Clark David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Second ReadingText is subject to correctionClark David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Second Reading[Sitting date: 05 December 2013. Volume:695;Page:15320. Text is subject to correction.]Dr DAVID CLARK (Labour—Dunedin North): Labour will be supporting this bill the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill with some reservations and I want to echo Minister Goodhew’s sentiment in thanking the Finance and Expenditure Committee for the constructive work it did. It was certainly my observation that around the table there was a spirit of wanting to make this legislation as fair as it could be. The Minister raised the issue of fairness many times and talked about how our tax system was good because it had fair obligations and then she helpfully linked this to compliance. All of these are issues that I would like to cover in my contribution.It certainly has been the case historically that we have had good voluntary compliance in New Zealand but what the Minister did not point to was the fact that that compliance is dropping. That voluntary compliance that we rely on in our tax system is dropping. That is inevitable in part because businesses are struggling under this Government. We know that there are 2500 fewer small businesses being created every year under this Government. It is in part because people are struggling and we know that inequalities are at the highest that they have ever been in New Zealand in recorded history under this Government. We also know that people who cannot afford to put food on the table are going to struggle to meet their child support obligations and the other tax burdens that are upon them.This Government is doing very little to help those people. Those record figures for inequality are something that should be regarded as a national shame. We have a history of being and a pride in being a country of fairness and equity and that reputation is going down the tubes. So the contribution made on behalf of the Minister of Revenue by Minister Goodhew begged a question about whether these changes and the future changes that the Government wants to make will contribute towards that understanding of our tax system as being fair and equitable and will contribute towards the voluntary compliance that we actually rely on in order to have a functioning and efficient tax system that collects revenue to fund our schools and hospitals which I am sure most members across the House would want to see continue.We heard yesterday in the financial review hearings about the fact that the Inland Revenue Department is not meeting its new target—its new revised target—of answering three out of four phone calls which I found shocking frankly. That three out of four phone calls is the target in the first place is pretty shocking and that the department is not meeting that target is I think unacceptable. That points again to the kinds of frustrations that people are experiencing with the tax department which is under-resourced and is struggling with an outdated computer system.We on this side of the House worry that these proposed changes might come back to the House for revision when the Government tries to implement them. That has certainly happened before with legislation in my time here. It has been passed throughthis House and has come back for revision because the department has found that it is not able to implement it.Hon Anne Tolley: You don’t think in 9 years that Labour knew that system needed upgrading? You did nothing about it.Dr DAVID CLARK: The Minister opposite raises the 9 years that we were in Government. That is an interesting point because when this Government came in 5 long years ago it was stated in the briefing to the incoming Minister that this problem of the computer system urgently needed addressing. In fact her Prime Minister acknowledged 2 years ago now that changes to our tax system were being held back because the system had not been repaired. I am very glad that the Minister is bringing this up because that problem is growing. It is a shocking problem that needs to be addressed and taxpayer money has been spent on it with very very very little progress. We heard yesterday in the select committee Ms Tolley that $50 million has been spent so far on the computer system and what do we have out of it so far? We have out of it unfortunately an agreement from Ministers that it should proceed in theory. We have an in principle agreement to make some change—$50 million.Moana Mackey: $50 million?Dr DAVID CLARK: Yes $50 million. Now we have an in principle agreement to make the change that the Inland Revenue Department recommended to this Government 5 years ago and that the Prime Minister acknowledged 2 years ago was urgent—$50 million has been spent and now we have an in principle agreement to do something about it.That is why on this side of the House we are worried about whether this legislation can actually be implemented by this Government. It has been making excuses. It is getting nowhere with fixing the tax system and New Zealand is suffering because every Western democracy needs an effective and efficient tax system to collect the taxes so that we can have schools and hospitals. It will not do to just flog off every asset that the Government owns. Eventually we will run out of assets to flog off to fund those kinds of projects and we have seen that the Government is no good at doing that anyway. It has failed to meet its target.We do need a reliable tax system that collects the revenue fairly as the Minister indicated at the start and we need voluntary compliance which involves having the people out there getting a satisfying experience with the tax system as they hand over their dues voluntarily. It is not one that faces having three out of four phone calls unanswered and it is not a tax system that releases information willy-nilly as well. We had the privacy breaches with the Inland Revenue Department tax system that were widely reported last year. Last year it was reported that over 6000 people’s details—their most private details—were released by the Inland Revenue Department because that tax system is burdened and is squeaking at the seams. And you would expect that because it is 21 years old for goodness’ sake! Not many people rely on 21-year-old computer systems in their everyday work—10 years before Facebook for goodness’ sake! That is an outrage. It needs to be updated.The $50 million spent so far to get an in principle agreement to proceed ought to lead us somewhere. In fact we also learnt at the select committee yesterday that the tenders for the development of the first stage of the business case which is the next stage are out at the moment and that they will be reporting back in June next year with an updated business case. June next year—there is some hope. They will get there eventually. They will have an in principle agreement then they will have an in principle business case—Hon David Parker: Peter Dunne will probably be Minister of Revenue again.Dr DAVID CLARK: Mr Dunne may well be back as Minister of Revenue by then. I am sure that he has got nothing to fear and nothing to hide or that is what he will be claiming—goodness knows. This Government does not seem focused on that task. It is not resourcing it and so that is why we have got these worries about whether these actual measures will be able to be implemented.There is one equity issue that remains important with this legislation and that is the foreign superannuation changes. If we take for example two young New Zealanders who go on their overseas exchange and one of them heads off to England and one of them heads off to Australia they will find if they are saving there in a foreign superannuation scheme that when they return to New Zealand one of them will have a whopping great tax bill and the other one will not. At some level that does not feel very comfortable at all and the problem quite simply would not arise if we had a proper capital gains tax in this country. A proper capital gains tax is something that again this Government has been avoiding because it is very interested in protecting the interests of those who have money and it protects their interests above fairness.That is why the voluntary compliance level is dropping in my view. People no longer regard the system as being as fair as it was once upon a time and nor is it easy to interact with. With the privacy breach concerns on top of that we have a department that is struggling and that the Government is clearly not focused on and clearly is not interested in and we have growing non-compliance.Part of that non-compliance as I mentioned is due to tax avoidance which others see as unfair and then they feel that they should not themselves be paying their tax burden. We know that this is a growing problem worldwide. A recent edition ofThe Economistreported that now very close to 200000 individuals have assets of $30 million or more. That is a 6 percent increase on last year. There is a growing inequality of wealth around the world. The problem in New Zealand is growing faster than elsewhere and that level of inequality is driving the non-compliance as I explained at the beginning of my address.Unfortunately this department is not even able to be focussed very much on pulling that in. We heard in the Finance and Expenditure Committee yesterday that there is no estimate of the size of tax avoidance in New Zealand. The department finds that it is too hard and it does not have the resources available to it to actually estimate it properly.So here we have another bill going through that we will be supporting because it makes some steps in the right direction certainly with the tax on mining. We agree that some of those things that have been clarified in the select committee needed clarification. They are sensible changes and the committee was well chaired and worked through the issues thoroughly. I congratulate Mr Goldsmith on his work in that regard. We have made some good changes here. The equity issues between those coming from Australia as opposed to those coming from the rest of the world still stand out as unusual and difficult and I am sure that we will hear of many people out there listening who have concerns about that—The ASSISTANT SPEAKER (Lindsay Tisch): Sorry to interrupt the honourable member. His time has expired.