Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
Text is incorporated into the Bound Volume 
Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
[Sitting date: 18 September 2012. Volume:684;Page:5320. Text is incorporated into the Bound Volume.] 
Taxation (Annual Rates Returns Filing and Remedial Matters) Bill 
In Committee 
Debate resumed from 28 August. 
Part 2 Amendments to Income Tax Act 2007 ( 
continued 
)  
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to support the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. We are debating Part 3 of the bill now in my understanding. 
Louise Upston 
: No. 2. We’re on Part 2. 
Dr DAVID CLARK 
: Part 2. Well that is very very good because I have some things I still wanted to say about Part 2 but did not have the opportunity to say. I thought I had missed my opportunity. 
The loyalty bonuses issue was one that came up in Part 2. I wanted to raise some concerns but did not have the opportunity in relation to where that issue had broader relevance. We saw that coming up likewise at a similar time in our Parliament around the asset sales legislation. In some places there appears to be an inconsistency. In the asset sales legislation that this Government is trying to ram through the House as quickly as it can we are encouraging people by giving them bonus shares. In Part 2 of this legislation on the other hand we are taxing bonus shares. The submitters to the Finance and Expenditure Committee who spoke about this suggested that this was really the wrong way round and asked how we could encourage investment in capital markets and local markets when we are taxing these shares rather than encouraging more shareholding. 
In Part 2 clause 17 talks about software development write-offs. The way in which this de-risks business is something that the Labour Party supports. We believe that there are some sensible things in this bill. Overall the bill does contain some sensible measures but by and large it is restricted to tinkering around the big issues of the day. The pro-growth tax policy that would take our country ahead is left grasping and excluded from this legislation whereas taxing bonus shares is included. We have no plan for KiwiSaver beyond the unimaginative plan which we will discuss in further parts of this bill to increase it mildly after the Government had previously cut it. The Government is all over the place on KiwiSaver. And then we have nothing in the bill about monetary policy. Of course this would not be the place but it all adds up to no real vision for this sector. 
What we have in the bill part by part is this little piece of tinkering and that little piece of tinkering. Many of the provisions are good many of them valuable particularly in the area of write-offs for software development but we do not have the big picture in here. We do not have a real vision for saving in a beefed up KiwiSaver scheme. We do not have any pro-growth tax policy and that means that as a country we have seen our tax take drop. We have seen it drop 4 percent during the time of this Government in policies that were described as broadly fiscally neutral. We have nothing in this bill that seeks to correct for that or that seeks to make sure there are the right conditions for growth in our economy in order to secure the revenue base that we need as a country to secure future public services that we rely on—the hospitals the schools which look after our children and the police who look after our society. All of those services that we as taxpayers value are at risk when the tax base has been eroded and when there is no plan through the tax system or otherwise to grow our economy other than things like taxing bonus shares which is actually going to make our capital market more shallow than it already is. 
If we compare our capital market with that of our neighbours in Australia we can see part of the picture of why Australia has got so far ahead of us in recent years. It has $1.3 trillion in its retirement savings scheme. In New Zealand our KiwiSaver is a johnny-come-lately. The Labour Government in the 1970s put in a scheme that would have seen us actually better off than the Australians with our savings but Mr Muldoon pulled that back and we are all rueing that part of the story.  
But there are opportunities now in the KiwiSaver space. There are opportunities here in terms of the decisions we could make. The plan to have write-offs around software development that has not been successful which de-risks some of that development work is a good step forward. The replacement of the—[ 
Bell rung 
]—KiwiSaver 3 percent— 
The CHAIRPERSON (Lindsay Tisch) 
: No. The member must sit down when I have rung the bell. That is it. You do not continue. Otherwise I will give you another call. 
LOUISE UPSTON (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 98 in the name of the Hon Peter Dunne to Part 2 be agreed to. 
Amendments agreed to. 
Part 2 as amended agreed to. 
Part 3 Amendments to Tax Administration Act 1994 
Hon CLAYTON COSGROVE (Labour) 
: 
 Given that we are proceeding with a reasonable amount of haste through this— 
The CHAIRPERSON (Lindsay Tisch) 
: I am sorry to interrupt the honourable member. The time has come at a reasonable pace for me to leave the Chair. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
The CHAIRPERSON (Eric Roy) 
: Members the Committee resumes its consideration of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. Before the dinner break we were debating Part 3 and the Hon Clayton Cosgrove has the call. He has used 8 seconds of his 5 minutes so he has 4 minutes and 52 seconds remaining. 
Hon CLAYTON COSGROVE 
: Thank you Mr Chair. Indeed it was— 
Chris Hipkins 
: I move an extension of time! 
Hon CLAYTON COSGROVE 
: Indeed it was a short call before dinner—even shorter I think than your colleague the other Chairperson who was in the Chair at the time in metaphorical terms in good humour. 
I want to address a number of clauses in Part 3. I know that the Minister in the chair the Minister for the Environment will be ably prepared to answer some questions. Specifically in clauses 104 to 106 there are a number of provisions that deal with the electronic and otherwise filing of forms and the aim I am advised is that as is the case with many tax bills that flow through the Finance and Expenditure Committee it is an attempt to reduce compliance costs for taxpayers and to make the Inland Revenue Department more efficient by moving from paper to electronic services. 
I would note though—and it would be interesting if the Minister could provide some background to this—that there is still a gap in the Inland Revenue Department system in that when you get a personal tax statement it will allude to salary and wages but it does not take account of interest paid on bank accounts. Some years ago I inquired of officials why that was and it was because of the archaic computer system that we still have at the Inland Revenue Department. 
So we have this bizarre situation as this bill tries to gain some efficiencies within the department where if you request your personal tax statement and you align that with your resident withholding tax certificate you will find that the two do not match up even though the bank has transferred—if you are on the right tax code which most people are—your resident withholding tax from your account to the Inland Revenue Department and for some reason relating to the archaic computer system the department cannot then reproduce that as part of your personal tax statement. 
So what you are required to do I am advised is either assume the Inland Revenue Department has got it right and that there has not been a mistake which is probably in about 90 percent of cases if you have the right tax code or if you want to be safe ring up your bank get your tax certificate and advise the Inland Revenue Department in writing. The Inland Revenue Department then both reconciles on paper and produces another tax statement with the correct amount on it even though the Inland Revenue Department has got the money. 
I said to an Inland Revenue Department official that given that the banks are compelled to transfer the funds the resident withholding tax from a person’s account to the Inland Revenue Department surely there is a more efficient way given that the Inland Revenue Department has got the money for the department then to produce a piece of paper that says: “Here is your wages and salary and anything else. Here is your personal tax statement. And it will include the money that we the Inland Revenue Department have already received from the bank.” But apparently this is a sheer impossibility. It cannot happen because there needs to be some reform or some change to the Inland Revenue Department computer system. 
So I ask the Minister given the wonderful things that are contained in clauses 104 105 105B 105C 105D and 106 whether there are any moves afoot to deal with the basic basic anomaly whereby the Inland Revenue Department receives the money but cannot actually reconcile the amount it receives from an individual’s bank account and have it reflected in the individual’s personal tax summary without that person or business having to go back with their certificate from the bank and go through the motions again. 
Can I also ask the Minister a question in respect of clause 104 which one could nominally perhaps refer to as the “John Banks clause”. Clause 104(1) states the following: “Where information contained in a taxpayer’s return has been transmitted by electronic means in the prescribed electronic format in accordance with”—I am sure the Minister is familiar with this—“section 36 the taxpayer shall retain or cause to be retained—(a) the return in the form of—(i) a signed hard-copy transcript of the information transmitted:”. Given that there has been some controversy in recent days—and I can see the National Party members have sort of perked up and are taking this very seriously—over whether people who sign forms read them retain the notion in their brain that they have signed them and have a memory of signing them and given that that is a normal human biological and mental practice for 99.9 percent of the populace apart from one person from Epsom what would be the penalty regime if somebody acted in a fraudulent way? 
What would be the penalty regime—I see Mr Goldsmith the chief biographer of Mr Banks is drafting his obituary as we speak; volume 2—if somebody acted in a fraudulent way? What I ask the Minister if a person did not retain the correct documentation or did sign that documentation and could not remember the name they used in signing that documentation—which is very 
 The Day of the Jackal 
 is it not—or could not remember or did not read the documentation they signed? Would that absolve them? I am sure the officials will be poring over the statute book as we speak— 
Hon David Parker 
: What about David Garrett? 
Hon CLAYTON COSGROVE 
: I will come to him in a minute. What would be the penalty regime? I am not a lawyer but Mr Parker and others around the place are eminent lawyers. I would have thought that that was fraud in its simplest definition. I would have thought— 
Michael Woodhouse 
: Careful. 
Hon CLAYTON COSGROVE 
: No I am talking about if a taxpayer— 
Michael Woodhouse 
: Is this a hypothetical situation? 
Hon CLAYTON COSGROVE 
: Absolutely. It is very hypothetical very hypothetical. I would have thought that that is fraud. If one signs a document or signs it negligently or falsifies documentation or maybe has a bout of amnesia and cannot remember their own name or perhaps signs somebody else’s—who knows—but cannot remember doing it would that absolve them of their tax obligations under new section 23(1)(a)(i) of the Tax Administration Act set out in clause 104? Then we come to new subparagraph (ii) whereby the taxpayer must retain “an electronic form meeting the requirements of section 25 of the Electronic Transactions Act 2002; and”—it goes on—“(b) for a period of—(i) 7 years after the end of the income year to which the return relates;”. 
Then we turn to clause 105B clause 105C and clause 106. Clause 106 inserts new section 33AA which relates to “Exceptions to requirement for return of income” and it says: “(1) A natural person is not required to furnish a return of income for the tax year if for the corresponding income year the person—(a) derives no assessable income other than—(i) income of a type referred to in subsection (2) including a total of $200 …” blah-blah-blah. 
So there is a whole series of requirements here that require a high requirement from the individual taxpayer: first that they do not have amnesia; second that they are being honest and not fraudulent; third that they actually read the documentation unless they have entrusted it to a trusted adviser; fourth that they sign their name to it; and fifth that they retain it. Presumably the Minister can advise us that the law would state that assuming you have signed it yourself you are aware of its contents and therefore you are responsible for the veracity and accuracy of those contents. I know that the Chairman is taking great interest in this; I can see the look on his face. I think he is an alumni of the Finance and Expenditure Committee possibly. 
We could call this the “John Banks series of clauses” and I think it is important given the environment in which we find ourselves floating around in this Chamber that we get squarely on the record whether this would be considered fraud whether a person in that situation would be seen to have lied to the Inland Revenue Department to have falsified documents or to have falsified the position and that being the case I ask what penalties or remedies the Inland Revenue Department would have through our judicial system. It is a worry. 
The other point is that I presume that under the mental health legislation some power of attorney would be required if somebody did not have the mental capacity to sign—I am being very serious—their own name because they had for instance amnesia. 
Michael Woodhouse 
: There is a scope issue here surely. 
Hon CLAYTON COSGROVE 
: No no. It is in scope because in order to comply with clause 104 presumably you would have to delegate power of attorney to somebody of sound mind who could sign on your behalf. But presumably a court would hold that the court would have to determine whether you indeed did perhaps have amnesia were incapable of remembering your own name or were acting as a responsible citizen and therefore requiring power of attorney to be delegated to a third party. That might happen and if that was the case presumably you would comply with the law. 
But if you falsified the documentation there is a question of penalties—and I know that the Minister in the chair is a lawyer a very senior lawyer I am told so she will be able to snap her fingers and gain the answer for us. What are the penalties? What are the remedies that Inland Revenue Department would have under that theoretical case if the documents were not retained under clause 104 and they were not signed appropriately? 
I know that Mr Bridges is a former chair of the Finance and Expenditure Committee and this is an issue that is very close to his heart—that and wheel clamping as he is the Associate Minister of Transport. He asked me whether I would mention him in the speech tonight. We call him Jed Clampett for obvious reasons. He is famous for his role as Associate Minister of Transport. 
Dr RAJEN PRASAD (Labour) 
: 
 Thank you. It is a privilege to rise and take a call on this Taxation (Annual Rates Returns Filing and Remedial Matters) Bill and to talk about clause 103 in Part 3. I know that the Hon Simon Bridges is particularly interested in this part and so he will be following my comments particularly closely. This particular clause is permissive in the sense that it now enables— 
Hon Simon Bridges 
: That’s like half the Labour caucus Rajen. 
Dr RAJEN PRASAD 
: I beg your pardon Mr Bridges? 
Hon Simon Bridges 
: That’s like half the Labour caucus—permissive. 
Dr RAJEN PRASAD 
: I do not know what that member knows about the Labour caucus but what he knows about the Labour caucus will not fit on the back of a small stamp. 
Chris Hipkins 
: I don’t know whether to be offended or flattered. 
Dr RAJEN PRASAD 
: Yes yes yes. But we know much more about that member’s caucus. I am happy to elucidate on that if the member is particularly interested but I am sure he is not and it will be outside of scope. 
The CHAIRPERSON (Eric Roy) 
: Part 3. Part 3. 
Dr RAJEN PRASAD 
: Thank you Part 3. Thank you Mr Chairman for bringing Mr Bridges back to the point that I am trying to make. So here is a permissive provision for the keeping of records when tax returns are submitted. 
