Cunliffe David: Goods and Services Tax (Exclusion of Rates) Amendment Bill — First Reading 
Cunliffe David: Goods and Services Tax (Exclusion of Rates) Amendment Bill — First Reading 
[Volume:619;Page:14638] 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I would like to say something nice about Gordon Copeland although I am afraid not to the extent that I can signal support for the bill. Gordon Copeland is a very assiduous member of the Finance and Expenditure Committee and he is a man who does his homework and a man who thinks carefully. It is just that unfortunately on this particular issue he is in a situation where he is his party’s champion for whatever purpose of a bill that flies in the face of well-accepted tax policy and rationales that were formerly accepted by his own leader. So the Government opposes this bill and there are four particular reasons why. They are the “floodgates” arguments the tax policy argument the competitive-neutrality argument and the no-free-lunch argument. Let me try to handle the first two quickly before the tea break. 
Hon Ken Shirley 
: Is there any argument in support? 
Hon DAVID CUNLIFFE 
: There is no argument in support—other than that I feel somewhat uncomfortable being on the same side of an issue as people like Roger Kerr and Ken Shirley. That caused me to pause but other than that I think the logic is in favour of that member of the Opposition—Mr Shirley—on this occasion. 
Let us turn to the “floodgates” argument. The fact is that GST is a broad-based tax and one thing that we have always taken pride in in New Zealand is that it has been a very difficult tax for smart lawyers to dodge. It has been a very difficult tax for people to get around just because they could afford to hire a smart lawyer and it has had relatively low compliance costs because it is not some fancy retrofit with lots of exceptions. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
Hon DAVID CUNLIFFE 
: Prior to the dinner break we noted that there were at least four good reasons why the Government should oppose this bill. The first was the “floodgates” argument. Our GST system is built upon the rationale that we should have a clean system with few exceptions. Having an exception for rates would create a race for other exceptions and we think that is in violation of the key principles of GST. 
The second argument is the tax policy rationale for GST itself. GST represents payments for local authorities’ services consumed by citizens and ratepayers of the area. Local authorities provide goods and services many of which are funded wholly or in part by rates. Those goods and services represent consumption by ratepayers and therefore GST should as a matter of principle apply. 
The third argument is the competitive neutrality argument. The bill would give local authorities particularly their strategic business units an undue competitive advantage over other competing businesses. 
Paul Adams 
: How? 
Hon DAVID CUNLIFFE 
: Some services—to answer the member—for example car parking facilities and rubbish collection are also available from the private sector. Those providers would be at a competitive disadvantage. 
I do find myself in something of a quandary on this point because my notes indicate that such luminaries as Mr Roger Kerr Mr Ken Shirley Mr John Key and Mr Simon Carlaw are all in agreement on this point. As the member said: “It does cause me to reconsider briefly but on this occasion I think we are on the side of principle and there is a fortuitous alignment of stars that are normally in another galaxy.” 
The fourth argument is the “no free lunch” argument. One hundred and sixty-six million dollars per annum is raised by GST on rates. Unless members of the United Future party are going to come up with some other tax that would replace that revenue I think we have to admit that there is a real issue of base maintenance of the fisc. Certainly in my area of town in New Lynn we worked hard to get a new hospital for Waitakere the total cost of which was $70 million. I cannot help but look at a number like $160 million and say that that is 2½ Waitakere hospitals a year. That is revenue that this country sorely needs to fund services for ordinary New Zealanders and it is not ever wasted. 
Hon Ken Shirley 
: Oh! 
Hon DAVID CUNLIFFE 
: That was a bit much for Mr Shirley. I ask Mr Shirley to indulge us here for a moment. I guess I am left with a question. If the logic of the argument is against GST on rates why is Gordon Copeland the member known for his studious and rational approach to economic matters bringing this bill that is pretty much without merit to the floor of the House? I am left thinking perhaps this is an uncharacteristic attempt at populism by the United Future party. I find it difficult to be in the situation of having to draw that kind of conclusion. I am looking forward to the speech from the United Future member to come next and I see that members opposite in the New Zealand First Party are smiling sweetly because they know that nobody does populism like they do and even on this bill the best they can do is have a buck each way support it going to a select committee and kill it thereafter. I rest my case.