Dalziel Lianne: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
Dalziel Lianne: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
[Volume:675;Page:20782] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 There are a number of features of the Taxation (Tax Administration and Remedial Matters) Bill that fully meet the intent of something that is described as a tax administration and remedial matters bill. What Amy Adams talked about was not one of them. The abolition of gift duty does not fit within the ordinary definition of tax administration and remedial matters. That has been the Opposition’s No. 1 objection to the use of this particular vehicle for the abolition of gift duty. It is a policy matter of some substance and deserves to be dealt with by a bill that actually addresses policy issues rather than it simply being seen as a matter of tax administration. But there is a reason why this Government has chosen it as a matter of tax administration and I will come to that shortly. 
As members of this House will know I am a great fan of something known as a regulatory impact statement. I sometimes feel like I am the only person who reads them but on this occasion I know that is not the case because every Labour member on the Finance and Expenditure Committee read the regulatory impact statement and they were unimpressed. They were so unimpressed that they actually challenged the content of the regulatory impact statement in their report back to the House. I think that is a significant issue and something this House should take very seriously. If we cannot rely on the regulatory impact statement to provide us with the basis for quality decision-making then heaven help us because actually the people of New Zealand put us here to do something a little bit more than a once-over-lightly and the regulatory impact statement is supposed to offer slightly better than the options offered in this case. 
Let us look at the options but first I should make this point to the House because I think members just do not get what the regulatory impact statement is for. It is supposed to identify the mischief that is to be remedied by the particular proposal that the Government has adopted. It then should identify a range of options that the Government could adopt choosing the least regulatory intervention all the way through to a major regulatory intervention. All of those options would be put on the table and then there would be a cost-benefit analysis a risk-opportunity analysis—all of that work would be done and that is where the regulatory impact comes in. There would also be consultation with major players. Well the consultation on this particular one has been rather an eye-opener for me as well. 
Let us look at the options that the regulatory impact statement put on the table. The first option was to narrow the scope of gift duty. It looked at the people whom the previous speaker was talking about—the family trusts the individuals and the closely held companies. It then looked at the concerns around income tax minimisation social assistance targeting and defeating creditors which largely relate to gifts between those individuals and therefore looked at limiting the rules around gift duty to those particular individuals. 
The second option was to raise the threshold at which gift duty applies noting as the regulatory impact statement did that the current threshold of $27000 per annum for the gifting programme had been fixed in 1984 and had not been revised since then. There was a view that it had not kept up to date with inflation. The regulatory impact statement identified that if the threshold had been adjusted it would be $78291 but it said that that would “dilute gift duty’s protective effect against these forms of targeted gifting by speeding up the rate at which assets may be transferred.” But actually getting rid of gift duty does not just speed it up; it completes the process in one fell hit. So I do not know why that was a good argument but I am sure that somebody in the bowels of whatever department wrote the paper will understand why that was the case. 
Option three was to remove the need to file gift statements for non-liable gifts. I found this absolutely fascinating because we have heard a lot of people saying that about 200000 gift statements have to be filed each year. Well that is quite interesting because the regulatory impact statement states that “The most significant part of compliance costs is not completion of gift statements—rather it is the annual drawing up of deeds of forgiveness which require engagement with a legal practitioner.” That is it. So all of this talk we have heard about the huge cost to the Government of managing the compliance cost in relation to the completion of gift statements does not stack up against the Government’s own regulatory impact analysis. 
Option four is to move to electronic systems. Well I was gobsmacked to find out that in fact they cannot be filed by electronic means at the moment. I do not understand why. It is to do with the original deed having to be filed along with the gift duty statement—which is then photocopied and returned by post. I am sure we could do better than that. I do not know why it was ruled out. The regulatory impact statement says “The financial outlay required to upgrade systems is expected to cost within the range of $1-7 million.” Within the range of $1 million to $7 million? One would think Treasury could come up with something slightly better. It sounds like the good old days when Labour was in Government and we got quotes from the Ministry of Social Development as to how much it would cost to upgrade SWIFT for a minor technical adjustment to a benefit. It was always in the millions and millions of dollars. But $1 million to $7 million to make it possible for the Inland Revenue Department to have a document scanned as an original document and signed off by somebody who would give it the status that it required? I cannot believe it. This document says a lot. 
The last option of course—they have left us only one option the one they wanted right from the start—is to repeal gift duty. The thing I find fascinating is something the previous speaker drew attention to. She said we are saving the private sector $70 million. Is that not wonderful? We are saving people $70 million by getting rid of gift duty. Well do members know how they came up with that figure? It was on the basis that the average cost quoted by practitioners for drawing up an annual deed of forgiveness is $285 plus GST. So what she meant to say is we are saving 225000 people $285 plus GST each so that they can have the benefit of not paying tax on what they are gifting to somebody else in order to divest themselves of their assets. That is what this is about. The Government does not like hearing this but this is about its priority. It is prioritising the same people it prioritised in the tax cuts. It said that 10 percent of New Zealanders would get the bulk of the benefit of the tax cuts and that is exactly what it is doing with this measure. 
That is what draws me to paragraph 57 in the regulatory impact statement: “The number one concern related to the repeal of gift duty from an income tax perspective has until very recently been the ability of individuals to reduce their taxable income by transferring their income-generating assets to a trust. High-earning individuals could transfer assets such as shares or interest-bearing savings to a trust so that the associated income accrues to the trustee. This would allow the income to be taxed at the trustee tax rate instead of at the top marginal personal tax rate.” Now listen to this: “Up until 1 October 2010 this would offer a tax saving of 5%. However alignment of the trustee and top personal tax rate from 1 October 2010 will remove this tax advantage.” But that is the whole point. The Government reduced the top tax rate for its mates and now it is giving them the total benefit by removing the gift duty as well. Those members are saying that it makes no odds because of a change they have made to the tax system favouring the highest-income earners in this country over and above those who struggle to make ends meet every single week because of the price of milk because of the price of fuel and because of the price of their groceries which just go up and up and up. 
This debate says a lot about this Government’s priorities and we know exactly where this will take us as we enter election time because the people of New Zealand will know perfectly well where that party’s priorities lie and it certainly is not with average New Zealand with every New Zealander who sees themselves disadvantaged once more by this Government.