Cosgrove Clayton: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First ReadingText is subject to correctionCosgrove Clayton: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First Reading[Sitting date: 10 March 2015. Volume:703;Page:2103. Text is subject to correction.]Hon CLAYTON COSGROVE (Labour):I must say that I do feel sorry for Todd McClay. He is the ministerial version of the guy walking behind the elephant with the shovel. After 15-plus years of Peter Dunne being Minister of Revenue—I think he holds the record for the person in that portfolio of any Minister of Revenue in the Commonwealth—suddenly we get this piece of legislation and I give Mr McClay credit because he has made the best fist of it. He has polished it up. He has shellacked it a few times. He has got the spin as best he can but I have to say there is the conspiracy theory and the cock-up theory and we certainly have the latter today.He touched on bodies corporate. Well let us have a look at the history of that. On 6 June the then Minister of Revenue announced that bodies corporate were to be deregistered for GST from that date. The result of that of course was that those bodies corporate lost the ability to claim input tax refunds on their expenses even if that expenditure was funded from levies on which GST had already been paid—for example a double tax of GST on the same expenditure. The Minister’s announcement of course overrode the finding in law reached by the Inland Revenue Department. So that was June 2014. This bill that comes before the House is a clean-up is a reversal of that decision. It is a stuff-up a total—Hon Todd McClay: Clarification.Hon CLAYTON COSGROVE: No no it is a reversal. What it means of course is that this was bad policy. It was bad in principle. It was bad process. It overrode the Inland Revenue Department but I have to say that bodies corporate will welcome the sort of reforming zeal of the present Minister of Revenue because he is prepared to reverse it. But you have to ask this: where has the institutional knowledge in the Inland Revenue Department gone and why has it taken—and this is just strike one—the change of a Minister from a veteran to a newbie for us to find about these sorts of things?Then of course we come to the child support issue. So Mr Dunne the longest-serving revenue Minister in a Commonwealth Parliament says that he looked at this issue and the expenditure went from $30 million to $120 million within a couple of years.Hon Damien O’Connor: How much?Hon CLAYTON COSGROVE: From 30 million bucks to 120 million bucks. Now we asked Mr Dunne: “Could you please explain?”. You know it is a bit like Manuel on Fawlty Towers—“Esplain?”. There was silence from a 15-year veteran who took a quarter-of-a-million-buck salary every year for 15 years. Now he has another job and he passed the steamy brown bag with the mess in it to Todd McClay. So then we asked Todd McClay since he took over what has happened. It went from $120 million to $210 million—that has to be some sort of Guinness Book of Records job that one. Then Cabinet decided to paper over the cracks and revise it down to $163 million.Grant Robertson: By not implementing it.Hon CLAYTON COSGROVE: By not implementing it. I was coming to that bit—by not implementing it. So we have got clauses in this bill tonight to roll back Government policy on child support that was trumpeted before the last election because the Budget blew out.I know how tough it is. I have sympathy. Like Mr McClay I was a Minister. There were late nights. You have to read past the executive summary you have to actually ask some questions and you have to know what questions to ask and sometimes at the weekly staff meeting with your officials when you are dealing with IT projects and the like it pays to say: “Are we on budget? Has it clicked up a notch? Why have we gone up a couple of million bucks?”. Mr Dunne probably waited. Maybe it was like Who Wants To Be A Millionaire?—“I will wait until I hit 120 million because we’ve already got 30 million in the locker and then I might wake up and ask the odd question.” Then Todd McClay comes in and says: “No I can do better than that. I’ll wait till it gets to 210 million and then I will go running into the Cabinet room and say: ‘Boys and girls we’ve got a problem. We have to do something.’ ” Then they send the poor chap down here to try to shellac over the problems.So I have to say that this is on top of course of what we now know is a massive blowout—and I look forward to the select committee tomorrow; that will be a cracker—in the business transformation programme. What an oxymoron that is. That is 83 million bucks so you have got $163 million—four times Novopay and counting; at least $83 million that we know of—spent for no gain whatsoever in a “business transformation project”. Well it is transforming all right. It is transforming a lot of money out of the pockets of taxpayers down the toilet and at 250 bucks in stipend per day on accommodation fees and trans-Tasman flights I think it is goingto Accenture to these multiple consultants who fly over every day who write papers and do all sorts of things. It is transforming the Inland Revenue Department. It is transforming it into the best example that we have had since INCIS. So we have had Novopay. The Government has not learnt anything from that. And we now have a budget blowout which we are trying to peel back tonight of 163 million bucks. What has the Government learnt from Novopay? Zero.So I have got to say that I have some sympathy for Todd McClay tonight. He has been sent down here. He has been given the hospital pass. Although he has got associate trade so fair go that must be the sort of gift that keeps on giving. That will get him out of the revenue portfolio when Tim Groser heads off to a diplomatic post at some point. So maybe that is the consolation prize for taking the bullet and taking the hit tonight.But this is serious. This is serious. Who is accountable Minister for the $163 million blowout? We asked some questions last week and not one Minister—not yourself or your 15-year veteran predecessor—would ante up and tell the taxpayer how this blowout occurred. There was some waffly explanation about depreciation and the capital charge. All that proves Minister is that your department has spent a chunk of dough a big chunk of capital. But there is no explanation at all; no accountability. Maybe tomorrow at the Finance and Expenditure Committee we will get some sort of explanation out of the Minister’s departmental head the Commissioner of Inland Revenue. But one would have expected a Minister—although again I have got sympathy for Mr McClay. I think Mr Dunne is around here somewhere in the ether. He is very happy to wax eloquent on all sorts of other issues except a 15-year legacy of hundreds of millions of dollars of blowout under his watch. But at least he had the ability to admit that he sat there and watched it go from $30 million to $120 million and did nothing. He did absolutely nothing.The other measure that has been waxed eloquent on is the research and development so-called cash-out. Here is the difficulty Minister and I will be very interested to hear what your officials have to say on this. Given this is a highly complex instrument that is based on shareholding based on labour to research and development ratios and a whole series of complex formulae not even consistent with the general definition of research and development has he taken into account the need of small to medium sized enterprises—if they want to participate in this—to have a bucketload of professional expensive accounting advice? I can remember the words of Bill English when we were in Government and we introduced proper research and development tax credits. Bill English said: “This will be a joy for the accountants. This will be a joy for the accountants and the tax lawyers. They’ll make all the dough.” Well I wager that no small to medium sized enterprise Minister will be able to deal with this and take full advantage of this unless it has the resources to go and seek expensive tax advice. This is not simple. Small to medium sized enterprises require simple transparent legislation that is workable. It may be well intended but I would put it to this Minister that it is unworkable.So what we have in conclusion tonight is a botched series of policies embarrassing reversals paper-overs some shellacking by the Minister rolling back of many of the parental clauses simply to save money and tinkering around the edges. But the taxpayers have one little bit of certainty. They know that this Minister took the bill from $120 million to $210 million and then revised it back to $163 million and his predecessor took it from $30 million to $120 million. There were no questions asked—because he would have told us—no holding the department to account no saying: “I want to know if we’re going off the rails.” or: “The million-dollar mark is clicking up. No I’m going to monitor this closely.” There was not a thing—asleep at the wheel. Solid Energy I suspect Mark II. And they send the junior Minister down here to try to paper it over at 9.30 at night hoping everybody is asleep.I say Minister that we will support this going to the select committee because that is the tradition with these tax bills. But this will come under close scrutiny. I suspect we will have a large number of submissions from small to medium sized enterprises from the tax fraternity and from others. We will await with bated breath some sort of explanation from the Minister in the chair or maybe—he is around here somewhere—from his veteran 15-year predecessor who went “ker-ching” every day and let the cash flow out of the taxpayer’s pocket down the proverbial.