It does actually fail to achieve its objective. It does not go far enough for Kiwi businesses. They are looking at high upfront costs in terms of trying to comply in order to gain those credits. In terms of timeliness and making the claims so that they benefit from the credits there is a big lag there. It is incredibly complex it is costly and there is a huge disincentive to not even bother.New Zealand First supports the stated intent of this bill and as I said at the start actually we agree that it does go some way to achieving what it says it intends to do. We do not think it goes far enough. It sounds like the entire side of the House does not think it goes far enough but it does go some way. New Zealand First does support this legislation but we hope that the Minister will take on our earnest suggestions in terms of reflection and working through complex tax legislation. Thank you.ALASTAIR SCOTT (National—Wairarapa): I rise in support of this the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill. I am going to touch on a couple of points in the bill. The bill relates to and supports small businesses. It treats research and development expenditure as if the business had positive cash flows. It gives them the same cash-flow benefit as if it was a business with positive revenues by way of a rebate. It also deals with expenditure that was not deductible until now which should be—and that is known as the black hole expenditure. This is now deductible.The third and most important part of this bill clause 65 relates to the annual rates. As someone said on the other side these rates are the same as last year. Also we know that this party believes that people are better off with lower taxes. The Minister of Finance has already talked about potentially lower tax rates. Let us look at next year’s probability. If it was the other party we would know that it would be the higher rate the tax and spend party that it is. An example of that is Labour’s recent policy announcement on free education: a handout that is only going to cost the taxpayer more. It is going to give the taxpayer a view that the rates under a Labour Government would only be higher with no possibility of tax rates being lower because the Labour Party does not believe that people know how to spend their own money.This Government believes in lower taxes. It believes in people having the understanding and the wherewithal to spend their own money. The free education policy is a problem in that it does not allow the student to have skin in the game. When someone is given a handout it is taken for granted. The result of the new “bums on seats” policy that is being proposed by the Labour Party is that it will achieve nothing more than higher tax rates and higher Government expenditure. It will increase the number of buildings that are required to educate these students; it will take more lecturers more staff and more people to educate them—and for what? For bums on seats.It has not worked in the past and it will not work in the future. It is important that these students have skin in the game so that they can appreciate the money that they are spending on their own education. There is plenty of evidence to say that graduates are paid more. They do earn more over their lifetimes over their careers. It is only fair and reasonable that these people who do earn more as a result of their education should pay for a portion of their education. As we know it is only around 25 to 30 percent of the total cost that they pay—the taxpayer is generous enough to pay for the other three-quarters. That as the Prime Minister said today is about the right balance and that is what the people of New Zealand think to be fair and reasonable. They have no interest in paying for bums on seats for no real benefit.Turning to other taxes for example: by way of not voting for the supporting of the Trans-Pacific Partnership (TPP) one can only assume that the Opposition is in support of tariffs because all that the TPP does is it allows us—Hon David Cunliffe: Irrelevant and wrong.ALASTAIR SCOTT: Well it is an example of a tax. A tariff is a tax. By not supporting a reduction in tariffs you are supporting an increase in the tariffs and taxes.The Green Party is quite confused. I am not even sure why it is called the Green Party; it should be more the “Multicoloured Party” or the “Technicoloured Party” because it has absolutely no understanding of taxes. Its members talk about the methane tax. They want to close down farming. They want to reintroduce their fart tax. But of course we know that if we take out the farmers of this country if we take away the sheep and beef farmers who on earth is going to pay for the—what was the quote—“warmer houses the welfare kids and the high living wage”? Apparently those things just grow on trees. I am very pleased to support this bill to the House.GARETH HUGHES (Green):Ngāmihi nui ki a koutou. Kia ora. I just want to touch on one of the last comments the last speaker Alastair Scott made which was “Who’s going to pay for the warm homes?”