Volume 656 Week 22 - Thursday 27 August 2009 
Volume 656 Week 22 - Thursday 27 August 2009 
[Volume:656;Page:5963] 
Thursday 27 August 2009 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Visitors 
Finland—Audit Committee Parliament of Finland 
Mr SPEAKER 
: I have much pleasure informing the House that the Audit Committee of the Parliament of Finland led by Mr Matti Ahde the chair of the committee is present in the Speaker’s gallery. I am sure members would wish that the committee be welcomed. 
Business Statement 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 At the end of this week the House will adjourn for one week. During that time it is expected that the Local Government (Auckland Council) Bill will be reported back to the House. When the House resumes on Tuesday 8 September priority will be given to the Resource Management (Simplifying and Streamlining) Amendment Bill the Local Government (Auckland Council) Bill the Taxation (International Taxation Life Insurance and Remedial Matters) Bill and the first readings on the Order Paper. Wednesday 9 September is set down as a members’ day. 
Hon DARREN HUGHES (Senior Whip—Labour) 
: 
 I wonder if the Leader of the House could confirm whether it is correct that urgency will be used to progress both the Local Government (Auckland Council) Bill and the Resource Management (Simplifying and Streamlining) Amendment Bill and furthermore whether he could confirm to the House or offer to the House the ability for a stand-alone debate within the Local Government (Auckland Council) Bill on the issue of Maori representation on that council. 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 The Government views the passing of both those bills as something that will be considered somewhat urgently by the nation let alone this House. It remains to be determined exactly how it is progressed through this House but those bills will be progressed during the next session. As for the stand-alone debate the members know that there are ways in which he might request that of your good self Mr Speaker. Therefore the decision is most certainly out of my hands. 
Sittings of the House 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 Mr Speaker—[ 
Interruption 
] Those members just lack politeness; it is unbelievable. 
Hon Darren Hughes 
: You’ve only worked 1 day this week! 
Hon GERRY BROWNLEE 
: Well if I have worked only 1 day this week it is 2 days longer than Darren Hughes; that is for sure. 
Mr SPEAKER 
: It is the last day of term. 
Hon GERRY BROWNLEE 
: I seek leave of the House to sit on the ringing of the bell on Thursday 10 September 2009 following an official luncheon for the general secretary of the Communist Party of Viet Nam. 
Mr SPEAKER 
: Is there any objection to that course of action being followed? There is none. 
Points of Order 
Emissions Trading Scheme Review Committee—Report Back 
Hon DAVID PARKER (Labour) 
: 
 I raise a point of order Mr Speaker. I just heard from the Clerk on your behalf that there has been no report received from the Emissions Trading Scheme Review Committee. That committee deliberated finally on Wednesday 19 August—last week. 
Craig Foss 
: Thursday 20! 
Hon DAVID PARKER 
: I stand corrected; on Thursday 20 August. The report according to the Standing Orders should immediately thereafter have been presented to the House. It has become apparent from statements made to the media today that have been publicly recorded—reported by NewsRoom and also in a press release from a Government member—that the report has been suppressed because after deliberation by the select committee once the select committee had finished its business and there was then a report to the House a member of the select committee sought to change a minority report and has stopped publication of the report. That is a most serious and egregious breach of the privileges of the House. As a member of the committee I am in breach of privilege if I talk about the report before it is presented to the House. I seek your authority not the authority of the House to table the report now because the select committee has authorised it to be tabled. I ask you to give me a ruling on the matter. 
Mr SPEAKER 
: I will seek a little advice on the matter the member has raised. It is a most unusual matter of order and I will seek some advice on it. 
Hon PETER DUNNE (Leader—United Future) 
: 
 I raise a point of order Mr Speaker. As chair of the select committee can I just add some comments which as I understand them may be relevant to your consideration. What the member says is correct; the committee did deliberate last week. As part of its deliberations it passed a resolution giving those who wished to submit minority reports until 5 p.m. last Thursday to do so. My understanding is that one of the submitters of a minority report is in the process of reviewing whether he or she wishes to continue with presenting such a report and that that is what is delaying the presentation of the final report to the House. I think that is a relevant factor in your consideration. 
