Burns Brendon: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Burns Brendon: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16171] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I will talk for a moment about clause 106 of the Taxation (GST and Remedial Matters) Bill which effectively relates to providing some provisional tax relief in the super-city transition in Auckland. I have a question that arises from it which perhaps the Minister in the chair the Hon Georgina te Heuheu or her learned colleague the Minister of Defence may be able to assist me with.  
I do not think any member would have any difficulty about transitional tax relief being provided in the amalgamation of local authorities in Auckland into one council when we are seeing an arrangement whereby an acknowledgment of debt is entered into by the council in relation to assets held by effectively another arm of the council. That is a wholly appropriate thing. But just a couple of weeks ago the House passed the Local Government Act 2002 Amendment Bill which contained within it a provision that allows any council should it wish to enter into a new arrangement I think from 2012 or 2014 for the provision of services such as water on a contractual basis for a period of up to 35 years. Members on this side of the Chamber view that as effectively constituting privatisation given the length of time involved. There is the ability for those assets to go into private hands with a return yes to ratepayers’ ownership at the end of the 35-year period. But 35 years is a long long time between drinks so we regard that as being effectively privatisation.  
Clause 106 relates to allowing arrangements around the acknowledgment of debt for the new Auckland Council in respect of taking up assets and I think this relates mostly particularly to Watercare Services Ltd and acknowledging the debts created and providing for tax relief in respect of that. But I want to ask about what would happen if in 2 or 4 years’ time a council in Auckland—I am sure this would not take place under the current council led by Mayor Len Brown—wants to effect a change in the ownership structure. What would that mean in respect of clause 106 and the provisional tax relief that is being provided? Would we see a similar arrangement being entered into? What are the consequences for the past forgiveness of debt by the council? Are we creating a precedent here that has some unintended consequences if a council goes down the track of making a new arrangement for the provision of water services for instance in Auckland and putting it into private ownership for a period of 35 years?  
The background is that this legislation provides for provisional tax relief and arrangements that are entirely appropriate when we are talking about wholly publicly owned assets and the tax arrangements between them. But when we start to talk about a privately owned company taking over those assets we should turn to the officials in the Chamber for advice. Obviously the Committee stage is the point at which to do this; this is our last chance to ask questions and gain assurances on behalf of taxpayers. The future management of assets has been a very very crucial issue certainly in terms of the other legislation that allows for assets to go into effectively private ownership for 35-year periods. So there is an important question in respect of whether clause 106 sets up a precedent with unintended consequences. Should we see a change under a future Auckland Council and a decision be made to move into private control some of the assets for which under this provision provisional tax relief is provided—which Parliament is pleased to support given that we are talking about wholly publicly owned enterprises? What is the situation? I ask the Minister in the chair to please invite the officials to give her a brief on this or the Minister from the North Shore who has a keen interest in Auckland issues to seek advice from the officials so that we have an answer.  
I think this is a very important point as we go through the final stages of this bill coming into law. This is the last chance to get some clarity around whether unintended consequences will come from this legislation. We obviously have a lot of occasions when we go from having a council that operates with just publicly owned entities to having one that does deals with people outside the ambit of ratepayer-held assets. I am thinking of my own city of Christchurch where a couple of years ago the Christchurch City Council provided a $17 million loan to a property developer called Dave Henderson. Just in recent weeks that property developer went bust. Obviously the council was using ratepayer funds to bail out a property developer and that raised a great deal of concern in Christchurch. I can tell members that without any qualms whatsoever.  
Dave Henderson is a close friend of the Minister of Local Government Rodney Hide. He is a very close friend. They have publicly described each other as being close friends. Obviously concerns arise when a council is able to provide a sweetheart deal to the private sector using ratepayers’ money. I understand that not only did Mr Henderson receive $17 million in ratepayers’ money but he did not pay back the GST on the deal to the taxpayer. So the ratepayers of Christchurch subsidised a personal friend of the Minister of Local Government and then that person did not pay to the Inland Revenue Department the revenue that was due. Perhaps the officials might clarify that matter for us as well. What revenue was due to the department from the GST on that deal? In effect there has been a double whammy to ratepayers and taxpayers in respect of that issue.  
That is why we do not want to see such arrangements being entered into under clause 106. We want to see the Auckland Council enter into sensible tax arrangements in respect of the super-city transition. That is wholly appropriate; it is wholly appropriate to see that happen. We want to see those sorts of arrangements be effected between wholly publicly held and accountable ratepayer-owned organisations and institutions. That is wholly appropriate. But when we go down the track as the Local Government Act 2002 Amendment Bill did of providing for entry into contracts that effectively privatise such important assets and utilities as water supplies for 35 years I think the Committee demands to know whether this clause has any ramifications for those kinds of long-term actually intergenerational arrangements—35 years is across generations. The people of New Zealand would like to know whether we are setting ourselves any precedent here.  
Allied to that issue is the question of whether we have seen in my city of Christchurch a deal whereby ratepayer funds were used to bail out a property developer. I would really like to know in that instance whether any revenue went back to the Inland Revenue Department. The very clear understanding I have is that not only did the ratepayers of Christchurch fund a property developer’s bail-out in the wake of the crash—that property developer has now gone bust—to the tune of $17 million but the Inland Revenue Department base has not received the GST owed to it on the $17 million paid by the ratepayers of Christchurch to Dave Henderson. I think we deserve to be given some clarity on that important issue as we progress through the final stages of this bill.  
Clause 106 provides for provisional tax relief in the super-city transition. We have a very good Mayor of Auckland in Len Brown and I cannot see any possibility that we would see the currently publicly held assets vested in Watercare Services going into private hands which is the issue at the heart of my concern about this clause. But the Committee deserves to receive some assurance from the officials to the Minister that no precedent is set by this measure. If those assets are later transferred into private ownership what tax ramifications are we creating in clause 106 this afternoon? Clause 106 obviously provides for tax arrangements that are basically neutral in respect of the debt that is being on-passed and picked up by the new Auckland Council as it absorbs the assets of Watercare Services. It is a wholly appropriate arrangement but I think the Committee deserves to know the answers to the questions that I have posed here in the final stages of the Committee stage of this important bill. This is a very important clause. It may have some ramifications that are truly long term and I think that the Committee deserves to have an answer to those questions this afternoon.