Cullen Michael: Estimates Debate — In Committee 
Cullen Michael: Estimates Debate — In Committee 
[Volume:618;Page:14327] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 In reply I thank members for their sometimes lucid participation in the debate—at least from Mr Clayton Cosgrove. 
Mr Peters asked a number of questions about the TrackCo issue and why the Government is putting money into the track. It is because firstly the track needs it; secondly the public interest is in keeping expanding traffic on the rail; and thirdly if the Government does not do it the cost will fall back on the public anyway through increased costs of roading. Unfortunately there is no no-cost option for the Government in this particular area. 
The TrackCo deal is a very simple one. Basically we have agreed to put $200 million of capital upfront into upgrading of the track and delayed maintenance. Toll as a consequence is committed to a level of upgrading of its own capital equipment and the Government will recover by way of charging any expenditure above the $200 million. In terms of due diligence firstly I think it is fair to say that the Government knew more about the nature of the track than Toll did when it bought Tranz Rail. We could not actually warn it about it because of the nature of legislation around companies etc. Secondly as I said we will recover expenditure above $200 million in terms of the charging regime. 
With regard to Mr Adams and the issue of GST on rates I say that in my view it will stay in force. We certainly oppose it. I remind the member that it passed the Labour caucus in 1984 by one vote which was that of Mr Dunne. He actually voted for imposing GST on rates. I can say that I voted against it at that point. Had Mr Dunne voted against it in 1984 GST would not have been imposed upon rates; it would have lost in the Labour caucus by one vote. But since that time firstly we have learnt that we were right in terms of the majority position—that is that keeping the GST system simple and as broadly based as possible is actually central. It is one of the reasons we have the best value-added tax in the world. It is a much better value-added tax than the Australian goods and services tax. Secondly in fact rates have increasingly become a fee for service of one sort or another and are less and less related to ability to pay or variable. The more rates are a fee for service the more the case is absolutely clear that GST should be applied. Finally I point out that even if GST on rates is seen as a tax upon a tax it is not the only case; GST is applied on top of excise duties on petrol tobacco and alcohol products but that does not seem to arouse the same concern. 
Mr Key came back to the good old issue of the top rate of income tax. If that is the National Party’s obsession and clearly it is the thing that sends its members to sleep at night—thinking about reducing that top income tax rate—why is it not National’s “Key” policy so to speak? It does not seem to be its “Key” policy; it is not even its “Brash” policy now. It used to be. It has kind of dropped down in relevance in terms of the National Party’s approach. 
As for the company tax rate I say that the only beneficiaries from lowering the company tax rate are foreign investors in New Zealand. For New Zealand investors it is an imputation credit. If it were a classical tax regime then the argument might be different but there is an imputation tax regime in New Zealand on company tax and therefore it is only a timing issue. As long as New Zealand public companies pay out just about all of their profits by way of dividends their argument is extremely weak because it is clear they are not ploughing their profits back into growth. And that is another issue the Government is looking at. 
Of course the National Party cannot get its position right on this issue or its position right on the track. Mr Key could not tell us what the National Party’s position on buying back the track was. He was asked during his speech but he would not give it. The problem is of course those members have to wait for the signals from “Foggy Bottom” before they know what their position should be on any particular issue before the New Zealand public whereas we in the Labour Government make our own decisions. 
Finally I will address the issues raised by Pansy Wong who has this obsession with the Export Credit Office. What has happened is that a lot of deals have gone though as a result of the Export Credit Office being in place. There are now exporters who can indicate their ability to finance for greater than 1 year. I have a whole series of examples here of exporters who have been able to proceed because of the existence of the Export Credit Office. It has been successful in that respect. I have examples of a Canterbury exporter an Auckland exporter able to offer finance a marine exporter offering finance terms and a communications company offering finance terms. They were able to proceed to make those offers because the Export Credit Office was standing in the background. The fact that in the end they did not need to use it is actually—if Mrs Wong cares to think about it—a positive because therefore no Government money was actually put at risk in any of those deals. But the fact that the Government backing was there enabled those exports to occur. If Mrs Wong is telling us that National would remove the Export Credit Office I say to her: “Make our day.”