. Well I am proud that my party has worked with that party and that party to deliver hundreds of thousands of warmer homes. Who is going to pay for it? We agreed it was beneficial—in fact it had a 2:1 cost ratio. So we would like to insulate more of those cold damp and unhealthy homes. And if the Government is just going to stand there and say “Oh well what can we do about it? We can’t do anything about it. Who’s going to pay for it?”people are going to continue to struggle people are going to continue to get sick they are going to go to hospital—and sadly we do see a terribly high number of Kiwis dying as a result of our housing. That is something we want to work on.I rise to support the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill. I do not think any party in this House is likely to put that on an election billboard—the title of this bill—but I do hope that innovation and research and development become an election issue because it is a key defining separation down the corridor of this Chamber.This bill contains a whole bunch of tweaks to GST and bodies corporate Working for Families minor remedial matters and we also see some changes around tax credits and black-hole deductible expenditure. What we see and what the IRD estimates is that the total tax impact of this bill is around $17 million a year. And this is what I mean by the dividing line separating the policies in this Parliament. On this side we see the big change—$17 million in tax. Last election the Greens took a policy of an additional billion dollars—billion with a “b”—in research and development. We want to see a more diversified economy. We want to see a richer economy. We want to see a New Zealand that does not just export those bland brown paper bags of milk powder overseas because there is a limit—and we are seeing it in our waterways.There is no limit to the intellectual property the services the software the products the ideas that we could be coming up with. But if we are going to be just tinkering around the edges with an additional $17 million per annum we are not going to get there. And I think it was quite telling the last member’s contribution. The wheels are well and truly falling off the Government when it cannot talk about its own legislation it cannot talk about its own track record and it would rather talk about Opposition policies. That shows it is rattled. That shows it has run out ideas and it would rather talk about the other side’s ideas. All we are seeing are tweaks.In fact this legislation is a bit of a U-turn because the Government opposed and got rid of tax credits for research and development. What do we see in the Government’s legislation? Tax credits for research and development. Although the Green Party supports it because it is a step in the right direction the Green Party has a vision and a fully costed-out plan to achieve a richer smarter more innovative economy. We would invest an additional billion dollars in research and development over the course of 3 years. We would get us moving in the right direction away from the bottom half of the OECD as a percentage of GDP research and development spend. We would see more Kiwis getting patents. What we see under the current Government is research and development in the bottom half of the OECD—we patent four times less than the developed world average. We have an innovation problem. In fact under the current Government the New Zealand economy according to the metrics has become more simplified. That means we are more susceptible to shocks as we are seeing in the dairy industry. We heard last week of a $17 billion hole in the Government’s accounts. A richer smarter economy is the Green’s plan.We would also not just throw additional amounts of money and pretend as if it matters because that is short-term politics. That is cynical politics. We want to see a transformational shift in the way the New Zealand economy operates because we want to see it operate for everyone. We want to make sure those kids are growing up in warm dry safe homes. We want to make sure they have a job in the future economy not just the past one. That is why we are opposed to Minister Bridges’ gamble for oil drilling which plainly is not working. No one is doing any drilling. Royalties are down $500 million jobs in Taranaki in the sector are down 20 to 30 percent. This Government is doing everything it can under the sun to support one particular industry. We want to support the future. That is innovation.Hon DAVID CUNLIFFE (Labour—New Lynn): It is a real privilege to have an opportunity to speak in this third reading of the lauded Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill. Speaking of remedial matters I cannot resist the urge to refer back to the contribution of the well-known member and celebrated winemaker Allan Scott who said as follows in relation to tertiary studies—Hon Amy Adams: Alastair! Allan is the other winemaker. Come on!Hon DAVID CUNLIFFE: Oh really? I thought he was famous! I thought he was famous! Maybe not. OK. So the National intake was not quite what it seemed. My apologies to the member over in the back row of the National caucus. His contribution was complete and utter tautology. It was on the one hand that the Government is giving outrageous handouts to tertiary students and they do not deserve a penny more and then he went on to say: “But those very same students go on to earn a massive fortune through the course of their lives.” Doh! The penny did not drop that therefore they pay more tax. Universities New Zealand this week has proved conclusively by surveying literally millions of graduates that pretty much every single graduate educated at the taxpayers’ expense returns far far more in additional tax dollars to the Crown than it costs to educate them. If that is the quality of the Government’s analysis you can see why this bill is as limited as it is.This bill does three things: it perpetuates the myth that the National Government has an economic policy—it just rolls over for 1 more year the annual rates that it got wrong when it came in in the first place; it put up GST after it said it would put it down; and then it raised tax on the poor to pay the rich and the result was the economy got worse. And now as we look overseas and we see world stock markets in turmoil and the European banking system teetering on the brink of another global financial crisis what great ideas does the National Government bring to New Zealand? Bills like this which do nothing.So the Government does not change tax policy to get the incentives right. It does not help