Maggie Barry 
: Take your time. 
Dr RAJEN PRASAD 
: What clause 103 does is it actually enables records to be kept in a particular way. I notice Maggie Barry is particularly interested in keeping it narrow because that fits within the ambit— 
Maggie Barry 
: Get to the point. Get to the point. 
Dr RAJEN PRASAD 
: —of that member’s understanding of this. If the member will allow me it is about where the records are going to be kept and what kinds of records. Ms Barry as a member in an electorate with a whole lot of Korean members would be interested in how the system is going to work when the language now is permissive. Records do not have to be in English. Also what this clause does is enable these records to be kept anywhere. So the Minister in the chair Amy Adams might want to tell us what kinds of provisions the Inland Revenue Department will make to make sure that there is an ability to access those records and translate them in a way that would make sense within the New Zealand tax system. I have some experience with this I would want to tell both Maggie Barry and Simon Bridges because when I was a member who heard immigration appeals on the Residence Review Board I had to deal with a lot of records in banks about what banking records— 
Hon Clayton Cosgrove 
: Banks? John Banks? 
Dr RAJEN PRASAD 
: —in business—Banks again. No no different kind of banks. This is a good bank; that is a bad bank. This is a good bank a straight-up bank. Banks that can be trusted. Banks that do not forget what they are telling you about. Banks with good records Mr Bridges—those kinds of banks. Here Mr Bridges one had to really do a lot of work to understand the investment records of those who were applying to come to New Zealand on business migration visas. That required all of the skill I have and I know Mr Bridges it is not that great but it is enough. It is enough. It has got me this far and I am sure it will see me through my time. 
What are the provisions by which the Inland Revenue Department is going to access these records? They could be in Swahili. A record could be in Ethiopia. It could be in the Middle East. It could be in Korea in India or wherever. So here we have a set of permissive provisions. That— 
Todd McClay 
: If it was in Swahili it would make more sense. 
Dr RAJEN PRASAD 
: The member does not know Swahili? We will send him to East Africa—we will send him there. The member might want to know that it is a language. Mr Todd it is a language and it is used for trade in that particular region as well. Here are provisions in this bill that say records can be kept in any language and in a number of different places. So where are the checks and balances I ask the Minister in the chair? The Minister might want to take a call to explain to us where those particular records will be kept and how might they come to be utilised by our tax authorities here. 
Of course clause 104 also enables this information to be transferred electronically so it makes it even more important that we have those checks and balances. I just assumed that the Finance and Expenditure Committee and the Minister of Revenue have thought about these provisions and I am sure they have. I would just like to know what they are because there are so many languages of trade internationally now yet this is permissive. 
Todd McClay 
: No they’re in favour. 
Dr RAJEN PRASAD 
: It is permissive. Well Mr Todd this says it does not have to be in the English language. 
TODD McCLAY (National—Rotorua) 
: 
 Thank you very much. I just want to clarify an issue for the last speaker Mr Rajen Prasad. It was not that I did not know what Swahili was—of course it is a language. I had suggested to the Committee by way of interjection that if the member was speaking in Swahili his speech would be much more enjoyable because the poor people at home would not understand the rubbish he was talking about. If ever there was a reason for the taxpayer to deserve a refund on an MP’s salary it was that last speech from Mr Prasad. 
So what I would like to say very clearly is that in the Finance and Expenditure Committee when we focused on Part 3 we gave a large amount of time to consider these issues. There were very few submissions on them but we did question our advisers at great length about language what it meant how we needed to use it how the Inland Revenue Department would deal with it and so on and so forth. Actually our advisers showed so much more common sense than has been apparent in the part of the debate that I have been listening to since I got here that I am thankful that we now get to move on. I do note that I think the parties in Parliament are supporting this legislation. It is good that we get to talk this Taxation (Annual Rates Returns Filing and Remedial Matters) Bill out I suppose but let us make some progress. Thank you. 
Hon DAVID PARKER (Labour) 
: 
 I want to ask the Minister of Revenue about clause 106 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill which as I understand it is part of the provisions of the Budget that picked the pockets of paper boys. Remember that line that we had? This is the provision that rather than exempting a certain level of income that could be derived by paper boys and paper girls by babysitters and the like the Government came along and said: “We are so broke as a country we are going to disincentivise young people getting part-time work by taxing them more.” My understanding if I am correct is that clause 106 of the bill is the clause that gives effect to that by saying that instead of the previous exemption there is a limited exemption of up to $200 of income per annum. 
Hon Clayton Cosgrove 
: The Uncle Scrooge clause. 
Hon DAVID PARKER 
: The Uncle Scrooge clause as Mr Cosgrove describes it. 
I would be interested if the Minister could take a call and explain the justification for this and explain why we have become so miserable in New Zealand that the only level of exempt income is limited to $200 per annum. This is in stark contrast to Australia where the first so many thousand dollars of income is not taxable whoever earns it rather than the miserable $200 per annum limit that we have under this bill. We had this Government come into power on the slogan: “Wave goodbye to higher taxes. Not your loved ones.” It was going to close the wage gap with Australia and decrease the number of people moving from New Zealand to Australia. In part that was because it said it was going to reduce the tax burden in New Zealand whereas this bill and this provision in this bill does exactly the opposite. It increases the tax burden on people who are already earning very small amounts of money. I would be pleased if the Minister took the next call and indeed told the Committee that the Government is not going to proceed with that change to the income tax law that effectively increases the taxation of young people who have got their small amounts of earnings often irregular amounts of earnings and who often do not have security of income from week to week because their hours can change and the— 
Hon Clayton Cosgrove 
: The big tax reform. 
Hon DAVID PARKER 
: —big tax reform is going to take more money off them. 
 I would also ask another question following up from what the Hon Clayton Cosgrove asked in respect of when you file returns. My understanding of the provisions in this part of the bill is that you are obliged to disclose if you have received income. If you have not received income then you are not doing anything wrong to say that you have not received income. But if you file a tax return that says that you have not received income when you have that would be an offence against the tax legislation. [ 
Interruption 
] 
One of my colleagues interrupts me and says: “What if you cannot remember?”. Well that would be a matter for the court as to whether it believed you. It would not be for the Minister or for the Prime Minister to pretend to judge a claim by someone as to not being able to remember whether they had received income or not. That would not be a decision for the Inland Revenue Department. It would not accept my word if I pretended that I had not received income even though I had received cheques in an envelope. I do not think I would be believed particularly if I had asked for them or if I had asked for the income to be split into more than one payment. I would think that it would be very unlikely for the Inland Revenue Department to believe me when I said that I had not received income. If I filed a declaration to that effect I think I would be held to account for my declaration. 
Hon Clayton Cosgrove 
: And signed it. 
Hon DAVID PARKER 
: If I had signed a declaration to that effect I would be held to account for it. If I later denied that I was liable for the truthfulness in my declaration because I could not remember I would be doubted. I think that if that were any normal person the Inland Revenue Department would not give them the benefit of the doubt and it would say that that is a question that should be put to a jury rather than the Inland Revenue Department the police or whoever it is that prosecutes these things—rather than them taking the decision as to whether it believes the unbelievable story. 
Dr David Clark 
: What if there were sworn affidavits? 
Hon DAVID PARKER 
: Well if there were sworn affidavits from people who were involved in the payment of those amounts to me and they said I knew I received them then I would expect that that would make it even less likely that I would be believed if I denied that I had received that income. That seems to me to be so obvious that I am surprised to be asked the question. But I can understand why there is a level of doubt about that because that of course is exactly the standard that John Banks and the Prime Minister are expecting us to believe in respect of other aspects of the conduct of affairs in this country. That level of double standard is— 
Hon Clayton Cosgrove 
: Despicable. 
Hon DAVID PARKER 
: —despicable. It is despicable that someone can stand up in this House in respect of other legislation and say that they have no responsibility for a lapse of memory. They do not have to account to Parliament or to others for the lack of credibility. They do not have to respond to the statements by other people that cast into doubt the unbelievable statements that they are making anyway. 
I would ask the Minister to take a call and explain the point of principle that is different in respect of taxation legislation and explain why if I received income and failed to properly declare it for income tax purposes there should be a different standard in respect of income tax from that which is applied to political donations in other parts of the law. We know that different standards are being applied in respect of different areas of the law because we have seen it in respect of the investigations into the Hon John Banks in respect of campaign donations that he received and that the evidence shows pretty clearly he knew he received yet he claimed they were anonymous. If that is permissible in respect of donations for political parties that are meant to be subject to a limit or even when they are not within the limit they are meant to be publicly disclosed why is it that we have a different standard in taxation legislation where people are held to account for the honesty or otherwise of the statements they make as to the receipt of income? 
This is relevant to Part 3 because it is Part 3 that imposes obligations on people to return their levels of income and as Clayton Cosgrove said earlier to keep copies of these documents. If they are submitting them electronically they still have to keep an original copy that bears their signature. Why is that? Because they are held to account for what goes in under their signature. If that is good enough for taxation and if that is good enough for the tax system why is it not good enough for rules that are meant to keep New Zealand free of corruption to keep political operators from being unduly influenced by donations and to keep a level playing field between candidates so that one person cannot cheat on the system by spending more in their election campaign than the nominal limit while someone else complies with the rules? 
One of the ways you do that of course is by having proper disclosure as to the amount of donations. In terms of avoiding corruption and avoiding the allegation that people are effectively selling policy for money they are meant to disclose whether they know who the money is coming from. In respect of the tax system it is clear that you have to make those disclosures. The sorts of excuses that are being used by the Prime Minister John Key and by John Banks in respect of political party donations would not stand the tests in respect of this tax legislation. I ask the Minister to take a call and to explain what is the point of principle that says we should be stricter in respect of our tax rules in the enforcement of electoral declarations. In fact in some ways the declarations are not quite as clear because all you are doing is saying “This is my income.” 
The other declaration that Mr Banks swore— 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I am very pleased to take a call at this point as I had the opportunity in the previous debate but I think it is important to come back to the context for starters because we are talking here about a Government that is failing. It is failing in respect of having the worst economic growth record of any Government in 50 years. There are 50000 New Zealanders leaving annually for Australia there has been a 50 percent increase in unemployment and there are now nearly 50000 more people on benefits. That is because this Government will not tackle the big issues and Part 3 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill is another illustration of that. This part of the bill has more tinkering. 
We have here some positive streamlining. That is the best thing we can find in this bill. We can find no pro-growth tax policy we can find no research and development policy we can find no savings policy in this part of the bill and there are no changes to monetary policy of course. This is a Government that is failing. 
I want to question whether the Government can actually implement the changes. I would be interested if the Minister in the chair the Minister for the Environment would like to take a call on this and say whether the Government can actually implement the changes that it is proposing here in respect of electronic transactions. I raise the question because it was not so long ago—well it is actually over 6 months ago now—that John Key made his Valentine’s promise. John Key’s Valentine’s promise on 14 February of this year was to address the problems with the Inland Revenue Department’s computing system. The Inland Revenue Department’s computing system is not up to scratch. We know that. The Inland Revenue Department has been saying it for a very long time. And we know that tax policy is being held up because the computer systems—and I am quoting the Prime Minister here—cannot actually support radical changes from the Government. The Prime Minister on Valentine’s Day said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” That is what the Prime Minister said. He told reporters that he did not want to be held hostage to a lack of technology. 
Well he is held hostage at this stage because this Government has not addressed the Inland Revenue Department computer system—a computer system that was designed in 1992 and apparently would cost somewhere between $1 billion and $1.5 billion to replace. I find that number implausible in and of itself. It is hard to believe that our computer system would cost that much to replace. We are not the only country in the Western World that has a tax system. 
We have not seen a plan yet from this Government as to how it is going to address these problems so how on earth can it convincingly say that it is going to implement even something like electronic filing? The electronic filing provision here listed retains I notice paper copies as well. I think that is probably because the Government is a bit nervous about whether these electronic transactions will really work. So I would be interested if the Minister in the chair could express some confidence in the ability of the Inland Revenue Department to deliver these changes. 
The other thing that is happening of course as this computer system struggles through is that the Inland Revenue Department is preparing for this new world but customer satisfaction levels are dropping. It is laying off staff around the country—42 people in the last 4 years down my way. It continues to have dropping customer satisfaction because everything is going on the phone. If you have a tax issue it is actually hard to find somebody these days who will service your needs. We all as taxpayers pay for the system but our need for service is not being met. 
There are advantages in having electronic returns so I congratulate the Government on recognising this at last. I guess one of the advantages of being able to put in electronic returns is that you can put them in more immediately. You can write them up straight away. If you are carrying around an iPhone or an iPad I assume you can write up your electronic returns straight away or that will be a provision I hope. The Minister might like to explain that as well and how immediate that is. I assume those forms will be online. You will be able to start filling them out. If you are somebody who perhaps suffers from memory loss if that is an issue that somebody struggles with you could— 
Dr Rajen Prasad 
: You can’t bank on it. 