Mr SPEAKER 
: I thank the honourable member. 
JEANETTE FITZSIMONS (Green) 
: 
 I was also a member of the committee. I think probably in that case it would be wise to determine whether a report was submitted by 5 o’clock last Thursday as the committee accepted or whether the matter has been left hanging. I do not know the answer to that question but the clerk will. 
Hon DAVID PARKER (Labour) 
: 
 Again I cannot be certain because the process is opaque to members which I find very surprising but my understanding is that a form of the minority report was submitted by email. I cannot verify that but there are email copies of the minority report. From my perspective as an Opposition member what appears to be happening or what may be happening is that the Government is having negotiations behind closed doors trying to suggest to a minority party that was quite entitled to make— 
Mr SPEAKER 
: Such allegations must not be made under a point of order. The matter that I as Speaker must consider under the point of order is whether there is any problem in respect of the Standing Orders in terms of the length of time it is taking for the chair of the committee to submit the report. I point out to the House as I read the Standing Orders that it is the responsibility of the chair of the committee to present the report. The Hon David Parker is quite correct; the report should be presented to the House as soon as possible after a decision is made by the committee. But there are situations in which the Standing Orders recognise that there may be a reason for some delay. In fact Speakers’ rulings point out that a delay of a week in reporting to the House is quite acceptable. The explanation given by the chair of the select committee seems perfectly reasonable at this stage. I ask that the chair of the committee makes sure the report is presented to the House as soon as possible but the explanation he gave for why there has been a small delay sounds reasonable given the decision of the committee to allow minority reports to be attached. The fact that a member had not completed his or her minority report to his or her satisfaction seems a reasonable explanation. 
Hon PETER DUNNE (Leader—United Future) 
: 
 I raise a point of order Mr Speaker. I simply raise another point by way of a question upon which your guidance would be appreciated. It is this: if a member or a party submits a minority report the custom has always been to treat it as being that particular party’s or individual’s responsibility. So presumably if the member or party wishes to withdraw a minority report or to amend it prior to the publication of the final report that responsibility also rests with them rather than with the committee as a whole. 
Hon DAVID PARKER (Labour) 
: 
 Although I respect the Hon Peter Dunne’s opinion on such matters his opinion must be wrong. The report is a report of the select committee and once the select committee has deliberated on the report to Parliament it cannot withdraw it. The select committee has made its report to Parliament. All that happens thereafter is that the report is published. It may be embarrassing for a party to have discovered that it made a mistake or it might have changed its mind for reasons of political imperative or negotiations but that matter is outside of the report of the select committee. It can in no way be in order for any clerk of the committee or any member of the committee to amend the report once it has been deliberated upon by the committee. The committee is functus officio as soon as it has deliberated. 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 I just want to make clear two things. The first relates to Standing Order 244 and to Standing Order 245. They deal with the way in which reports of select committees are to be delivered to the House. What is salient in this case is that neither of those two Standing Orders applies because no specific report-back date was applied to the bill. Secondly that takes us to the position that was outlined by the Hon Peter Dunne which is that the select committee itself has given authority for him to accept minority reports from other parties. Mr Speaker you have said that you wish that to be done in a manner that is speedy and respectful of the House. I do not think the short time we have had since that decision by the committee represents anything other than that exact process and Mr Dunne has indicated today that he accepts your ruling. I think that sets aside the concerns that the Hon David Parker is raising in a somewhat political manner. 
Hon David Parker 
: Mr Speaker— 
Mr SPEAKER 
: No I do not need the matter to go on any further; I think I have heard quite sufficient on it. The point the Hon Gerry Brownlee made is perfectly correct in that as long as the procedures of the committee are within the Standing Orders the committee is the master of its own decision making. It seems from what the chair of the committee has said that the committee deliberated and decided that minority reports could be attached to the final report. That is therefore a decision of the committee and not a matter that can be litigated in the House. In fact the report is a matter for the committee to agree and if there is doubt about the decisions the committee has made then the committee should probably reconvene and agree a process of confirming the report outside of a committee meeting. It is a matter for the committee whether minority reports are included; it is not a matter for the House. The remedy for the questioner—and it was a perfectly fair question—is that as long as the committee is proceeding within the Standing Orders these matters are matters for the committee to sort out not the House to sort out. 