the economy move forward. How does it treat research and development? Well it got that wrong too. It got it wrong because this minor fix this piece of window dressing for the black hole expenditure that the member opposite could not explain is a pale version of what Labour and the Greens have been advocating for the last two elections—a comprehensive research and development tax credit that shares the risk between the entrepreneur and the inventor and the taxpayer because the entrepreneur never captures the full benefit of the invention—it flows to the economy as a whole. Therefore it is reasonable that we all help offset the risk.That is bog-standard economic orthodoxy pretty much throughout the OECD—except not here in good old “Planet Key” because Mr Key thinks he is smarter than the rest. “No. New Zealand business is much tougher. It doesn’t need a comprehensive tax credit. We’ve got a better idea—bureaucratic hoop jumping. We will force good Kiwi businesses to jump through hoops prove their wares to a bunch of bureaucrats in Wellington. And if they are very very good and say ‘Pretty please with sugar on top.’ then they will get a grant in addition to this minuscule offset.”—which is only a loan because they have to pay it back later.The Callaghan Innovation system is so flawed that its crowning achievement was to give a grant to the competitor of Team New Zealand Larry Ellison’s Oracle America’s Cup bid. Was not that fantastic? And there are publishing companies whose next stop was the SFO—the Serious Fraud Office or German subsidiaries whose next act after taking the cash was to relocate back to Germany. It is a joke and any small business that is trying to innovate will tell you that it is clumsy. So what fascinates the Labour Opposition is that Government members may talk the talk of the market but they cannot even walk the walk of the market very well which is why the business community is starting to lose confidence and chafe at the bit and boring pedestrian mean-nothing do-nothing bills like this do not help.JAMI-LEE ROSS (National—Botany): I do not think we need to ask this Parliament about the tax policies that this Government has. In fact the New Zealand public passed judgment on that member and his research and development tax credit policies and his policy proposals in 2014 and how did that go for him? Not very well. In fact it went so poorly that even Tim Groser beat him in the party vote in New Lynn and he was out of the country most of the time. So David Cunliffe is not one to stand up and lecture on research and development policy. His policies were soundly rejected by the public.I am pleased to be supporting this bill as other members on this side of the House are. It is a bill that implements the tax rates and tax policy that fund the New Zealand Government—a New Zealand Government that is delivering better public services for New Zealanders. This Government has a policy programme that is delivering higher wages for New Zealanders. It is delivering lower unemployment rates in this country. It is a policy programme funded by these income tax rates that is leading to more social housing being provided for New Zealanders; it is leading to better health policy for New Zealanders; and it is leading to better education outcomes for New Zealand children—and I am proud of that as other members of this House are.I have sat on select committees for a couple of weeks now with Mr Fletcher Tabuteau. I see that he was speaking earlier in the debate. I sat on a few select committees with him where he has talked a lot about the Ministry of Foreign Affairs and Trade. He seems to seriously dislike it.The ASSISTANT SPEAKER (Lindsay Tisch): No no.JAMI-LEE ROSS: I am raising this Mr Assistant Speaker because under clause 65 the income tax rates are set and those taxes go on to fund policy advice to the Government. The Ministry of Foreign Affairs and Trade does a phenomenal job in providing good quality advice to the Government. It has provided advice to the Government around the Trans-Pacific Partnership—The ASSISTANT SPEAKER (Lindsay Tisch): Order!JAMI-LEE ROSS: —which shows huge growth for New Zealand.The ASSISTANT SPEAKER (Lindsay Tisch): No no we are not into that. Good try.JAMI-LEE ROSS: Mr Assistant Speaker that member Mr Tabuteau has deliberately attacked a number of times the policy advice that is funded by this bill. I actually want to outline for the House that the tax rates that go on to fund that advice should not be attacked by that member. As we have seen when the Ministry of Foreign Affairs and Trade has provided advice before around trade policy—The ASSISTANT SPEAKER (Lindsay Tisch): Order!JAMI-LEE ROSS: —and around free-trade agreements its advice has actually been exceeded considerably by the outcomes. Mr Assistant Speaker I just wanted to touch briefly on that point. I am pleased that you have allowed me to do that very briefly.I just simply say to the House so we can move on that this is a good bill that allows the New Zealand Government to carry on with the policy proposals it is putting forward which are leading to greater growth better outcomes for New Zealanders and better public services and we support that.The ASSISTANT SPEAKER (Lindsay Tisch): Dr David Clark—on the subject.Dr DAVID CLARK (Labour—Dunedin North): This bill is one we have indicated we will support on the basis that it makes our tax system more robust. That is its most basic and important function as a bill in my view. So that becomes the overriding reason that we support the bill. In this bill we are of course confirming the annual rates of taxation which are the same taxation rates that were confirmed in the Government’s 2010 tax package where 40 percent of the value of those tax changes went to the top 10 percent of earners and the bottom 20 percent got just 