Dr DAVID CLARK 
: You could not bank on it my colleague says but I hope that it is true that this will facilitate an easier filing of returns for people who struggle with a variety of issues not just memory loss. I was thinking about this as I flew up from Dunedin North the fine electorate that I represent—[ 
Interruption 
] In an aeroplane. Yes that is right. It was not a helicopter and I do remember that very very well. I was thinking about the advantages of electronic returns. 
The other thing that we are seeing as these computer systems struggle is that a range of other problems are starting to impact on the department. We had 70000 calls not answered in the lead-up to the last filing date. We have hundreds— 
Dr Rajen Prasad 
: How many? 
Dr DAVID CLARK 
: Seventy thousand calls unanswered—70000 calls. 
Kris Faafoi 
: Are you sure it wasn’t 50000? 
Dr DAVID CLARK 
: I am sure it was not 50000 Mr Faafoi. It was 70000 calls and I do remember. I do remember. We have hundreds of thousands of unprocessed returns—hundreds of thousands of unprocessed returns—in that department. I am sure we will hear more from my colleagues about returns. We have a system that falls over at crucial times and was declared by the Inland Revenue Department in many of its past briefings to incoming Ministers to be on its last legs. We have no plan but only talk of a $1 billion rebuild. We are not as I say the only country in the Western World with a tax system. 
The other point that I would like the Minister to perhaps address is the rumours that are swirling around about the rebuild of this computer system—presumably the computer system that files these electronic returns. There is a rumour floating around that there is a 1700-page draft report—a 1700-page draft report—on repairing this computer system. We have seen no action from the Government. There has certainly been no public announcement of a plan. 
Hon Clayton Cosgrove 
: It’s called a manual. 
Dr DAVID CLARK 
: It is called a manual—yes it is. But we have seen no public announcement. We have seen no commitment and I wonder whether even this 1700-page draft report—if it exists—will suggest what the next steps might be. Perhaps there will be another draft report. There are some consultants doing very well out of this. My colleague Mr Chris Hipkins pointed out not so long ago just how well the consultants there are doing. After pointing out that a million clients hung up before their calls were answered last year Mr Hipkins drew attention to the more than $125 million that has been spent in the Inland Revenue Department on consultants and contractors. That is unbelievable for a falling level of service which the public of New Zealand are getting sick of and which is simply not able to make the big tax changes that we would like to see: the capital gains tax the research and development tax credits—the things that would actually make our economy work rather than these smoothing gestures— 
Dr Rajen Prasad 
: Rats and mice. 
Dr DAVID CLARK 
: —the rats and mice that we find in Part 3 of this bill. I notice also that clause 131 notes that a taxpayer may apply for financial relief. That financial relief in the face of hardship in paying tax is another sensible clause in this bill. 
So the kind of tinkering that is in here most of it we do not object to. We just think that the really big changes could be addressed. Who knows the financial relief might be useful for somebody who has filed a false tax return who is then forced to repay some money and then whilst paying their debt to society is scratching around for some extra dough. So the clauses that are in this bill do seem sensible. Unfortunately they are only tinkering and they do not get to the heart of the issue. They do not address the real problems in our economy—the big problems—which the National Government will not address because it does not seem to have the wherewithal to address those things that would make our economy function properly. Thank you. 
SUE MORONEY (Labour) 
: 
 I think in order to understand the importance of Part 3 of this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill I actually want to get members of the public to just rewind a bit back to Budget 2012. I think that will help them to understand the importance of Part 3 of this bill. 
Remember Budget time 2012—unemployment soaring economy flat-lining trouble everywhere in New Zealand families under huge pressure and stress and what was the big idea that this Government rolled out? It was taxing paper boys and paper girls up and down the country. That was the big fix and the big idea the Government had back in Budget 2012. That was going to deliver the brighter future according to John Key. People—I am sure when the parents of these paper boys and paper girls saw the Government promise them a brighter future—they never imagined in their wildest dreams that what this Government was up to was to tax their children who were doing jobs after school trying to get just a little bit of pocket money for themselves. 
I do not think that any parent in this country believed that that was what John Key meant when he promised them a brighter future. But here it is in clause 106 of this bill that we are debating here this evening. This is the part of the bill that actually brings in the big idea from this Government. It actually taxes paper boys and paper girls and all of our adolescent children who do a bit of work here and there to get a bit of pocket money. Apparently clause 106 is the provision that brings this in. It is the big idea from National that was going to change the direction and deliver this brighter future that it promised at the last election. 
Of course what we know is that it is a complete and utter joke and that even though this will be passed into law this clause 106 in Part 3 is not going to deliver a brighter future. That is just tinkering around the edges. That is what the Budget was known for. It was known for clause 106 of this bill tinkering around the edges trying to imagine that we would somehow get ourselves a brighter future by taxing adolescents who are doing a bit of work for a bit of extra pocket money going into their families. That is what clause 106 is about. 
But I cannot let the irony of tonight’s debate go by without understanding the irony of debating part by part what the obligations are of ordinary New Zealanders to make sure that when they sign documents they are actually making honest declarations and spelling out as in this part of this bill what they are doing and what they are required to do in order to make sure that they are putting forward information on taxation issues in the appropriate manner. 
How ironic that we are debating the detail of what ordinary New Zealanders are required to do and the implications of when they put their signature to documents what that actually means because that is what is covered in Part 3 and how ironic on the same day that the Prime Minister seems to have a completely different standard for his Ministers. He seems to believe that a signature from someone who is now a Minister in his Government can be put on a document and that that person cannot be held to account for it. Yet here we are in Part 3 of this bill spelling out all the measures by which ordinary New Zealanders are going to be held to account for signatures that they put to documents with regard to their taxation income. 
I thought that actually clause 130 was going to be the one that would ensure that the John Banks fiasco would be uncovered and discovered. It is called “Knowledge offences”. I thought that was going to be the part of this bill that was going to make the Prime Minister see sense over his ducking and diving today over John Banks’ affairs. But no it seems that it is not about actual knowledge offences over the type of return that John Banks signed his name to. It is actually about employers’ superannuation contributions. What it does is it just makes it a bit more explicit that the knowledge offences under the taxation bill— 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I am very happy to take a call on Part 3 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. This is the part of the bill that is about the electronic filing of tax returns or the electronic filing of information. I think that that is a great thing. I file my tax return electronically each year. My accountant prepares it for me but I have to sign it. Before he files it electronically for me I have to sign it and I can tell every member in this House that I actually read it before I sign it. So the accountant may prepare it for me and put all the information together about my income and expenditure and so on but before I sign it and before it is submitted by him electronically I read it and I make sure that all the information in it is absolutely correct. 
I think that it is no unreasonable thing for the Inland Revenue Department to ask New Zealanders to read their tax returns before they are filed electronically. I think that is very reasonable. New Zealanders know that if they provide wrong information deliberately to the Inland Revenue Department the department will come and find them. I tell you that if there is one agency of Government that somebody does not want to be investigated by it is the Inland Revenue Department. Anybody who has been investigated by the Inland Revenue Department—I have the pleasure of saying I have not been one of them—will say that it is a most unpleasant experience to have the department investigating— 
Maggie Barry 
: That’s the whole idea. 
CHRIS HIPKINS 
: “That’s the whole idea.” says Maggie Barry. I agree because people when they are filling out forms and signing them should make sure they are correct except this Government thinks that that rule applies to everyone else but not to it. The Prime Minister this week has said that it is OK for a Minister to sign a return without reading it and knowing that the information in it is false. If somebody did that with their tax return and knowingly filed it electronically and according to the provisions of this piece of legislation the Inland Revenue Department would be all over them. The Inland Revenue Department would not let go. The Inland Revenue Department quite rightly would be all over them. It would go through all of their financial affairs because it can do that. But the Government’s message to New Zealanders is that “That is the standard we expect you to adhere to but we have got a different one for ourselves.” That is the rule according to this National Government. It is absolutely and fundamentally wrong. 
Let us talk through what that means. If somebody is earning for example money in cash and somebody gives them an envelope a brown envelope at a meeting over lunch with a cheque in it for let us say 15000 bucks—so somebody gets 15000 bucks—are they obliged to declare that as their income when they file their tax return? Actually yes I suspect they would be required to declare that when they file their tax return. If they knowingly filed a return that contained false information about the $15000 they received in an envelope while they were having their lunch they would be done for. The Inland Revenue Department would be all over them. But actually the Government—John Key—says that is OK providing nobody prosecutes anybody. Well actually if New Zealanders took $15000 in income and knowingly filed incorrectly with the Inland Revenue Department about that income the Government would be all over them. The Inland Revenue Department the Government’s agent would be all over them. What this Government is saying is that that is the rule for everybody else but not for it. 
The point that my colleague David Clark raised earlier on about the electronic filing system is a very legitimate one. If the Government is going to implement an electronic filing system we need to make sure that it is going to work and that it is going to be robust but also that people who are using it will get the support they need to get. Electronic filing systems do not always work. There can be difficulties with an internet-based system and somebody when they are doing these electronic returns needs to be able to pick up the phone now and then and talk to somebody particularly given that the penalties for getting it wrong are quite high. For somebody filing information with the Inland Revenue Department that is wrong the penalties are quite high. They need to be able to pick up the phone talk to somebody and make sure that they can get it right. If there are a million calls a year where people give up before they even get through to somebody at the Inland Revenue Department that would suggest that the system is not working well. 
Transferring a whole lot of the administrative burden from a call centre to an internet-based system does not necessarily resolve the problem. You still have to have the backup of the call centre if somebody needs to get hold of someone and talk to them and ask them questions. If we think about the massive amount of productive time that is being lost every year by people who are trying to get hold of the Inland Revenue Department and are not able to get through the cost is quite significant. So I think that is something that the department really does need to give some thought to. 
I know that the Inland Revenue Department is going through an upgrade of its computing systems. I am interested—and I am sure we will deal with it when we get to Part 5—in the fact that one of the things this bill does is allow the capital costs of unsuccessful software development to be tax deductible. I am sure that that will not apply to the Inland Revenue Department’s development of its own software if that turns out to be unsuccessful! Given the huge amount of cost that seems to be involved and some of the stories associated with this development of new software for the Inland Revenue Department perhaps it should make it tax deductible although— 
Hon Clayton Cosgrove 
: Would Dotcom software be tax deductible? 
CHRIS HIPKINS 
: Would Kim Dotcom software be tax deductible? Well that is something that I am sure we will talk about when we get to Part 5. I can feel another speech coming on when we get that to part of the legislation. 
To summarise the contribution I want to make to this bill I think electronic filing is a great thing. I think that New Zealanders will welcome the opportunity to file more information with the Inland Revenue Department— 
Hon Clayton Cosgrove 
: If the computer works. 
CHRIS HIPKINS 
: —if the computer works—electronically. I think that is good. It potentially is a great productivity-enhancing measure but the message to all New Zealanders—and we live in the electronic age where New Zealanders do so many things online—is that this is one of the more serious things they will do online so they need to make sure they get it right. This is not just updating your Facebook status or sending a tweet. Filing something electronically with the Inland Revenue Department has quite severe consequences if it is wrong. One or two colleagues have discovered that filing an unwise Facebook status update can get them into hot water as well but it is nothing compared with the hot water they would be in if they filed something incorrectly with the Inland Revenue Department. The department would be all over them. 
Just as the heavy hand of the law should deal with people who knowingly file incorrect returns in other areas so too should that be the case with the Inland Revenue Department. I think it is very concerning that according to this Government according to our own Prime Minister it is OK for people to knowingly file information that is incorrect and to state things in a return that they sign that they know are not true and to then try to claim ignorance when challenged on that. A person filing an incorrect tax return could not claim ignorance. They could not claim that they simply did not know about it. They could not claim that they had not read the return that they signed. That simply would not be an acceptable defence to the Inland Revenue Department and nor should it be. Nor should it be an acceptable defence for elected officials to high public office to try to claim that about the forms they fill in either. The New Zealand public should not be held to a separate standard from that to which we hold the people in the highest office in the land. They should be held to the same standard as every other New Zealander and filing a false return while knowing it is incorrect is unacceptable for anybody in New Zealand to do. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I want to return to clause 106 of this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. I do not want to reiterate what other colleagues have said in respect of this clause—the “Uncle Scrooge” clause. It is the big tax reform this Government has come up with apart from giving the top 10 percent the vast majority of the tax cuts and the lowest on the rung virtually nothing at a cost of 300 million bucks a week in net borrowings which of course it then blames on the global financial crisis but does not admit that it is in direct relation to the tax cut. In the Budget this clause was effectively signalled and is now replicated to be actioned in legislation. The big reform that the Government came up with in tax policy was to flog a few hundred bucks off paper boys and paper girls. Those young people are in jobs that we probably all had. Gerry Brownlee may have been a pizza delivery boy when he was a young fella; I do not know. Simon Bridges I am told had a milk round. But this is the big reform. New Zealanders in the middle of a global economic meltdown placed their confidence in this Government at the last election on the slogan of a brighter future encouraging entrepreneurship and people getting ahead. Then we get to the Budget and we come up with this clause which we are now actioning tonight. 
We had the cycleway. That was going to be a silver bullet. It was a fizzer. There were two jobs according to Chris Tremain—a fish and chip shop and a bike shop in Napier. He could not tell us how many permanent jobs came out of that. That was a fizzer. Then we had the great international financial hub that New Zealand was going to be. That lasted 5 minutes. Then we had mining in national parks and Gerry of course like the earthquake blew apart on that. That lasted 5 minutes. And now we are down to this. 