Hon DARREN HUGHES (Labour) 
: 
 I raise a point of order Mr Speaker. I have two points to make to you. Firstly the select committee existed only with one item of business before it. Now that the committee has reported—or the committee at least thought it had reported; it directed the chairperson to make the report—the committee cannot meet again because it was set up only by a motion of the House to do one thing. So your ruling that the committee could meet again to talk about the matter further cannot be so. It has completed its work. It no longer exists once its report is made. 
Secondly Speaker’s ruling 93/2 makes clear that “As soon as the chairperson of a committee is directed to make a report to the House it should be made with the least possible delay.” You have commented on that timing by saying that about a week is acceptable. From what I understand the Hon David Parker said a week has passed today. Today is the House’s last sitting day before an adjournment for 1 week. The matter being reported on was so important to the House that it resolved to set up a special select committee to consider it. I just wonder whether we could have some guidance from you as to when you believe the period of delay is no longer acceptable. The committee has resolved that Mr Dunne present the report to the House. A week has now passed and I think the House is entitled to know why a different process has been used from what is ordinarily the case. 
Hon GERRY BROWNLEE (Leader of the House) 
:  
We have been over this. The process that is being followed is one that the select committee determined for itself. If the Labour Party has decided that it does not want a smaller party to put in a minority report then that would be OK that is a political position it can take. There is no procedural breach here at all. The Hon Peter Dunne as the committee directed him is giving the parties concerned an opportunity to present their minority reports. 
Mr SPEAKER 
: I do not need to hear any more on the matter. The chair of the committee has told the House what the committee agreed. The House cannot dispute that. The chair of the committee advised the House that the committee agreed that when the main report was deliberated on the parties were at liberty to attach minority reports to it and there is some delay in one or more parties doing so. That is not a matter for the House to take further time on. We cannot doubt the word of the chair of the committee. If there is concern among the committee that the matter has not been reported to the House I am sure the committee can get together again should it wish to do so. The report is not out of the hands of the committee until it has been reported to the House. It has not been reported to the House and the House must take the word of the chair of the committee why it has not been. There is no further matter that the House can consider under the Standing Orders. 
Hon Members 
: Point of order— 
Mr SPEAKER 
: It must be on a different matter because I have ruled on that matter. I will take Jeanette Fitzsimons’ point of order first. 
JEANETTE FITZSIMONS (Green) 
: 
 I raise a point of order Mr Speaker. With the greatest of respect I think a matter has been missed in the debate. I do not want to challenge your ruling but I do not know how else to do it. It is the question of whether— 
Mr SPEAKER 
: I have made it very clear that this is not a matter for the House. Under no Standing Order is this a matter for the House; it is a matter for the committee. I have ruled that this matter must not be raised further. I have ruled on it. 
Hon David Parker 
: Point of order— 
Mr SPEAKER 
: The Hon David Parker might note that the Speaker is on his feet. 
Hon David Parker 
: Point of order— 
Mr SPEAKER 
: He will sit down while I am on my feet. I have made no move to sit down. I have ruled on the matter. It is not a matter that can be handled in this way in the House. I listened carefully I sought advice and I have made a careful judgment on the matter. That is the end of the matter. I warn any members who wish to trifle with that ruling that they do so at their own risk. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I raise a point of order Mr Speaker. I think we need a further ruling from you on the position between when a bill is reported to the House and when a committee has resolved to report it. It has always been my understanding that when a committee has passed a motion— 
Mr SPEAKER 
: Can I be clear with the honourable member. I believe that he is litigating the same issue. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 No I am asking you to rule on whether a committee can again pick up a bill on which it has already resolved to report. 