2 percent of the value of those tax cuts as they were called—and of course it got swallowed up in GST at the time as John Key broke his promise not to increase GST.So this is what we do in this bill. We confirm that 2010 tax package. Let us not forget that in doing that we seem to be under this Government’s stewardship committing this country to further borrowing. This Government sitting opposite us is a Government that has borrowed more money than the Muldoon Government borrowed.Hon Ruth Dyson: What?Dr DAVID CLARK: This is the Government that has created more debt for New Zealand than any other Government in New Zealand’s history. Part of the borrowing has been to fund these tax cuts.Chris Bishop: We blame you.Dr DAVID CLARK: And they do blame us—the member is quite right. Although there is absolutely no evidence to support the claim they blame us for the fact that they have borrowed and borrowed and borrowed to fund the tax cuts they put through in the 2010 tax package where all of value went to the very top earners and the middle class missed out again. They are working with this tax package to ensure that their mates in the in-club—a very small club I might add—are looked after into the future and to make sure that middle New Zealand sees none of the benefits of their economic gains.Of course today we also heard more evidence coming out in recent days that shows that New Zealand’s GDP is not growing per person. The only thing that has grown our GDP in the last year basically is immigration. So individuals are not better off. In fact in many regions of New Zealand real household incomes are still lower than when National took office all those years ago. New Zealanders know this to be true. They experience it in their everyday lives. They know that the Kiwi Dream is leaching away from them. They know that these tax changes that we are again confirming this year in this bill before us are responsible for them being worse off over time as the borrowing and these tax changes go to fund the very wealthiest 1 percent of New Zealanders to live the lifestyle that many people could only imagine in their wildest dreams.Most of New Zealand is missing out under this Government. It has a terrible record. It actually has the worst economic record of any Government in the last 50 years. We know for certain that no one has borrowed more. We know that no one has driven inequalities in quite the way they are being driven now as we have the lowest homeownership rate in 60 years.The OECD put out a report about a year ago saying the inequalities in New Zealand had acted as a major handbrake—a major handbrake—on our economy. It is about 15 percent smaller as a result of inequalities than it would have been otherwise. The tax rates in this bill which we are affirming this evening are a part of that picture. This is a Government that just does not seem to care for the middle class. It is concerned only with that very tight in-club that very tight Cabinet club and their well-being and that is coming at the expense of ordinary New Zealanders who once used to dream of owning their own home. It was not such an unreasonable thing to dream of.When I was a kid growing up I think most people imagined that they would own their own home. Now I see a large number of my peers—people in my age group—saying it will never happen for them because housing has got so out of control particularly in Auckland. The average house price there is now around $930000 and it will soon hit a million dollars—for the average house. It is one of the most expensive housing markets in the world. Something is out of whack.James Shaw: The most.Dr DAVID CLARK: It is the most my colleague in the Green Party says—the most expensive. This is where we are heading to as a country. This is not the New Zealand that we should have. This is not the New Zealand that we should have and yet in this bill we are once again affirming those tax rates.We know why inequality is bad for us. We know that when kids go to school hungry they do not learn as well. It is not rocket science. We know that if they go to school without shoes on without raincoats they get illnesses that are preventable. They probably feel the world is against them and it probably is actually. They are more likely to end up in the prison system. They are more likely to be unable to make the contribution they otherwise could make as a result of inequalities.We know that inequalities are bad for us when people are so desperate to earn money because they have grown up in poverty that they throw every other care aside—other societal cares. Think of the person who goes out to become a wealthy stockbroker exploiting loopholes in financial systems in order to make sure that they can provide for the next generation because they grew up in poverty. That person might well have been better as a neurosurgeon. They are choosing to use their talents out of desperation when they live in an unequal society.We know that less equal societies do not invest in infrastructure in the same way that more equal societies do. We see that in the United States. The state of many major highways is woeful compared with the major investment in places that are committed to public infrastructurelike China. We see China in recent decades is on the way up as it has invested in public infrastructure and the United States is struggling.These are meta-trends. We know we all need hospitals and schools and we need a taxation system that supports them but the more our taxation system drives inequality the greater the burden on those particular systems and the greater the cost of running them effectively. We need a more equal society and this Government just does not care. It seems determined to focus on making sure that the 1 percent the very wealthiest of the wealthy are looked after at the