We have got 120-point plans and more task forces than we have had hot dinners coming out of this Government. But when you drill down with tax legislation what is the big reform in terms of cutting compliance costs or reforming the tax system? What is the big reform the big revenue generator other than flogging off assets to Kiwis who already own them and those overseas interests? They tried that in the 1990s but it did not work. That is the history but they are trying it again. The big reform is to take a couple of hundred bucks off paper boys and paper girls and those in small jobs. 
I have got to say that this is groundbreaking financial and taxation reform from the National Government—groundbreaking thinking! I would like to know— 
Michael Woodhouse 
: I raise a point of order Mr Chairperson. I would just like to point out that the policy that is being described by the member has already been passed into law and is not within the scope of this bill. 
The CHAIRPERSON (Eric Roy) 
: I will take the member’s word for that. 
Hon CLAYTON COSGROVE 
: No you will not because he is a whip. What does he know? 
The CHAIRPERSON (Eric Roy) 
: Order! I am on my feet. The member should not be engaging in some kind of interjection with me. If the member is speaking about clause 106 he should address himself to that or to some part of Part 3 and while he is doing that I shall have a look at the clause that he is talking about. 
Hon CLAYTON COSGROVE 
: With respect I advise you that it is not appropriate to take the word of any member. I could make something up on clause— 
The CHAIRPERSON (Eric Roy) 
: Order! I have ruled. The member should speak about Part 3. 
Hon CLAYTON COSGROVE 
: And I am speaking about Part 3 clause 106. 
Hon Member 
: He makes something up all the time. 
Hon CLAYTON COSGROVE 
: Well you would know. 
Michael Woodhouse 
: I raise a point of order Mr Chairperson. It may assist the Committee if the member could point out which part of clause 106 refers to the taxation of paper boys. 
Hon CLAYTON COSGROVE 
: Speaking to the point of order Mr Chairperson is that a debating point? If it is you should rule on it. I am waiting for you to rule on it. 
The CHAIRPERSON (Eric Roy) 
: Yes I guess that is a debating point. That really was not a point of order so thank you. 
Hon CLAYTON COSGROVE 
: We will carry on where we left off. I appreciate the lack of assistance from the senior whip. 
Michael Woodhouse 
: I raise a point of order Mr Chairperson. Perhaps if you could just assist me. Does this mean that any item that is arguably outside the scope of the bill becomes a debating point; if so what does the Standing Order mean when it talks about speaking to the bill? 
Hon CLAYTON COSGROVE 
: Speaking to the point of order what the member is doing is expressing an opinion about my speech and the content of the bill. He is not the Minister. In fact the Minister of Revenue will be here somewhere but he is not in the chair. 
The CHAIRPERSON (Eric Roy) 
: Order! 
Hon CLAYTON COSGROVE 
: It is for the Minister to make statements on that. Unless the member is taking advice from officials and is going to table some advice it is a debating set of issues that he has raised. We should get on with the debate. 
The CHAIRPERSON (Eric Roy) 
: Look the member justifiably raised a point of order and said the member was outside the scope of the bill. I invited the member to continue while I read the particular point that he was at and that is what I have done. I have actually now read clause 106 and I think the member might be referring to new section 33AA(1)(c) inserted by clause 106 which states: “has total income of $200 or less or derives no schedular payment other than an amount or proportion of an amount for which the Commissioner …”. Is that the section the member was referring to? 
Hon CLAYTON COSGROVE 
: I am reading from a number of them including that one. 
The CHAIRPERSON (Eric Roy) 
: OK so I think he is drawing a wide bow but in the context of the debate thus far he is probably no further away than some other members were. 
Hon CLAYTON COSGROVE 
: I raise a point of order Mr Chairperson. [ 
Interruption 
] This is a point of order. This issue was raised I think prior to the dinner break and post the dinner break for about an hour and a half. No Chair has ruled that it is out of scope. The Minister in the chair has not challenged any speaker except a member decides to have an interpretation of legislation and has interrupted the debate a number of times. That is trifling with the Chair and interrupting speeches and you should deal with it. It is a debating point. 
The CHAIRPERSON (Eric Roy) 
: I will choose whom I deal with. I have told the member that he is inside the scope with regard to everybody else and it is out of order for him to raise the matter in the way he has just done. I ask him to continue with his speech. 
Hon CLAYTON COSGROVE 
: Thank you and can I thank the senior whip for exposing his lack of skill and knowledge about this bill and also thank Maggie Barry. If anybody can talk about grace of course Maggie Barry can. But we will not talk about putting the old tumbleweed back at the back of the garden. 
So where colleagues did we leave off? Where did we leave off? We were talking about the great reform within this bill as reflected in the Budget. What we have seen over the last couple of minutes is that it is the old sort of Captain Mainwaring. Remember the Home Guard the old cold steel? They do not like it up ’em over there. They do not like it highlighted because they are embarrassed about it. But the facts are that that is what they did. That was the sort of big-hit reform that they tried to cover up. 
Where is the reduction in compliance costs plan in this legislation? We have heard about the computer system and all sorts of reforms that are dependent on electronic media within the Inland Revenue Department but there is no money to actually action it is there? No. Oh they are all very silent now. Even the tumbleweed is quite silent. They are all very silent now. 
Hon David Carter 
: They’re bored. 
Hon CLAYTON COSGROVE 
: Well people are not bored with Mr Carter—not down my way. We are looking forward to doing him slowly. This is what the big reform was in this legislation. It is mean-spirited and it actually does not contribute to New Zealand’s economic growth one iota but simply highlights the lack of ideas. They have got lots of plans and no implementation lots of task forces but no implementation and they are out of ideas. The only idea they have got for generating a bit of money in the economy is to flog off the family silver—and once it has gone it has gone—and take a few dollars under clause 106 from the odd paper boy. So the economic integrity is in tatters. When we talk about Mr Banks and signatures if we refer to clause 104 as we have done their political and moral integrity is in tatters. They have no ideas and they have no plan apart from the little 200 bucks paper boy tax. 
JONATHAN YOUNG (National—New Plymouth) 
: 
 I move  
That the question be now put 
. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 98 in the name of the Hon Peter Dunne to Part 3 be agreed to. 
Amendments agreed to. 
Part 3 as amended agreed to. 
Part 4 Amendments to Goods and Services Tax Act 1985 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 Part 4 concerns the amendments to the Goods and Services Tax Act 1985. Fresh in our minds of course for those of us on this side of the Chamber who have constituents struggling at this stage in their lives with the rising costs of living are the changes that this Government made in 2010 in the so-called tax switch where 44 percent of the value of the tax cuts went to the top 10 percent of earners and the bottom 20 percent of earners got just 2 percent of the value of the tax cuts. That was some switch. Any benefit that those who were on low and middle incomes got was very quickly swallowed up in GST and then in subsequent rises in the cost of living. 
This change in GST has really affected us as a society. Recently there was a report that made it clear that we are becoming more and more unequal. In fact New Zealand is now more unequal than it has ever been in its history and that is not something to be proud of. When we have an unequal society we have wasted potential. We have people right now in poverty falling between the cracks. We have got to ask: was that tax reform the sensible tax reform that should have happened? Is there any better tax reform proposed in this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill that would sort out that problem of widening disparities and the poverty that is eventuating? There is wasted talent amongst our poor people who are not able to put nutritious food on their table in some cases and who are not able to afford the school books school shoes and raincoats that they need for their kids. They have kids getting preventable illnesses because they are living in cold damp and overcrowded homes. Those preventable costs are borne by all taxpayers. They are borne by high-earning taxpayers and by low-earning taxpayers. 
 Really there is a huge social shame associated with being poor—unnecessarily and because of this Government—and also with those health effects that go with being poor. Those people who are missing out as a consequence of not having the resources they should have will also not become the taxpayers of the future in the way that they could. I put it that if those people were given the full resources to develop as young children—and we know that early intervention has high rewards—then those children would grow up to be high-contributing taxpayers. That is why we need a tax system that is fair where everyone pays their fair share and where those at the top pay their fair share. We know that only 50 percent of the highest earners in New Zealand are on the top tax rate. We know that there is something not fair there and that is part of the reason we need tax reform. We also know that sometimes people do not meet their tax requirements for a variety of reasons and we deplore on this side of the Chamber those who do not fill out correct returns. That has been the topic of much debate this evening. 
I want to address a couple of specific clauses in Part 4. One clause is clause 151B the keeping of records and if we take the first section there in section 75(3D) the words “name address and registration number” are replaced by “name and address and registration number or tax file number as applicable.” This is the kind of change we see in this bill. We see— 
Hon Clayton Cosgrove 
: Radical! 
Dr DAVID CLARK 
: —radical reform—adding the words “and” and “or tax file number as applicable”. This kind of tax reform is you know hard to oppose—it is hard to oppose. I see that. Politically that might be a strategy from the Government of the day to put up tax reform where the words “and” and the words “or tax file number as applicable” are added in to the legislation because Oppositions cannot get up much steam against that stuff. But what it also reveals is a Government that is bereft of ideas and a Government that is not able to implement the real change that is needed to get New Zealand’s economy back on a track that would grow the pie for all New Zealanders. That is what we on this side of the House believe should be happening. We know that our trading partners over recent years China and Australia have been going gangbusters and we know that during that time real wages in New Zealand have dropped. That is almost unbelievable. What is going to happen when those economies falter? New Zealand is going backwards already. Will we go back further? So we see this tinkering in the legislation where we should see more adventurous change. 
Another clause that leapt out at me when I was reading through was the retrospective GST exemption in clause 135 of the bill for “the Auckland Council Independent Maori Statutory [written Statu-tory] Board established by section 81 of the Local Government (Auckland Council) Act 2009”. It was with some relief that I saw that hyphen in there. If it had been an “E” there the clause may have been restricted—perhaps some might jest—to members of the Maori Party to the “Maori Statue Tories” as we have perhaps seen them acting in the recent debates on assets sales. I am sure my colleague Rino Tirikatene might have something further to say on that as the debate proceeds. 
This kind of change—again a small change—is something that is difficult to oppose because in and of itself it is worthy but it really is tinkering and we are tinkering here with little bits of GST here and there. We are not expecting to see a step change in the economy as a result of these changes to the GST treatment. It would be great if we had a Government that did have a vision and that did really want to make change that would benefit our economy and that would really get our economy moving with pro-growth tax reform and policy that promoted savings perhaps through a universal KiwiSaver. We know that this Government has had more positions on KiwiSaver than the Kama Sutra. We wish that this Government would adopt a position that actually was beneficial for all New Zealanders not just a position that was all over the place—all over the place. It would be a pleasure I am sure if we saw a positive position adopted. Variety is not always the spice of life as we know in the area of savings policy. 
This Government is bereft of these changes and of direction in terms of GST and in terms of what kinds of changes could be made more broadly and that is why it is the Government that has the worst growth record of any Government in the last 50 years in New Zealand. That is why 50000 Australians are leaving annually to make their permanent home in Australia. 
Hon Clayton Cosgrove 
: New Zealanders. 
Dr DAVID CLARK 
: Sorry—New Zealanders are leaving. I was saying Australians are leaving! It has not quite got to that. They are leaving New Zealand too because this Government is bereft of ideas. One thousand people we know left Dunedin my hometown last year. They permanently left Dunedin for Australia because they saw greater opportunities there. I am assured it had nothing to do with the local National member of Parliament. It is because the opportunities were better abroad in general under the National Government’s term in office. 
It is also true that this Government is failing because perhaps it has not addressed the Inland Revenue Department system which is failing. John Key has pointed out that it is not working and that it needs to be upgraded because the Government is being held to ransom effectively through having a computing system that is out of date and not able to adopt the big changes that would be needed to get our economy back on track. It is perhaps symptomatic of a Government that really is giving up it appears and that is not good enough. We think this Government is letting people down and that is what we are hearing out on the street. People are telling me those people who did support John Key—and I find that a little challenging—that they supported John Key because they were promised a brighter future but now they are disappointed because it is not being delivered. In Dunedin we are seeing jobs being cut left right and centre. We are seeing our economy slow down and these people are disappointed. That is the word on their lips. They are disappointed with what this Government has not offered them—has not offered them. And that is why they are leaving New Zealand at a rate of 1000 people a week for Australia. 
We will come I am sure to more about the software development. It is not touched on in this part of the bill so I will leave that conversation for the next part of the bill but suffice to say that the kind of change that we see in section 151B around the keeping of records is symptomatic of a Government bereft of ideas and bereft of direction. It is now reduced to adding the words “and” and “or tax file number as applicable”. That is not real change. That is not going to improve our economy. 
Hon DAVID PARKER (Labour) 
: 
 I want to refer to clause 137 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill which changes the way in which the Inland Revenue Department gathers more tax in respect of late payments. Currently when someone does not pay an account on time and the person to whom the money is owed adds a late-payment charge that charge does not incur GST because it is in the nature of an interest payment. It is effectively a late-payment fee which is a little bit like interest. So the predominant view within the accounting community has been that it is not a taxable good or service; it is a financial service that is zero-rated for GST purposes. Clause 137 changes that. It says that for the first time the Inland Revenue Department is going to be pinging the late-payment fee and saying “Oh that’s a GST-able activity.” This is going to be causing all sorts of complexity for people in business. All of a sudden those— 
Paul Goldsmith 
: Not as much as GST off the fruit and vegetables. 
