McClay Todd: Supplementary Estimates Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeMcClay Todd: Supplementary Estimates Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill — Second Reading[Sitting date: 26 June 2013. Volume:691;Page:11340. Text is incorporated into the Bound Volume.]Supplementary EstimatesHon TODD McCLAY (Minister of Revenue):I moveThat the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill be now read a second time . It is the ongoing focus of the Government that all taxpayers pay their fair share of tax thereby reducing the national debt burden. However this must be tempered by the need to ensure that tax rules are not unduly onerous.Since this bill was introduced two items of note have been introduced into the bill by Supplementary Order Paper 167 and these were subject to submissions during the select committee process. The first was the proposal to treat lease inducement payments and lease surrender payments as taxable income for the recipient and as tax-deductible expenditure for the payer. The objective of this proposal is to remove a distorting factor that currently means that business decisions can be influenced not by prudent investment factors but by tax consequences. The Government is focused on supporting businesses to help grow our economy and by removing distortions in the tax system we help investment to flow into more productive areas. This proposed change to the tax treatment of lease inducement payments and lease surrender payments will also make the tax system fairer.The second addition to the bill addresses salary trade-offs and aims to achieve greater fairness between those employees who receive a non-cash benefit as part of their remuneration and those who receive cash-only remuneration. One part of this reform would have changed the way some employer-paid car-parks in central Auckland and Wellington were treated for tax purposes but this was withdrawn following consideration of compliance costs.Another key factor of this bill relates to livestock valuations. Members may recall that in Budget 2012 a change was made to the livestock valuation scheme that made elections to use the herd scheme generally irrevocable. This was a question of fairness as some farmers were simply electing in and out of the herd scheme in order to gain a tax advantage. The bill contains detailed supporting rules to buttress the general proposal of irrevocability and to provide appropriate exceptions and other compliance-driven charges.I began my speech by saying that tax rules must strive not to be unduly onerous. Included in this bill is the proposed change to the tax treatment of assets used both privately and for earning income. Concern has been raised about the complexity of these rules. It is worth noting that this perceived complexity will not affect the majority of taxpayers. Complexity arises only where taxpayers have placed assets into complex ownership structures. Where assets are held in simple structures the rules are relatively straightforward. The rules are only as complex as they need to be to ensure that the issue of how to tax these assets is addressed fairly and equitably. It is in the Government’s interest to keep tax rules simple as that ensures a greater rate of compliance and every effort is made to keep the rules simple.I would like to thank the Finance and Expenditure Committee for its work on this bill. I do know that there was significant interest in many of the provisions contained in the draft legislation and I believe that the committee and in part the chairman have done an outstanding job on our behalf. It is therefore with pleasure that I commend the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill to the House. Thank you.