Mr SPEAKER 
: Let me put it in very simple terms for the member. The chair of the committee has advised the House that when the committee deliberated it decided that parties could attach minority reports to the report. The chair of the committee is waiting for that to happen so that he can present the report to the House. I believe that that is what the chair told the House. 
Hon PETER DUNNE (Leader—United Future) 
: 
 The committee resolved as I said that minority reports could be submitted up to 5 p.m. last Thursday. Subsequent to that date one of the parties that had submitted a minority report sought to withdraw that minority report. That is what is delaying the publication of the final report. That was the point I raised with you Mr Speaker. Because the committee did not deliberate on the minority reports—and in this case it ruled that it would not—then it must be the prerogative of those that have submitted the reports either to submit them or to withdraw them. That is the point that has delayed the publication of the final report. 
Mr SPEAKER 
: I want to resolve this issue and I apologise that I misunderstood what the chair of the committee was telling the House. The chair of the committee has made clear to the House now that the deadline for submitting the minority reports has passed and a party wished to withdraw or somehow change its report. If that is a problem it is a matter for the committee to resolve. There is nothing that I can see in the Standing Orders that prevents the committee from doing so because it made its decision subject to those reports being done. It seems that a problem has now emerged from that decision. There is nothing wrong with the committee should it choose to do so reconvening to reconsider that matter because the report has not been presented to the House. 
The report is still in the hands of the committee. The committee made a decision that had certain conditions attached to it for certain things to happen and there has been a problem in the committee with that decision. The House does not need to take further time on it. If there is a problem it is in the hands of the committee to resolve that problem. 
Hon Members 
: Point of order— 
Mr SPEAKER 
: I will hear the person who raised the point of order first David Parker but I make it very clear that I am running out of patience on this matter because it is not a matter for the order of the House. 
Hon DAVID PARKER (Labour) 
: 
 I raise a point of order Mr Speaker. With respect if the Speaker is running out of patience with me after he misinterpreted Mr Dunne’s advice to him that is not my problem. 
Mr SPEAKER 
: The member will resume his seat immediately. Either way I make it clear to the member that this matter is not a problem for the House because the report has not been presented back to the House; it is still in the hands of the committee. It is the responsibility of the committee to resolve this difference and it is not— 
Hon David Parker 
: Point of order— 
Mr SPEAKER 
: Is the member having difficulty seeing? The Speaker is on his feet. Either way it is not a problem for the House to resolve; it is a matter for the committee to resolve. The chair of the committee I am sure as an experienced member is perfectly capable of resolving the problem. That is the end of the matter. 
Hon Members 
: Point of order— 
Mr SPEAKER 
: I will hear the Hon Trevor Mallard as long as it is a different point of order. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I raise a point of order Mr Speaker. It is a completely different point of order. I am seeking an assurance from you that each of the reports that was given by all parties to the chair of the select committee formed part of the papers of the select committee and will be available to the public on the tabling of the report. 
Mr SPEAKER 
: I do not believe that that is a matter the Speaker can get involved in or rule on; it is a matter for the committee. 
Hon members 
: Point of order— 
Mr SPEAKER 
: I have ruled on that I say to the Hon Trevor Mallard. It is a matter for the committee. The Speaker cannot rule on that matter but I will hear him further. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I raise a point of order Mr Speaker. I am going to ask you to give a considered ruling on the matter. You are the only person once a committee is finished—as it has because it has deliberated and reported—who can rule on whether papers submitted to the committee as part of its work are available to the public. 
Mr SPEAKER 
: If the member can cite the Standing Order under which I do that I will hear him later on in the session. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 I raise a point of order Mr Speaker. It might help if I cite Speaker’s ruling 92/2 from Speaker Steward in 1892 and gently offer it to the Speaker for some reflection. I can read it out. 
Mr SPEAKER 
: No that it is all right; it is a long Speaker’s ruling. The House does not need to hear all of it. 
Hon PETE HODGSON 
: Just as long as you are aware of it because it has been around for a hundred and something years. 
