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:16085] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Oftentimes when members begin their speeches they say that they rise to do so and so or they rise to support the bill. This morning I just say that I rise because with the kind of cold I have I feel like that is an achievement in itself. I am assisted I must say by Sudafed which means I probably would not be on my feet had the Government’s next bunch of legislation already been passed.  
In all seriousness I say that I am particularly happy to take a call because we are witnessing today a most grievous abuse of the parliamentary process. The Taxation (GST and Remedial Matters) Bill was an innocuous little remedial bill that was agreed by unanimous consent at the first reading and by all parties around the table at the Finance and Expenditure Committee. It tidied up a few tax glitches. The only thing that was strange about it was that there was so little in it which seemed like a bit of a mystery. Zero rating some farm transactions was about as far as it went.  
Now the truth is revealed. The whole point of this bill was the 70-page Supplementary Order Paper dropped on the House last night which is a fundamental change to an area of tax law that involves $2.3 billion a year of tax write-offs.  
The Minister of Revenue once stood for the sensible decent middle. He should be ashamed that he is presiding over an abuse of Parliament like we are witnessing today. For mum and dad out there I say that the Government is introducing most of this bill after it has had its only chance to go to a select committee and after the public have had their chance to have a say on the bill which affects over $2 billion a year of their taxes. Over $2 billion a year of their taxes is affected yet this Government would not let them see the bill before steamrollering it through with midnight sittings just before Christmas.  
What is the Government ashamed of? I will tell the Committee what the Government is ashamed of. It is the sham that is the look-through company.  
I will tell people a little story—a true story. I once looked at renting a boat. I went to a company in downtown Auckland at Westhaven and I was shown around some nice boats I could rent. They were nice but they were expensive on a per day rate. The salesman said it was easy; I just had to form an LAQC and put it through that. I asked him what an LAQC was. He said it was a loss attributing qualifying company. I said that that could not be legal. He said it was. He said I had to take a client out on the boat only once and I could write off the whole cost as a tax loss against my personal income. I told him he had to be kidding; it was a pleasure craft. He said it did not matter. With a loss attributing qualifying company I could run a loss on the company and write it off against my personal income.  
There might have been some good reasons for starting that tax incentive—to be fair it started under the previous Labour Government—but it has mushroomed and in 2008 $2.3 billion of tax loss was written off against loss attributing qualifying companies. The tax losses include a massive stock of rental property. Rental property was the main reason the global financial crisis bubble came to New Zealand. The main reason small businesses cannot borrow enough capital is that we have a national private debt equal to 90 percent of our gross domestic product most of which went through the banking system into rental property. Why did that happen? It was partly because there was a tax incentive. What was the tax incentive? One could run a loss on a loss attributing qualifying company and write off that loss meaning not only that no tax was paid in the company but that no personal tax was paid either because it was written off against one’s personal income. No wonder we had a property bubble.  
That problem has been unmasked in the 2 years that this Government has been in office. What has it done about it? It has replaced effectively the loss attributing qualifying companies with new creatures sanitised by the fancy-pants lawyers and accountants who serve their clients and donors called look-through companies. Those new things still allow people to write off company losses against their personal income because they look through their personal income tax rate.  
How is the Government doing this travesty—this $2.3 billion of tax loss? It is doing it in the dead of night in a Supplementary Order Paper that has not gone to a select committee that no accountant— 
The CHAIRPERSON (Lindsay Tisch) 
: I remind the member that Part 1 is about the goods and services tax; it is not about loss attributing qualifying companies. I remind the member to come back to the substance of Part 1. 
Hon DAVID CUNLIFFE 
: Mr Chairman you will forgive me I hope for my genuine outrage about the process that has been employed here.  
The first part of the bill is about goods and services tax and we all know that National—in a terrible regressive tax move—has been putting up that tax from 12.5 percent to 15 percent. We also know from statistics released by Statistics New Zealand and confirmed this very week by Treasury that as a result of the tax changes in the last year the average household is now $28 a week worse off and the average individual is $17 a week worse off. That is the average; the median is worse than that. But I will save some of my comments about GST of which there will be many for some subsequent calls.  
I will mainly in this opening call ram home that a terrible travesty of parliamentary process is happening today with this GST bill. It was a train that left the station innocuously and received unanimous support at the select committee until the main carriages were attached last night in the dead of night in a 70-page Supplementary Order Paper that does something that is completely irrelevant to the first half of the bill. That Supplementary Order Paper will not go to a select committee. It will not receive public submissions. It affects $2.3 billion of tax income. It has the potential to perpetuate the distortions of the tax system that led to the property bubble and that have absolutely euchred this economy.  
National once thought it was the party of business. Well it does not represent real business because real business is being screwed over by property magnates in this bill—that is what is happening. The fact that it is happening without proper parliamentary scrutiny is an absolute travesty. I imagine that officials in their heart of hearts are deeply ashamed. They know that tax bills go through this House every couple of months and there is no reason on God’s green earth why these look-through company changes could not have been attached to the next train leaving the station and have had proper select committee scrutiny.  
This is a very very serious matter. This avoidance problem is at the absolute heart of what is wrong with New Zealand’s tax system. It is at the absolute heart of the perverse incentives that mean we spend too much bidding up each other’s house prices— 
David Bennett 
: Talk about GST. 
Hon DAVID CUNLIFFE 
: —and adding David Bennett’s 2.5c extra to the GST rate. We have an absolute travesty in this bill: a travesty of process a travesty of substance and a missed opportunity.  
The best that can be said of this bill is that it is a missed opportunity. I say in this opening call that Labour will now oppose the entire bill on the basis of this travesty of process because what is in this illegitimate Supplementary Order Paper is far more important than the minor technical amendments that were in the so-called main bill. The Supplementary Order Paper changes the whole point of this legislation from decent remedial tidy-up to the perpetuation of a fundamental structural flaw in the tax system. That is wrong. It is wrong in substance and it is wrong in process and it is a goddamn shame that the otherwise worthy work which we all drew attention to in the first reading speeches has been washed down the toilet by a Government that not only does not care about democracy but is deliberately abusing the democratic process. Why?  
We can only ask who was not prepared to be subject to the scrutiny of the profession and the public by a select committee process. Whose interests are being protected? It looks like it is the interests of property investors. It looks like it is the interests of finance companies—the ones that have not yet been charged by the Serious Fraud Office. It looks like it is the interests of the same old corporate elite that cleans up every time and has holidays in Hawaii while ordinary working people get shafted. It is happening again.  
GST has gone up to 15 percent and ordinary Kiwi families cannot afford the cost. In most of this bill now there is a gold-plated let-off for people to write off property losses against their income through a thing called a look-through company. It is the same old same old.