Hon DAVID PARKER 
: Not as much as GST off fresh fruit and vegetables? Well actually I think you might be wrong there because I think the incidence and the irregularity of this will be far more pervasive than GST off fresh fruit and vegetables which would have affected supermarkets in the main. But in any event let us return to the point here. If that was wrong two wrongs do not make a right. Mr Goldsmith saying that would introduce further complexity into the tax code is rubbish. We are increasing complexity and compliance costs here. 
You know if you have let us say a $100 account and there is a 2 percent fee for paying it late that is $2. Do you know that every one of those people who collects that extra $2 is now going to have to adjust their future tax returns and include GST on the $2 financial penalty that they are charging someone who pays their account late? Every person who pays the $2 late-payment fee in theory if they are GST-registered—and some of the people in the gallery will understand this point even if the National Party people on the other side do not—is going to be able to claim a GST input credit in respect of that $2 payment. What a nonsense! This is not a good or service; this is a charge being made for late payment which is tantamount to an interest payment. In fact the department often calls it that. 
What did we hear in submissions? We had the accounting fraternity coming along and saying that this was wrong in principle. The accountants came along and said “What’s this Government up to? This looks like a tax grab.” It is not grounded in the principle that underlies the tax Act—the Goods and Services Tax Act—which is that financial services are not GST-able. So the Government is ignoring that basic prohibition on charging GST on financial services and saying that in respect of the late-payment fee that you are effectively charged in lieu of interest for paying an account late—they call it a penalty fee but it is essentially an interest charge—it is now GST-able. Where is the principle Minister Guy? Stand up and defend that principle. Stand up and explain why it is wrong or why it is right. The accountants said it breaches the principle that underlies the Goods and Services Tax Act. Why is it that we are proceeding with clause 137 of this bill which not only breaches that principle but is going to increase the compliance costs of businesses? They will have to be accounting for that little penalty as a GST-able supply and if they are paying it they are going to have to have a separate transaction that claims back the GST in a way that they cannot do for interest. 
Dr David Clark 
: What about early-payment discounts? Do they apply to them? 
Hon DAVID PARKER 
: Well that is interesting. Early-payment discounts—I am not sure Mr Clark. I do not know the answer to that but I think we should get the Minister to address that question as well. 
New section 5(25) inserted by clause 137 which sits in Part 4 of the bill states: “For the purposes of this Act an amount charged”—I am reading out the relevant provisions—“for the late payment of an account is treated as being consideration for a supply of services in the course or furtherance of a taxable activity whether the amount is described as a fee penalty or other charge.” So it might be interest it might be called interest it might in fact be a late-payment charge that is tantamount to interest and both the supplier and the purchaser may agree that that is the reality of the transaction but this legislation says that no black is white. It says that it might be that in reality but it is going to deem it to be otherwise—deem it to be otherwise. There is no principle that lies behind this particular clause in the bill. I want the Minister in the chair to stand up and explain why it is that the accountants are wrong and the Government thinks it is right. Why is it that what is essentially an interest charge which should not attract GST is being deemed to be a supply of goods or services when in actual fact it is a late-payment penalty tantamount to interest? If it is a late-payment penalty tantamount to interest it should be either zero rated or one way or the other outside the GST consequences of this provision. 
If we look at some of the other provisions in respect of Part 4 there are some other areas that I would like clarification on in respect of the zero rating of goods. There is a new section 11(8D) inserted by clause 139B that states: “For the purposes of the zero-rating of land rules—(a) a supply that is an assignment or surrender of an interest in land is a supply chargeable with tax at 0%:” but it is not if “the supply is made periodically;”. We also had submissions about this about what this is going to do in terms of the effect on the cost of rent-to-buy options. This is going to drive up the cost of low-cost housing in examples where people are getting an option to buy under which if they exercise it they can credit towards some of their purchase price under their purchase contract some of the payments that they have made as a tenant in the meantime. 
We had property developers saying that this change in provision here is going to increase the cost of housing because irrespective of whether the option is exercised the developers are going to have to pay GST on the transaction before it is exercised. The purchasers may never exercise this option but because they have the potential to credit some of their rental payments towards the purchase price if the option is exercised the developers are being deemed to be making a supply before the option is exercised. These submitters came along and pointed out that this is going to considerably increase the cost of their subdivisions. From memory the developer who was giving us this advice was from the Minister in the chair’s electorate Otaki so he might be interested in this. They were saying that this was going to increase their effective cost despite the fact that the option might not be exercised. The effect of this is that because they have to return GST at the start they have the carrying cost of that GST payment that is returned to the Government they then have to reflect that cost on to the person who may exercise the option or may not under the rent-to-buy scheme that increases the effective cost to the developer and therefore that cost is passed on to the low-income purchaser which is therefore increasing the cost of housing in New Zealand. 
It is another unprincipled amendment as I understand it according to the submission that we had to the Finance and Expenditure Committee that I would like the Minister to explain. The more important one of them in terms of the number of people affected is this penalty payment now being deemed to be a GST-able supply rather than an interest penalty. I would like to hear from the Minister as to what justification there is for departing from the underlying philosophy of the original Goods and Services Tax Act which is that financial services are zero rated—do not attract GST. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I want to pick up where my colleague David Parker left off— 
Maggie Barry 
: God it’s like Clayton’s greatest hits—he’s always on his feet. 
Hon CLAYTON COSGROVE 
: —sorry was there a funny noise over there—and that is in respect of the— 
Dr Rajen Prasad 
: Chattering classes. 
Hon CLAYTON COSGROVE 
: Yes the chattering classes. Sorry it was that gracious member Maggie Barry I forgot—the gracious member. What I would like to ask the Minister in the chair the Hon Nathan Guy is this. I could not find—it may exist—in the regulatory impact statement or in the report back any quantification of the saving in compliance costs in both the parts and clauses that we have already processed and in Part 4 particularly clause 137 which I think was the clause that Mr Parker was referring to. Under Mr Parker’s argument—I believe he is correct—actually against accounting principle and advice the late payment even a minor late payment by a small to medium sized enterprise or business will incur GST. So on that basis that is going to be a compliance cost for small business. 
I would like to ask the Minister—he might like to interrupt me and take a call—where in the legislation or the regulatory impact statement there is a quantification of the compliance costs that will be saved from having this piece of legislation. Is there an estimate? We are told— 
Hon David Parker 
: The fiscal cost to small business. 
Hon CLAYTON COSGROVE 
: And what is the fiscal cost of clause 137 and other clauses to small business? 
It may be and I would also like an answer to this that the Minister for Small Business the Hon John Banks has provided a report a Cabinet paper or whatever to this Minister on the issue of compliance costs because of course the Minister for Small Business has the Small Business Advisory Group or task force—whatever it was called; we set it up when we were in Government—and part of that group’s mandate is to recommend to the Hon John Banks the Minister for Small Business where savings can be made and compliance costs reduced. Given that we now have a proposition before us in clause 137 that against accounting principles against private sector accounting advice and against advice that said that late payment of penalties should be zero-rated we now have a GST impost on that. So can the Minister tell us one how much this bill will save small to medium sized enterprises; two can he quantify it; and three what is the negative fiscal impact on small to medium sized enterprises of clause 137? 
Would Minister Guy like to proffer an answer? I will let him finish his glass of water. No. Silence—silence. So either the Minister does not know—and hey nobody knows everything except Maggie Barry—or the Minister could take some advice. He could turn to his right and ask his officials. 
In the regulatory impact statements and there are a number of them—a whole host of them—there does not appear to be any attempt to quantify what the nature is of the saving in compliance costs that this legislation will render unto small to medium sized enterprises or business as a whole. 
Hon David Parker 
: It increases them. 
Hon CLAYTON COSGROVE 
: My colleague makes the point. Of course that we now know and we have received no argument to the contrary from the chief whip who in his own lifetime and in this Chamber in the last hour is the resident expert on this legislation. So if the Minister does not know could Maggie Barry John Hayes or the chief whip tell us how much increase in compliance costs clause 137 will have on small— 
Michael Woodhouse 
: None. 
Hon CLAYTON COSGROVE 
: None? None. Oh none he says. Well if that is the case could the Minister with his officials concur? Is there any evidence? Or is this another one of the chief whip’s attempts? He attempted about half an hour ago to wax eloquent and was wrong on the nature of this bill in Part 3. So now we are going to rely on and every small to medium sized enterprise in the country is going to hang on the word of the chief Government whip that there will be no increase in compliance costs for your small business or your medium sized businesses—none. 
Dr David Clark 
: He’s pitching to be Minister for Small Business. 
Hon CLAYTON COSGROVE 
: Maybe he is pitching to be Minister for Small Business that is true. Mr Woodhouse might well be. There could well be—I do not know I cannot see into the future—a vacancy opening up in that portfolio real quick. It will be real quick I suspect. So all we have got tonight is Mr Woodhouse the chief Government whip who is not the Minister and who does not have access to the advice. Every small to medium sized enterprise in the land can rest easy because Mr Woodhouse has said that there is no increase in compliance costs from either clause 137 or this legislation. So I invite colleagues especially those from Dunedin to write that quote of Mr Woodhouse’s down etch that into the memory because that will come back to haunt him. 
Michael Woodhouse 
: I look forward to the haunting. 
Hon CLAYTON COSGROVE 
: He looks forward to it he says. Well so do we because we have had no report from the Minister for Small Business—if there is one that exists. 
I know Mr Banks is a tad preoccupied with other matters and in fairness may not have been able to sign off said report from the Small Business Advisory Group. He may not have remembered to sign it off. He may not have remembered to ask. He may not have remembered that he does have a Small Business Advisory Group. He may have signed it—[ 
Interruption 
] Well indeed. He may have signed off the advice from the Small Business Advisory Group and it could well be wrong. Therefore the Minister in the chair may have refused to have read it in case maybe it was wrong but he will take Mr Banks’ word for it that all is well in small to medium sized enterprise land. So every small to medium sized enterprise in New Zealand will hang on the word of the chief Government whip that this legislation and clause 137 will in no way increase their compliance costs. 
Hon David Parker 
: That must be wrong. 
Hon CLAYTON COSGROVE 
: And that must be wrong. But I know that they will all be sleeping easy in their beds tonight and as they awake tomorrow morning and proceed to the computer the ledger or the journal to do their tax they will know that this change—against accounting advice against accounting principle—will in no way impinge on their fiscal position or on the hours they spend doing their tax return. It will in no way complicate their entrepreneurial lives one iota. 
Well all I would like from the Minister in the chair—and I see it is now the Minister of Commerce Mr Foss who is probably far more qualified than the last two invisible folks we have had as Ministers in the chair Amy Adams and Nathan Guy—is that maybe he could turn to his officials and actually ask and verify or quantify for us the compliance impact of this clause. We will try again shall we? Would the Minister like to answer the question? No. The silence is deafening. The silence is deafening. 
So we are paying these guys a quarter of a million bucks to sit in a chair so that he can do the crossword or sudoku or whatever it is. A quarter of a million dollars to sit there and throughout this taxation debate which has gone on since about 5.30 I do not believe that there has been one call apart from the initial call from Peter Dunne from any Minister to answer any of the questions on this legislation. There have been a lot of interjections—a lot of interjections—and a bit of banter and a bit of fun from the other side but not one answer to any question. 
Although colleagues I did make a breakthrough. Peter Dunne was in the chair and I asked him whether I could ask a question of the officials. The officials gave me a very diligent answer. I am gratified for that. But the officials I wager are not sitting there on a quarter-of-a-million-buck salary with a warrant with a ministerial office and with a BMW to boot. 
So the question is if the Minister is not prepared to answer any questions what is he here for? Could we give him a night off? Could he take an early shower? Maybe it would be a bit more productive. There have been serious issues raised throughout this legislation. Maybe he could go and have a wee lie-down and a wee kip and a nice little tot of whisky and that would be far more productive than sitting here pretending to be sort of a granite statue. Or maybe he could just stand up and say “I am not prepared to answer any questions.” or “We didn’t answer any on Parts 1 2 3 or 4 and we will not answer any on Part 5 so give up.” We will not give up but that would tell the New Zealand people exactly what they are paying him a quarter of a million bucks for: to do his crossword have a look at tomorrow’s menu or the breakfast menu or whatever it is or work out the diet— 
Dr Rajen Prasad 
: Shopping list. 
Hon CLAYTON COSGROVE 
: —or work out the shopping list. 
This is actually serious stuff—serious stuff. I have been a small-business person. A very limited small business it was and reasonably successful but pretty limited. I had the luxury and the resources to put all the receipts into a briefcase hand it to the accountant and say: “Can you untangle spaghetti junction and make sure I comply with my obligations?”. The truth is that for most small to medium sized enterprises it is the other half—either the husband or the wife—who sits there at night under dim light doing the Government’s work for it working out the GST the provisional tax and all these things. I would have thought that we could do something in this legislation to give them back a couple of minutes of their life—maybe an hour—because if you put a dollar rate on that a dollar value on how many hours they spend behind the desk as opposed to in the workshop or behind the counter growing the business that is actually a real cost to a small business. They cannot charge out their hourly rate to do the Government’s work for it. They have just got to do it. They have just got to eat it and take it. So I would have thought that at the very least they require some sort of basic assurance or explanation. 