Mr SPEAKER 
: I say to Opposition members that I have been very patient with the time. The House has wasted over a quarter of an hour on this matter which is a matter for the committee; it is not a matter for the House. I will look at the issue that has been raised by the Hon Trevor Mallard and the Hon Pete Hodgson because I am interested in the historical precedent there. I will look at that matter of at what point the report becomes a matter for the House and not the committee. I will look at those matters but the House will not take further time on them today. 
Jeanette Fitzsimons 
: Point of order— 
Mr SPEAKER 
: It had better be a different point of order. 
JEANETTE FITZSIMONS (Green) 
: 
 I raise a point of order Mr Speaker. I am genuinely not trying to try your patience but the point I have been trying to make all the way through is to ask whether it is a matter for the Speaker and this House if a decision made by the committee was not adhered to. That is the central part of the question. The facts are these: three minority reports were tabled at the committee; if in fact the fourth minority report was sent to the Clerk before 5 o’clock on Thursday then that was the matter that met the requirements of the select committee decision. If the report was later withdrawn then that is very different from whether that report was not submitted at all. That is the matter on which I was seeking information earlier. The committee no longer meets so we cannot find that out. But it seems to me there is a big difference between extending the time because someone did not get a report in and receiving that report sending everything off for proofreading and then having someone want to withdraw that report. That is what I am trying to establish. 
Mr SPEAKER 
: We will now go to question No. 1. 
Questions to Ministers 
Government—Relationship with Support Partners 
1. Hon ANNETTE KING (Deputy Leader—Labour) 
 to the  
Prime Minister 
: Does he stand by the answer given on his behalf that “The National-led Government has a strong relationship with its support partners”? 
Hon BILL ENGLISH (Deputy Prime Minister) 
 on behalf of the  
Prime Minister 
: 
 Yes certainly. 
Hon Annette King 
: Does “working together in good faith” continue to be part of the confidence and supply agreement with the Maori Party; if so why did the Prime Minister say no to Maori seats on the Auckland Council in April then in June set up a special subcommittee to hear submissions on the inclusion of Maori seats on the council raising the Maori Party’s hopes and then in August before the report back of the committee and with only a few hours’ notice slam the door shut in the face of the Maori Party saying that Maori seats on the council were not National policy? 
Hon BILL ENGLISH 
: In our experience of the relationship with the Maori Party it has sufficient dignity strength and mana to look after its own interests and it does not need Labour patronising it. 
Hon Annette King 
: I raise a point of order Mr Speaker. That was a highly political answer about Labour patronising the Maori Party. [ 
Interruption 
] 
Mr SPEAKER 
: I say to the Hon Pansy Wong that a point of order is being raised. 
Hon Annette King 
: My point of order was that the Minister speaking on behalf of the Prime Minister went nowhere near answering the question I had asked. He said the Labour Party was patronising the Maori Party and that had nothing to do with the question I had asked. He could have addressed at least a little bit of the question. 
Mr SPEAKER 
: I hear what the honourable member is saying but she may reflect that in her question she used language like “slam the door shut in the face of” a political party which is bound to elicit a less than objective response. The question itself was less than objective. That is my dilemma. If I insist on Ministers being objective in an answer to a question that had fairly tough overtones to it then I start to get into some difficulty. I invite the honourable member to ask a further question. If it is more objective I will try to make sure a more objective answer is given. 
Hon Annette King 
: Was there an option put forward by the Minister of Maori Affairs that allowed all Aucklanders to select two Maori seats at large thus meeting the Minister of Local Government’s requirement for one person one vote where everybody got the same ballot paper; if so why did the Government not accept that option which would have demonstrated its strong relationship with the Maori Party? 
Hon BILL ENGLISH 
: The relationship with the Maori Party is strong because it is based on respect not always agreement. 
Hon Annette King 
: I raise a point of order Mr Speaker. You asked for a straight question. There was nothing political in my question; it was dead straight and that was a crooked answer. 
Mr SPEAKER 
: I think it is unfortunate that that comment was made in the point of order because I was about to ask the Hon Bill English on behalf of the Prime Minister to be a bit more forthcoming in his answer. But how can I do that when the member in her point of order slung across the House that the answer was crooked? I have to show even-handedness and a point of order should not allege that an answer was crooked. 