expense of those in the middle—at the expense of those in the middle.We know that when we have a fairer society everyone feels like they are included. Everyone feels like they have a role to play. Everyone feels like they can give of their best and that it will be valued. That makes for a wealthier more prosperous and happy society.But this Government opposite seems determined to focus only on making sure the 1 percent are better off. It is focused only on some superficial targets around surplus. We have seen the Minister of Finance deliver his first surplus after 7 years of Government. He had been promising it for two elections has finally delivered one and now he is saying he cannot do it again. The last Labour Government delivered nine surpluses in a row. There was zero net debt at the end of the day. The last Labour Government had a very responsible fiscal position. This one has borrowed more than any other Government in New Zealand’s history.Chris Bishop: Absolute rubbish—left us with a structural deficit.Dr DAVID CLARK: It has borrowed more than any other Government in New Zealand’s history and that member knows it. He is embarrassed and well he might be because this Government has a shameful economic record—a shameful economic record. It has failed to recover after the financial crisis. It was gifted zero net debt. Bill English said: “That’s the day the rainy day we’ve been saving for.” that the Labour Party had saved for. They have spent that money through the global financial crisis.Nobody would say that was wrong initially but since then they could have got New Zealand back on track. They could have had a plan. Instead of going from one dairy price bubble to the next—blaming the farmers when things went wrong like that Government does—they could have set about diversifying the economy creating a plan and creating a tax structure that incentivised research and development properly rather than tinkering around the edges to protect entrenched interests which is their way of doing things. They could have created an economy that was humming that was really in New Zealand’s interests.We could have been debating a tax bill that had much more proactive measures in it—to create a better society to create a better country and a wealthier more prosperous New Zealand where people actually could afford to own their own homes where they were not worried about non-resident foreign buyers bidding up the market so that the whole market was unaffordable in Auckland for the average Kiwi to buy a home in.This is not the New Zealand we all dream of. This is not the Kiwi Dream. This Government has lost touch with the aspirations of New Zealand. They were there they spoke to those aspirations when they came in but now they look jaded. Now they look tired. They have given up on ordinary middle New Zealand and they are now only looking to the aspirations of the 1 percent in the hope that they can fund another campaign cling to power for another term and ram through more bills that preserve the status quo and protect the interests that they have and not the interests of ordinary middle New Zealand.ANDREW BAYLY (National—Hunua): Have we not heard some weird and wonderful things tonight? I heard earlier on that the Australian research and development tax system is much more simple than the New Zealand system. Well that is garbage I have got to say. I have just listened to the previous speaker David Clark talk about debt levels and tax rates for New Zealand.I want to take the opportunity to deal with the debt issue that the previous speaker has just been talking about. He is claiming that this country has got a massive level of debt. I just wish that this person would have a historical context in which to make a statement like that and actually look at some of the facts. If we look at the facts today our current debt is 26 percent of GDP. By 2020 in approximately 5 years’ time it will be about 20 percent.If you look at the Lucky Country Australia its debt levels are currently just about ours but by 2020—the same period; in 5 years’ time—they will be just under 40 percent i.e. twice New Zealand’s rate of debt. If we look at Europe and the UK debt is currently just over about 80 percent to GDP and in 5 years’ time it will be at that same level which again will be four times our debt level. We would be having a totally different conversation.If we look at America that place that a lot of people like to talk about current debt levels—Mr Clark you should stay and learn a little bit about debt if you are going to talk about it. Current debt levels in the US at the moment are 107 percent of GDP and are expected in 5 years’ time to be about 100 percent five times New Zealand’s current debt. It is five times! And you were saying that New Zealand is out of control Mr Clark.Anywhere in the rest of the world we would be talking about how we are going to put up tax how we are going to be reducing all our social expenditure. Well we are lucky to be in a situation through prudent management where we can even be talking about introducing research and development tax credits dealing with black hole expenditure and all that good stuff to try to make this economy much more successful than where it is at at the moment and grow it even faster.This bill actually has four key elements and unfortunately we have really only focused today on research and development but I would like to say that it also deals with Child Support Act changes. It also deals with GST on bodies corporate—again something that people wanted; 13000 body corporate owners have come to us. Finally it deals with controlled foreign companies and foreign investment firms. Again these are good tax measures they are comprehensive and they are all part of driving this economy forward. Thank you very much.Bill read a third time.