Mr Goldsmith has written a few books on this sort of thing I suspect. He might be able to give us some assurance. Somebody from the Finance and Expenditure Committee—Mr Hayes I am sure who is a resident expert on many things might be able to give us an assurance in respect of compliance costs and fiscal impact. Maggie Barry? No. We will move on. So they are the questions before the Minister. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to continue this debate on the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill because it is shaping into quite an interesting debate. I personally find it to be quite shocking that the Minister in the chair the Minister of Commerce has not taken a call yet on this matter. It is consistent again with the issue of the paper boy tax. I want to draw a parallel here because there is a pattern emerging in this legislation. I have said many favourable things about this legislation. I have said that there is little to disagree with. I have been appalled at the level of tinkering as opposed to real change but I have said on many occasions through this debate that it is hard to oppose the Government on much of this because a lot of it is common sense. 
Well here we have another example as my colleagues have pointed out of additional compliance costs on business. It seems that this Government truly does not like small business. This Government increases red tape on small business. The report we had in respect of the paper boy tax—the legislation that was more comprehensively dealt with earlier—made the point that there was expected to be increased compliance costs for many businesses. We are talking here about people who have cleaning jobs in schools for a few hours a week and do not earn much money. Businesses are now expected to keep their tax affairs close at hand and monitor them and likewise in this we are talking about the registration requirement for GST and penalty payment in respect of late payments. 
 Here there is a clear parallel. There is increased compliance costs on business. The interesting point is not just the increased compliance costs that National seems to be putting on business. National is also at the same time reducing compliance costs in some other parallel areas. So it is actually increasing the grey economy. It looks like National is trying to increase compliance on some businesses—it is not clear which or why—and there is a cost in that but it is also encouraging people to avoid paying tax. 
In the case of the paper boy tax we saw that those who had home lawnmowing jobs babysitting or other similar jobs where there was not a record of their payment on an electronic system were exempt from the same tax that those who were on a system were expected to pay. So we have a growing grey economy and an encouragement for people not to be registered with the tax system. Likewise here what the accountants said at the Finance and Expenditure Committee—and I recall that Mr Parker raised the issue of what happens with an early payment discount—in their advice as I recall it was that in fact GST will not be charged in respect of an early payment discount. 
So here you have an early payment discount not being charged for GST but then you have late-payment penalties being charged for GST. What do you think businesses are going to do? They are going to shift their model to avoid this unnecessary—as they will see it—additional burden of compliance that the Government is putting on through this legislation that we are passing through the Committee right now. Some will get trapped by it and some will have additional compliance costs. This is just a higgledy-piggledy mess in terms of this particular clause in the bill. It has not been well-thought-through. We have got early payment discounts on the one hand for businesses that change their paperwork so basically the Government is encouraging businesses to shuffle their paper. Then we have late payments attracting a GST penalty and extra compliance costs. 
We can see the parallel with the paper boy tax where there was a stingy tax grab from those who are on systems where the tax is carefully measured out and encouragement for people to have businesses where they are private contractors working in the grey economy and are therefore rewarded for that behaviour in future. It all adds to a pattern obviously of a Government that does not like business. 
The other point that I mentioned earlier on in respect of clause 151B “Keeping of records” was the kind of tinkering approach. There is a similar one in clause 150. This is the level of interest in this legislation. We see that it is a broadening provision so it is hard to oppose in this respect. I move on from the appalling encouragement of the grey economy in the previous clause but clause 150(1) says: “In section 55(1)(a)(iii) ‘multi-rate PIE’ is replaced by ‘multi-rate PIE or a look-through company’.” Again that is a worthy change probably and I would suspect that we are broadening the tax base a little bit. We are blocking the odd loophole here and there but that is effectively unpicked by the changes in clause 137 where we have actually got a new loophole being created at the time. We are creating a loophole clause and why would you do that? 
Hon Clayton Cosgrove 
: It’s a “John Banks clause” 
Dr DAVID CLARK 
: My colleague calls out that it is a “John Banks clause” and he may have a point. We actually see illustrations very clearly before us of why the law needs to be tightened. Indeed in respect of local campaigning and local elections the donations law definitely needs to be tightened up. I do not think there is much doubt about that. If we needed an illustration of that we have had one today that is playing out slowly and painfully as the Prime Minister tries to excuse one of his Ministers from his so-called high ethical standards by way—I will come back to the point—of excusing that Minister for having not read a report. You can see that what has been happening there is an encouragement of loophole behaviour an encouragement to look at a particular piece of law and look for the ways out. That is not a healthy way to have a democracy running. 
What we need if we want our economy really to get back on track is big proper change that will actually be a gear change for our economy. We have had this tinkering approach from the Government for the 4 years that it has been here. We have seen recently that the median wage has dropped 3 percent. The median wage has dropped 3 percent. This is ridiculous. We have seen the minimum wage dropping in real terms we see costs going up and we see people falling between the cracks. This is not a Government that is making big change; it is tinkering around with GST in this part. It is blocking a few loopholes but at the same time it is creating new loopholes. 
We could be spending our time here better by looking at things like pro-growth tax policy which would really encourage our economy to get ahead and encourage money to flow towards businesses—rather than towards the activities of compliance as we see in Part 4 of the legislation—and towards actually getting on with smart investment decisions that would gear up our economy and help it to succeed in conditions that up until now have been better than for most people. The Labour Government left many years of surpluses. Our trading partners— 
Hon Clayton Cosgrove 
: Nine years. 
Dr DAVID CLARK 
: Nine years of surpluses Mr Cosgrove reminds me—9 years of surpluses under the Labour Government. The economies of our trading partners China and Australia our main trading partners have been going well yet in New Zealand our economy is going backwards. It is because the big changes are not being contemplated in legislation like this. 
I have talked before in respect of a previous part of this bill about the excuses that might be made for change not happening in respect of the Inland Revenue Department computer system which is struggling and limping along. It is able to deal with small changes that close the odd loophole here and there and as we are seeing now open the odd loophole. It closes one with one hand and opens one with the other. But we are not seeing the really big changes and that is because the Inland Revenue Department computer system we are told is not up to it. Those big changes that are needed in the New Zealand economy cannot actually be made because we do not have a computer system capable of dealing with really big changes. 
That is why the Prime Minister on Valentine’s Day this year made his Valentine’s Day promise to address the Inland Revenue Department computer problems. He said that we should not be held hostage in terms of Government policy by an outdated computer system. But we have not yet seen the evidence that anything has been done about that. We have not seen a policy announcement or a timetable as to when that computer system will be upgraded or when it will be able to make the really big changes that we need as a country to have a modern economy that can get ahead. 
We know that Australia and our other trading partners have for example a capital gains tax which would push money towards the productive sector to support our export industries. We need export-led growth as a country. But we have in National opposite a party of “cannot” a party that says “no that’s too hard.” a party that refuses to make the big changes necessary and a party that is merely closing one loophole with one hand and opening another with the other hand. 
JOHN HAYES (National—Wairarapa) 
: 
 I move  
That the question be now put 
. 
Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman) 
: 
 I have come into the House to listen to this debate. I guess taxation for the National Party has always been really important. The National Party has focused a lot on it in its campaigning saying that lower taxes are nirvana and higher taxes are outrageous and will cripple the economy. How then can National bring into this House a bill that increases taxation by 50 percent? This bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill increases the KiwiSaver default contribution by 50 percent—from 2 percent to 3 percent. Is that a 50 percent increase? Yes. Is that going to cripple the economy? Well on the basis of arguments we have heard in this House for years from the National Party any increase in taxation will cripple the economy. That is what it says. That is why—[ 
Interruption 
] Part 2. That is why—[ 
Interruption 
] Part 4. Part 4. That is why— 
The CHAIRPERSON (Lindsay Tisch) 
: Order! We are actually on Part 4. Some of the things you have been talking about are in Part 5. [ 
Interruption 
] I am giving the member the opportunity. Part 4. 
Hon DAMIEN O’CONNOR 
: Thank you very much. It is about GST and I appreciate the Chairman’s guidance on that. I will stick to the issue around GST and the one of late-payment fees. 
I guess the issue is that this is the party—the great party of National—that wants to slash all taxes because that is going to provide a way forward. So what we have— 
Dr David Clark 
: It’s a tax grab. 
Hon DAMIEN O’CONNOR 
: It is a tax grab all right. So we are now going to have GST on late-payment fees. Do we pay GST on fines? When I get a parking fine do I pay GST on that? 
Hon Clayton Cosgrove 
: Or a speeding fine. 
Hon DAMIEN O’CONNOR 
: A speeding fine no. I have had the odd one of those. But the question is do we pay GST on fines? That is not a late-payment fee; it is a late parking fee. 
John Hayes 
: It’s a service. 
Hon DAMIEN O’CONNOR 
: It is a service. Oh you see—GST. The question is that if we are going to place GST on late-payment fees which most people would see as a penalty or a fine— 
Hon Clayton Cosgrove 
: Against accounting advice. 
Hon DAMIEN O’CONNOR 
: That is right—against accounting advice against all the advice to the Government. If we are going to start charging GST there then will the Government have in this House a piece of legislation to put GST on parking fines or on fines imposed by any part of the court system? I am guessing that that would open the way for some interesting constitutional issues. The Government could be honest and say that it is just increasing the fine but what part of that fine would then come back into the GST pot? If the accounting advice on this change to the legislation is that it should not occur then I am guessing that maybe the Government is not going to move on fines. But we want and I think most New Zealanders expect some kind of consistency in legislation. 
Hon Clayton Cosgrove 
: That’d be too much to ask from this mob. 
Hon DAMIEN O’CONNOR 
: Well it might be. On one hand the Government has championed the lowering of taxation on its mates. That is if you own $100000. If you earn high incomes we have to cut—and of course the GST argument the GST that this Government through this change is now going to impose on late payment fees that extra GST is just like the increase in the GST charge it put across the whole economy. It put it across the whole economy but did not mention it though. I guess the question that we must ask of the Minister is if this is going through against good accounting advice what else has the Government got in store for people? The one thing that it has consistently done is made it easier for people at the top who spend a lower portion of their income on GST-liable goods and made it harder at the bottom for the average New Zealander who spends the vast majority of all their income on GST-liable goods. They do not have much opportunity to move into the financial sector or to spend their money offshore because most of them are struggling to survive. 
This is in my view just another odd proposal by the Government. I am advised by my colleagues that it has been advised against by the accountancy industry and the Government is determined to push through with this in the same ridiculous idiotic way that it is pushing ahead with its asset sales. The consistency of that is that we have good advice that these are both bad things to do. We have professional advice— 
Hon Clayton Cosgrove 
: History proves you right. 
Hon DAMIEN O’CONNOR 
: History absolutely proves us right. Clearly there are no students of history over there. In spite of that advice that GST on late-payment fees is not good accounting practice and selling State assets is not good economic practice why is it that this National Government partnered by the ACT Party partnered by National’s mate John Banks is determined to push ahead with stupid things where the advice it has received from professional people is that it should not happen? Well I guess people will make their own conclusions hopefully in 2 years’ time. I am happy to take— 
Dr David Clark 
: Hopefully sooner. 
Hon DAMIEN O’CONNOR 
: Sooner? There is the opportunity and those members should be very aware of that. That is right. 
Hon Clayton Cosgrove 
: “Banksie” will be out to grass. 
Hon DAMIEN O’CONNOR 
: Sure he will be. What kind of animal eats grass? No we cannot say that. 
This is just one component of this bill here that clearly exposes—and I will have the opportunity later on to talk about the increase in taxation at a rate of 50 percent—that the imposition of GST on late-payment fees does raise the possibility that we will have GST imposed next on parking fines on speeding fines or on any kind of penalty that can be imposed on anyone. The question must be around the fee that the National Government imposed on people in the courts. What was that fee? The $50 fee is it or something—it has got a standard fee on everyone going through. 
Dr Rajen Prasad 
: Victims of crime. 
Hon DAMIEN O’CONNOR 
: Victims of crime that is right. Will there be a GST component to that payment? 
Dr Rajen Prasad 
: The Minister will tell us. 
Hon DAMIEN O’CONNOR 
: The Minister perhaps will hop up and tell us that. No. There is silence. OK. 
The thing that people expect of Parliament as I have said before is consistency and fair and reasonable law. 
Hon Clayton Cosgrove 
: Oh he’s consistently quiet the Minister. 
Hon DAMIEN O’CONNOR 
: Consistently quiet. Consistently inconsistent would be the way I would put it. The only thing we do know is that if you are poor and you are paying these things you are going to pay more under the National Government and if you are wealthy and you can get out of paying them you will not. So late-payment fees will generally be imposed upon people who struggle to pay their bills. They struggle to pay their bills for whatever reasons but mainly because they do not have enough income to cover all their costs and there are hundreds of thousands of New Zealanders like that. We have got the level of child poverty in this country. What will this additional GST charge do for those people who are already on the breadline or who are in fact below it? 