Hon Annette King 
: I raise a point of order Mr Speaker. I withdraw that remark. Would you like me to read my question again with no remark at the end? [ 
Interruption 
] 
Mr SPEAKER 
: A point of order is being heard. I will allow the honourable member to ask the question again. 
Hon Annette King 
: Was there an option put forward by the Minister of Maori Affairs that allowed all Aucklanders to select two Maori seats at large thus meeting the Minister of Local Government’s requirement of one person one vote where everyone got the same ballot paper; if so why did the Government not accept that option which would have demonstrated its strong relationship with the Maori Party? 
Hon BILL ENGLISH 
: As I said before the Government’s relationship with the Maori Party is a strong one and that is demonstrated every day. A range of options was looked at in respect of Maori representation on the Auckland Council and those options were debated in an atmosphere of respect. 
Hon Peter Dunne 
: What lessons has the Prime Minister learnt from earlier confidence and supply agreements that he has applied to his current governing arrangements and working relationships with support parties to ensure stable government? 
Hon BILL ENGLISH 
: Yes we have looked at how previous Governments operated particularly the last Government. The current Government’s arrangements are more inclusive. There is a greater participatory role for support parties through full membership of Cabinet committees. We have more frequent consultation particularly between Ministers and members of support parties instead of everything going through the ninth floor and we have a more open relationship with the leaders of support parties. 
Jeanette Fitzsimons 
: Which of the Prime Minister’s support parties if any does he expect to vote for his proposed amendments to the emissions trading scheme? 
Hon BILL ENGLISH 
: We would expect that the whole of Parliament would vote for a sensible emissions trading system. 
Hon Annette King 
: In light of the Prime Minister’s recent flip-flops on the issue of Maori seats what is today’s National Government policy on such seats given that its confidence and supply agreement with the Maori Party states that it supports Maori seats as long as Maori want them and given that on Monday the Prime Minister said that Maori seats would be against National Party policy? 
Hon BILL ENGLISH 
: The member is conflating two different approaches to Maori seats. 
Rahui Katene 
: Does the Prime Minister consider the relationship with the Maori Party to be a mature one with mutual trust and respect with differences when there are any aired on a face-to-face basis and not through the media? 
Hon BILL ENGLISH 
: Yes he certainly does. I think the most important element of the relationship is respect and that is something that National has offered to Maori representation that the Labour Party never has. 
Hon Rodney Hide 
: Can the Prime Minister confirm that the Minister of Finance and the Minister for Regulatory Reform have worked closely together to produce a Government statement on regulation that will cut red tape and provide higher living standards for New Zealanders? 
Hon BILL ENGLISH 
: Yes he can confirm that. I would like to thank the Minister for Regulatory Reform Rodney Hide for the focus and the energy that he has brought to that task. I think it will make a real difference to the quality of regulation over the next 10 years that this Government is in power. 
Hon Annette King 
: Is the Prime Minister concerned at the deteriorating relationship between his party and his confidence and supply partners through the media as seen in comments made by Tau Henare who called the ACT Party leader amongst other things a “buffoon” a “jerk-off” and a “….”; Hone Harawira’s claim that “We do not wish to work alongside ACT because of the lies they have fed us and also because of their racist decision.”; Pita Sharples’ comments that Rodney Hide’s actions are “over the top” “unfair” and “undemocratic”; and Tariana Turia’s comments that Maori seats are a “non-negotiable” issue? 
Hon Rodney Hide 
: I raise a point of order Mr Speaker. I take serious and grave offence at being called a “….” by the acting Leader of the Opposition. 
Hon Trevor Mallard 
: Speaking to the point of order Mr Speaker. 
Mr SPEAKER 
: We have wasted so much time now that I may as well hear the Hon Trevor Mallard. 
Hon Trevor Mallard 
: I think we should ask John Carter to explain. He was the last person to use that word in the House. 
Mr SPEAKER 
: Maybe I could call on the Hon Bill English to attempt to answer that question. 