In summary this is just another Tory piece of legislation that makes it harder for people at the bottom and makes it easier for people at the top. Thank you. 
MAGGIE BARRY (National—North Shore) 
: 
 I move  
That the question be now put 
. 
The CHAIRPERSON (Lindsay Tisch) 
: I will hear from Clayton Cosgrove. 
Hon CLAYTON COSGROVE (Labour) 
: 
 Thank you Mr Chair and it is great to see you this evening. We have missed you. I would like to turn to another groundbreaking clause within this legislation. It is another huge reform from the National Government which I believe my colleague David Clark in his opening address referred to. This is what we are down to. We are down to minutiae. The Government is out of ideas—have another drink. It is out of ideas and out of strategies. So this is what we are now down to. If you have a look at clause 151B(1)— 
Maggie Barry 
: He’s recycling. 
Hon CLAYTON COSGROVE 
: Well if anyone was recycled and close to the old compost in here it would be that member Maggie Barry over there but we will not go there. If we look at clause 151B(1) we see that it states: “In section 75(3D) ‘name address and registration number’ ”—get this—“is replaced by ‘name and address and registration number or tax file number as applicable’.” I am not an accountant. I think Mr David Bennett is an accountant is he or somebody? I am not sure. 
Maggie Barry 
: Ebenezer Scrooge. 
Hon CLAYTON COSGROVE 
: Oh Ebenezer Scrooge. Well if anybody would know about that it is the old ginger nut over there. 
When you look at clause 151B(2) we see it again: “In section 75(3E) ‘name address and registration number’ ”—get this—“is replaced by ‘name address and if the principal is a registered person or expects to be a registered person the registration number’.” This is ground-breaking! This is minute-of-silence stuff! This is huge tax reform! Again this is what we are down to now. In fact it would not even meet the status of tinkering. This is changing a word here and there. It would not even reach the high threshold this Government puts on tinkering with legislation. 
I would like to know from the Minister exactly what clause 151B(1) accomplishes. That is for the Minister’s benefit on page 89. What does that accomplish in terms of record-keeping? It is a one-word change—one word. This is almost as dynamic as the small business Minister’s Regulatory Reform Bill which expunged 31 Acts that do not exist. So we have a one-word change in clause 151B(1) and in clause 151B(2) a one-word change as well. There may be a good reason for this. I do not think it was to correct a typographical error. David Clark could help my memory; I am not as bad as Mr Banks but I do not think there were any reports from the drafters as to why this change was put in place or whether it was a drafting error. But could we get some explanation? 
Dr David Clark 
: We didn’t get any explanation. 
Hon CLAYTON COSGROVE 
: We did not get any explanation at all. Could we get any sort of explanation as to why there is a one-word change whether it is germane what it will do and either how it will assist the Inland Revenue Department in terms of its collection registration and recording-keeping procedures or how it will assist clarify make clear or take away ambiguity for those taxpayers small businesses and others that are required to keep records? Could we get an answer to that? Maybe the Minister in the chair is drawing a shopping list of the many questions—perhaps a couple of hundred—that have been put to him and his colleagues throughout this debate and maybe he is going to in sort of a turbo-boosted way towards the end of this debate answer all the questions for us. That would be great to be charitable if that is going to occur. I doubt it because—and Mr Damien O’Connor talked about consistency—the only thing that has been consistent from each Minister who has acted as the Minister in the chair at any time throughout the late stages of today is complete silence. 
I will say this. If the Minister of Revenue is in the chair he does tend to answer generally speaking many of the questions that members raise as we move through the Committee stage of legislation. I do not know whether the Chair can assist. I suspect he cannot assist. I am sure he would if he could if the Standing Orders allowed him to or maybe he could you know keep it between friends elbow the Minister in the ribs and say “Hey why don’t you answer a few questions?”. That might be in the unwritten Standing Orders. I know it is not within the written Standing Orders. But it would be good if we could get some answers to these questions. 
We have already talked about clause 137 and about the GST rating issue. We have had three or four speakers I think on that and still there is no answer to that question nor to questions on clause 151B(1) or (2). We are going to get on in Part 5 to some other— 
PAUL GOLDSMITH (National) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question that the question be now put. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Lindsay Tisch) 
: No. No I am— 
Hon CLAYTON COSGROVE 
: Sure. 
The CHAIRPERSON (Lindsay Tisch) 
: Unless it affects the result. 
Hon CLAYTON COSGROVE 
: It may do. It is a question. 
The CHAIRPERSON (Lindsay Tisch) 
: Well we are doing the vote. You can bring your point of order up after I have finished. 
Hon CLAYTON COSGROVE 
: OK no problem. 
A party vote was called for on the question  
That the question be now put. 
Ayes 106 
New Zealand National 59; New Zealand Labour 34; New Zealand First 8; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 15 
Green Party 14; Mana 1. 
Motion agreed to. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I raise a point of order Mr Chairperson. Could you advise me as to the status of proxy votes? I assume the following is correct. Where generally speaking a minor party is unavailable—shall we put it that way—to vote another party would carry its proxy. 
The CHAIRPERSON (Lindsay Tisch) 
: Well I can answer that very quickly. Parties have arrangements between their whips who casts party votes for the respective parties and that is the end of the matter. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Lindsay Tisch) 
: I have ruled on that one so— 
Hon CLAYTON COSGROVE 
: No no—absolutely. 
The CHAIRPERSON (Lindsay Tisch) 
: The Hon Clayton Cosgrove. 
Hon CLAYTON COSGROVE 
: Thank you for your clarification; I appreciate that. Could you also advise in what form that has to take—whether it is a written form— 
The CHAIRPERSON (Lindsay Tisch) 
: That is an arrangement between the whips of the parties. It is not a matter that the presiding officer takes account of. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Lindsay Tisch) 
: The member is trifling with the Chair. 
Hon CLAYTON COSGROVE 
: No no—I have one last question. 
The CHAIRPERSON (Lindsay Tisch) 
: The Hon Clayton Cosgrove. 
Hon CLAYTON COSGROVE 
: Thank you. Given that is the case if I could just seek clarification are you saying that that does not have to be in a written form or a form that is signed between parties? 
The CHAIRPERSON (Lindsay Tisch) 
: Like I just said that is a matter between the whips. 
The question was put that the amendments set out on Supplementary Order Paper 98 in the name of the Hon Peter Dunne to Part 4 be agreed to. 
Amendments agreed to. 
Part 4 as amended agreed to. 
Part 5 Amendments to other Acts and regulations 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to speak to Part 5 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. Indeed there is much to say about this part in the bill. There is a great deal of— 
Maggie Barry 
: Something new? 
Dr DAVID CLARK 
: —interest in this part of the bill. Ms Barry asked whether there is something new in this part of the bill. I will be interested to see what she contributes to the discussion on this part of the debate. She has been remarkably quiet up until now. 
There have been a number of salient points raised and many questions asked of the Minister in the chair but we have noted so far that the Minister in the chair has been reluctant to answer any of them—indeed reluctant—[ 
Interruption 
] “Apparently deaf” says my colleague. We seem to have a new Minister sitting in the chair the Minister of Defence so we can try our luck with this one and see whether perhaps he might be willing to answer some of the questions that have been raised earlier around the loopholes that are created the compliance costs on business and whether there is an estimate available of those compliance costs. I raise these questions now in passing so that the Minister can perhaps turn to his officials and raise this issue with them if indeed he would like to address those concerns that were raised about further compliance costs and National’s growing record of being on the wrong side of small business. 
I want to say more right now about the KiwiSaver clause in this bill. Clause 154 in the bill deals with KiwiSaver. This bill raises the employee contribution for KiwiSaver from 2 percent to 3 percent. In itself that is a 50 percent increase as my colleague Damien O’Connor pointed out earlier. It is a very modest increase. We know that National has been flip-flopping all over the place on KiwiSaver. I guess we can comfort ourselves that at least this flop is in the right direction. It is only 2 years ago that the Government cut the employee contribution from 4 percent to 2 percent. What this legislation does is increase it from 2 percent to 3 percent back up again—halfway back up. It went from 4 percent down to 2 percent and now it goes from 2 percent back up to 3 percent. So we will wait for the next instalment from this Government in terms of its KiwiSaver policy. I have made the point before that the National Government has more positions on KiwiSaver than the Kama Sutra. That is clear. The National Government has cut it previously. It was to have been progressively raised under the plan that the previous Government had to an 8 percent default rate of gross income by April 2011 for employees and a 4 percent default rate for employers. 
On KiwiSaver the National Government has discontinued the employer tax credit and that effectively subsidised employers for the costs of providing KiwiSaver. It has capped the employer superannuation contribution tax-exempt at 2 percent and previously it was to have been 4 percent. You see the Government is all over the place. It has been reining it in and now it is just nudging it up. It discontinued the fee subsidy of $40 per annum so again it was reining the system in and that is entirely inconsistent with what we see in this bill. That was aimed at ensuring that the accounts with low balances were not eroded through taxes. 
The KiwiSaver plan that the Labour Government put together was a good one. It was going to grow savings so that we had money in our economy for investments and so that we addressed the issue of capital depth that holds us back when we compare ourselves with say Australia which has a $1.3 trillion superannuation fund sitting there—money looking for a home looking for a place to invest profitably. And we wonder why Australia is getting ahead. 
National also repealed the Employment Relations Amendment Act that had aimed to ensure that employer contributions be on top of an employee’s pay. Under National’s changes employees and employers now have the ability as part of good-faith negotiations to contract out of this requirement. It is all about pulling the savings system back. Now in this piece of the legislation this piece of tinkering sees the employee contribution rate for KiwiSaver which the National Government took from 4 percent down to 2 percent go halfway back up to 3 percent. At least this flop as I said at the outset is in the right direction but all this chopping and changing on KiwiSaver by the National Government undermines Kiwis’ confidence and that in itself does nothing—absolutely nothing—to improve our dire national savings situation. 
 Labour’s policy which would look at introducing a universal KiwiSaver would create an enduring solution and lift our savings rate and raising our savings is desperately needed. My bill to raise the minimum wage which will come before the House would ensure that all workers could afford to pay for compulsory superannuation saving. So if we move towards that we have got to make sure that people are resourced to be able to afford to make those savings which will then benefit our economy over the longer term. 
In this legislation we also have clauses in Part 5 to do with software development. I will turn to Part 5. Here we see clauses to do with KiwiSaver and then further on in the legislation in clause 163 we have “Unsuccessful software development” and the treatment thereof and a tax exemption. Some of my colleagues have already been wondering aloud in debates on previous parts of the legislation—but that was not the time to have the debate—about how unsuccessful software development could occur in terms of the Inland Revenue Department which has a poor track record: $21 million was invested in a project to try to get the first of the reforms done within the Inland Revenue Department and a portion of that was written off because it was unsuccessful. Now we are told that this $1 billion or $1.5 billion rebuild of the Inland Revenue Department computer system is coming up. We do not have a time frame for it. We have a Prime Minister who says we should not be held to ransom by not having an effective tax collection system. Our current one was built in 1992. But we have had no progress and no confidence that this problem is really being addressed. John Key’s Valentine’s Day promise to look at our software system at the software for tax collection the computer system that the Inland Revenue Department has has not been realised. It is looking more and more like a promise in vain much like many of the other promises to grow our economy that Mr Key has made as leader. 
In and of itself this deduction for unsuccessful software development may encourage some businesses. I am not sure how this would affect say Mr Dotcom. He has come into the debate lately. He has had many successful as I understand it software developments in his time but were he to have an unsuccessful one I am not clear from my reading of the legislation—and perhaps the Minister would like to take a call on this—whether that would apply to him as a resident who is not a naturalised citizen of New Zealand. I invite the Minister to take a call on that in due course. I am sure other speakers will come to the issue of software development because it is a pertinent theme and one of the slightly larger aspects of the bill in the context of very much a tinkering approach to tax change. I am sure other people will come back to it. 
There is a further point if we go on to clause 170 if I may. Clause 170 talks about “Certain repairs to fishing boats” and the way in which the law applies to them in respect of the tax treatment. We have clause 170(1): “In section DO 2(1) ‘Part 4 of the Shipping and Seamen Act 1952’ is replaced by ‘Part 10 of the Maritime Transport Act 1994’.” There is some tidying up going on there but there are other questions that spring to mind. The provisions that apply to the repairs for fishing boats—how broad is that category? Do those provisions also apply to say cabbage boats? If someone had come down the river on the last cabbage boat and they needed repairs to their cabbage boat would these provisions in the law apply to that? Is a cabbage boat a fishing boat in this respect of the law? I think that is a legitimate question that the Minister in the chair might like to address because I am sure there will be people who might ask that question. They might claim they did not come down the river on the last cabbage boat but a lot of us suspect that they actually did. They may just not remember it I guess—that is the point—if their memory is failing about what boat they came down on about what river they were actually on when they were coming down and about whether there was a helicopter at the other end to meet them once they had come down the river on a cabbage boat to look at claiming for— 
Dr RAJEN PRASAD (Labour) 
: 
 I am sorry to take a call away from my friend Dr Clark who seemed to be on a roll here but I want to address my comments to Part 5 of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill and in particular to clause 154 just to say that what clause 154(1) and the subsequent subclauses represents essentially is the cynicism of the National Party and the National Government when it comes to savings. Really right from the time when it became Government it has had its nibs into a very successful saving scheme. In a sense it has wanted to do what it has always done to Labour Governments’ savings schemes which is to destroy them— 
Darien Fenton 
: Wreck them. 
Dr RAJEN PRASAD 
: —and wreck them. That is all it is: wreckers when it comes to— 
Colin King 
: Just robbing Peter to pay Paul. 
Dr RAJEN PRASAD 
: Well I say to the member if the member feels so strongly about any provision in this bill then the member might like to take a call. No member of the Government tonight has taken any call on the Committee stage of this bill. What is that about? Are they ashamed of the provisions of this bill? Are they ashamed of the provisions about KiwiSaver here? Is there nothing for them to defend? Or do they think that they can sit here and treat this Committee in the arrogant manner snipe away with the smart little inane comments that they have made all evening but do nothing to debate the substantive provisions of this bill? At least I hope that when I am sitting on that side I will defend what the Government is trying to propose. I say the same to the Minister in the chair the Minister of Defence. None of the members this evening has taken a call to answer any questions. I know the Minister thinks that may never happen but never say never Minister and I think the Minister knows that. 
But coming back to clause 154 here is the big flip-flop. Those members have tried to destroy—I think this was socialism by stealth was it not? 
Darien Fenton 
: No that was Working for Families. 
Dr RAJEN PRASAD 
: Oh there was something else. But they are certainly against it. They did not vote for the KiwiSaver scheme and they have tried to destroy it right from the time they have come into Government. So it is a Labour idea and here they are. They previously destroyed KiwiSaver by reducing it to a half and now they are slowly clawing it back and trying to reinstate it. 
But in the meantime years have been lost in the savings record. The Government is very very quick to talk about the importance of saving and it is very quick to say “Isn’t the country doing well in its savings now?”. Well it is no thanks to the Government. 
John Hayes 
: Oh rubbish! 
Dr RAJEN PRASAD 
: These are the policies put into place by the last Labour Government and that is the benefit that that member’s Government is reaping now. At least the member might be intellectually honest enough to actually say that. He could take a call and say “Ah we’re all about that and that’s why we’re making these changes now.” The Government does not really have a savings plan of its own. It is mucking around with Labour’s savings plan which is working now so the Government has no choice but to slowly increase that—slowly. It has no ideas of its own. 
The cuts to KiwiSaver have been significant. The Government has reduced it and it has retarded the ability of the scheme to contribute significantly to the savings programme of this particular country. These provisions begin to put a little bit back in but the Government has done so much damage to it. So it should explain why it was against the scheme right from the beginning. Why did it reduce it to half and is now increasing it by a quarter again? It knows that it was a great scheme. It knows it was working well. It knows its potential to assist the savings record of families and the future ageing population of New Zealand. This is what is going to save this country. That is no thanks to the members opposite and no thanks to the Government of the day. So perhaps they should apologise. They should just say “Sorry we screwed up. Sorry we made a mistake.” Now is a good time to acknowledge that this was a good idea and that the previous settings were just fine. 
I cannot remember but can anybody on this side of the Chamber remember any scheme that this Government has come up with in the last 4 years that actually increases savings or increases the development of this country? Is there any? There certainly have been none. The Government believes that trickle-down will actually do everything. In fact it will not. But if the members had the courage of those convictions they would take a call and yet they all bow their heads and they all snipe away at the comments from this side of the Chamber because members on this side feel passionately about the tax system and about the savings record of this country. That is why we have taken so many calls and why we are prepared to stay here and debate the points that are being made. But no there is nothing from the other side of the Chamber. There is no acknowledgment. There are snide comments about the chattering classes but no real programme no real defence— 
John Hayes 
: Not snide comments. 
Dr RAJEN PRASAD 
: Well I say to Mr Hayes please take a call. Please explain his Government’s views on this. Please explain to the Committee why these provisions are provisions that National has brought in and why it made the changes in the first place and why now it is increasing it and how long it will be before the settings go back up to 4 percent where the settings were previously. 
John Hayes 
: Oh bear of little brain! 
Dr RAJEN PRASAD 
: The member has no answer. The member has nothing but a cynical approach to a major bill before the Committee. 
John Hayes 
: Everybody except you understands why. 
Dr RAJEN PRASAD 
: Well take a call. Take a call and explain. 
John Hayes 
: I don’t need to. We all understand what we’re doing. 
Dr RAJEN PRASAD 
: There is no law that the Government members have come up with that they should not be able to stand up and defend and defend as often as necessary. But that member takes no opportunity. The member’s colleagues take no opportunities to defend the Government’s particular provisions in this bill. 
John Hayes 
: “We won you lost.” 
Dr RAJEN PRASAD 
: Well that is just so simple. That is so simple and that member forgets. “We won. You lost. Therefore.” What is Mr Hayes saying to the country? That the National Party won so everything now has got to follow its particular recipe even if it is going to fail even if it is unsuccessful? There are these constant shifts that they make with good policy settings and just to give an impression that this is progress fools nobody Mr Hayes—nobody. So let us just have some real debate. If there are some real points the members want to make they should make them but there is nothing. 
What other provisions do in Part 5 is improve that. I think the Finance and Expenditure Committee probably did great work on this particular bill— 
John Hayes 
: It did. 
Dr RAJEN PRASAD 
: That is no thanks to that member. But it did begin to look at provisions around a simple process of stopping contributions once the 5 years is up. I mean here is the select committee doing the work of the design of this bill that Government Ministers etc. should do but no members on the other side of the Chamber have taken a call to defend the provisions. No member on the other side of the Chamber has got up to actually counter argue the points that this side of the Chamber has put before the Committee in this debate—none. 
John Hayes 
: That should tell the member something. No substance to them. 
Dr RAJEN PRASAD 
: We just had another one from the member. It is something—he mumbles away and only the two people sitting beside him could hear. It was not important enough that the Committee needs to hear it or the country needs to hear it. Those members have no defence. There is nothing that they want to say. It is almost as if National has come up with it the select committee has done its work and therefore we should go from there. 
So I think that is contempt. It is contempt of the processes of this House. I may be new to this House. I am only in my second term but I find that quite contemptuous that Government members would not defend the very provisions that National has come up with and the very ideas that it thinks are important particularly when it comes to something as important as KiwiSaver. There is universal agreement that here was a programme that was well designed well-thought-out and set for the long term. But what does the Government do the moment it comes in? What is the first thing it does? It cuts it. That is what it knows: cut slash and burn. It has done it here as well. In the last Parliament that is what it did. Now it is having to retrieve some of that but again there is no apology. I say to Mr Hayes and his colleagues that this is not new. This is what National did to the fourth Labour Government’s scheme—the scheme that the Kirk Government put in. It was a great scheme and if that had been allowed to stay can you imagine where New Zealand would be today? But there is no credit to that side of the Chamber for destroying something that was good in 1975 and destroying something again that was good with the KiwiSaver scheme. So those members should take responsibility—maybe the next member will take a call. Thank you. 
Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman) 
: 
 Thank you Mr Chairman. Indeed I relish the opportunity to take another call and on Part 5 of this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. “Consistently inconsistent” is I think the term we used on the previous part. Actually I do not mind if I am a little consistently inconsistent myself in that I am in two minds when it comes to clauses 154 to 157. That is about the 50 percent increase in tax that is being imposed through this. 
I guess if I can be inconsistent I suppose firstly I would have to praise this. I have to say that this is a good move because it is increasing the contribution to KiwiSaver. But then I have to be inconsistent and say that unfortunately it seems to run counter to everything else we hear from the National Party in this House which is that tax is the root of all evil tax is the beginning of the end and the more we reduce it the more the economy can grow. That is what we hear. It is ideology from idiots. We keep hearing it. I would have to say that one of the classics is Mr Colin King sitting over there because as a traditional farmer he believes that without truly analysing it. 
We need to pay taxes to invest in good things. This 50 percent increase in taxation being imposed by the National Government here is actually a good thing because it ups the level of contribution to KiwiSaver a scheme that Mr King and many of his colleagues would have called communism. Mr McKelvie would have said the same thing—KiwiSaver was communism forcing people to do what they did not want to do with their money. That is what many of the farmers around the place think because they have listened to the drivel coming out of the National Party for years and years and years. 
Farmers understand smart investment when they see it. They also understand the value of KiwiSaver and of investing in our future. If we had not been sucked in as selfish idiots back in the 1970s and had not listened to and believed Robert Muldoon in wanting to have our cake and eat it too we would have a sound superannuation scheme and be a whole lot better off. We would be right up there with the Australians in terms of the level of investment income. But dare I say it—and I am a farmer from a farming background but a Labour Party farming background thank God which has given me hopefully a little bit more wisdom—the traditional farmers like Mr McKelvie and Mr King there who got sucked into Robert Muldoon thought they could have their cake and eat it too so they voted him in and voted superannuation out. Later under Michael Cullen and a Labour Government when we finally got brave enough and got to the point where we could afford to start investing in real superannuation again the National Party of course opposed it time and time again in this House. 
Dr David Clark 
: They’re still in their Muldoon mode. 
Hon DAMIEN O’CONNOR 
: They are and of course they have sold this idea that you can have your cake and eat it too—we can sell off our assets and have this wonderful country going forward. That is ideology continued ideology from the National Party. The other one is the mantra that with lower taxes we will all be better off and the economy will grow. Yet it is increasing taxes 50 percent here which I think is a good thing. So I am a bit inconsistent myself—I accept that. 
What Part 5 is also doing is increasing a fee from $50 to $150. Fancy that—a 200 percent increase in a tax a compliance cost the thing that the two farmers over there have rallied against and campaigned against and ranted and raved about. Yet here they are part of the Government and I bet those two members are going to vote for this piece of legislation which in clause 172(1) increases the fee in regulation 9(1)(a) from $50 to $150. Let the country be aware of what is happening under the nose under the direction of the National Government. 
There is another one. That is right: it does not stop there. There is another regulation that allows for an increase in fee from $30 to $75. That is a 150 percent increase. Can I say that there are literally dozens if not hundreds of these little increases right across the National-ACT Government’s oversight and governance of this country. And people wonder why their costs are going up. 
I go back to another part of Part 5 and ask a question and hopefully the Minister in the chair the Minister of Defence might get up and answer this. When I first came into Parliament in the 1990s when National was in Government I have to say one of the most common issues raised in my electorate offices was that of child support. It is unfortunately one of the challenges in New Zealand society. This Government is moving on that it says. It is going to force solo mums and solo parents back to work. [ 
Interruption 
] Thank you Mr Chair but it does relate to child support because I am asking questions about what this might mean the changes here for those—and I will quote from the amendment to the Child Support Act—“to whom section 33A of the Tax Administration Act 1994 applies”. My guess is that this does alter the taxation regime relating to child support or the liabilities of each or both of the parents. I would appreciate some explanation on it. I know there is a review under way. I do not know what this part relates to. I have asked my colleague who has not been able to clarify it. Maybe the Minister will. 
The point I am making is that it is rightfully one of perhaps the most responsible areas of legislation that we should get right and that is to ensure that every child in this country has the right level of support from either or both parents—enough support to make sure that they get a fair go. I think that is the simplest way. 
There are amendments occurring here in this piece of legislation. The vast majority of people who may still be awake who might have their TVs on and are trying to work out what is going on here will not know perhaps what we are changing here. But can I say if there is a consistency here it is that if you are a poor solo parent the chances are the National Government has kicked you in the guts once again. Most changes— 
Colin King 
: Tell us about the $8 billion we spend looking after those people. 
Hon DAMIEN O’CONNOR 
: That member will not admit it but he knows it is true. Most changes that have occurred from this Government have been about kicking solo parents. 
Colin King 
: Get out of the West Coast and into the real world. 
Hon DAMIEN O’CONNOR 
: Oh they get a bit touchy here because they know it is true. They know it is true. That is right. GST has increased. Here we are and the beneficiaries the same solo parents the parents whom child support applies to are being told “one strike and you’re out”. Of course as a criminal you can have three strikes. Funny that. Three strikes for a criminal; one strike for some poor person who is trying to bring up their child who has to be on a benefit to try to protect their child. This is outrageous. This is Toryism to the core and it is about time we got it right. 
The Chairperson is rightfully pulling me back into the Child Support Act. I do not know what this change means. It is a technical change written into this piece of legislation and I am concerned that it might make it harder and that each and every one of us as MPs on both sides of the House might be asked at a clinic on a Friday—we usually have them; I do not know about the National members—what is going on here. I would just like to hear an explanation from the Minister who I am sure has a handle on what is happening here. He probably believes he is doing the right thing but if he looks at the National Government’s record it is not. 
In conclusion I have to say that the changes here to KiwiSaver in my view are an increase in taxation. National when opposing us in the implementation of KiwiSaver railed and ranted against what we were trying to do. It then cut the contribution of course and it is now lifting it again. 
House resumed. 
The Chairperson reported progress on the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill and no progress on the Airports (Cost Recovery for Processing of International Travellers) Bill and the Legislation Bill. 
Report adopted.