Hon BILL ENGLISH 
: No. 
Hon Annette King 
: If National’s policy on Maori seats is so clear is the Prime Minister aware that the Maori Party announced this week that it intends to introduce legislation to entrench the Maori seats in Parliament and would that not contradict the confidence and supply agreement? 
Hon BILL ENGLISH 
: I am quite sure that the Maori Party will discuss with us as it always does what its intentions are and I do not think it is too worried about what the Labour Party thinks of it quite honestly. 
Hon Annette King 
: Can the Prime Minister see the irony of the situation that if the Maori Party introduces legislation to entrench the Maori seats in Parliament there would be enough numbers for the bill to pass if the ACT Party were to stick to the principle it espoused before last year’s election that it would support the entrenchment of the Maori seats leaving his comments about a “positive forward relationship” with the Maori Party as nothing other than empty rhetoric? 
Hon BILL ENGLISH 
: No and the only party here that has real trouble with the Maori Party is the Labour Party. 
Question time interrupted. 
Points of Order 
Emissions Trading Scheme Review Committee—Report Back 
Hon DAVID PARKER (Labour) 
: 
 I raise a point of order Mr Speaker. I seek leave to table the Maori Party minority report in the Emissions Trading Scheme Review Committee report which was deliberated on last week. 
Mr SPEAKER 
: I wish to seek some advice on what the member has sought. I apologise to members; the issues that have been raised are a little unusual. Leave has been sought and there is no problem with my putting it to the House. Leave is sought to table a minority report of the select committee. Is there any objection to that course of action being followed? There is objection. 
Question time resumed. 
Questions to Ministers 
Youth Programmes—Places 
2.  
CHESTER BORROWS (National—Whanganui) 
 to the  
Minister for Social Development and Employment 
: How many young people will benefit from the Government’s youth programmes announced yesterday? 
Hon BILL ENGLISH (Deputy Prime Minister)  
on behalf of the  
Minister for Social Development and Employment 
: Yesterday the Government announced the Fresh Start packages. These programmes will work with young offenders and give opportunities to those in disadvantaged high-need communities. There will be a total of 2957 Fresh Start package places and 30600 for Break Away school holiday programmes. This is in addition to the Government’s Youth Opportunities package which will give 16900 young New Zealanders education training and employment options. 
Chester Borrows 
: What response has the Minister seen to these announcements? 
Hon BILL ENGLISH 
: The responses have been very positive from those people who are involved in working with young people. The Chief Judge of the Youth Court Judge Becroft said it was a clear signal that the Government means business in working with at-risk young people across the board. There were a number of other comments that have been very positive as well and I would have thought that the whole of Parliament could get behind programmes that will provide opportunities for young people who need them. 
Sue Bradford 
: What evidence does the Minister have that sending young offenders to military-style boot camps does any good at all from any point of view especially given that virtually every single submitter to the Social Services Committee on this topic advised strongly against going down this route? 
Hon BILL ENGLISH 
: It is striking that some of our social policy establishment have apparently analysed boot camps for their effectiveness very closely but have never analysed whether any other programme works. The evidence is pretty clear that it is the follow-up from those military-style programmes that makes the difference and the Government’s announcement follows the evidence. 
Jacinda Ardern 
: Will the Minister amend any part of her boot camp proposals based on feedback from the public via the select committee given that yesterday she announced the pilot and committed funding before the committee had had the chance to report back? 
Hon BILL ENGLISH 
: The Government will analyse the feedback from the young people who go on these courses because it is what happens to them that matters not some theoretical debate from people who are not involved with the programmes. 
Chester Borrows 
: What are the details of the Prime Minister’s Youth Programme? 
Hon BILL ENGLISH 
: The Prime Minister’s Youth Programme will reward 100 young people who have made positive life changes. We will be asking communities to nominate young people who have made the effort to turn their lives around. If they stay out of trouble they will be eligible for this inspirational programme at the end of next January. These young people will get to spend time with and work with well-known New Zealanders such as All Blacks members of the Warriors netball players and hip-hop artists. 
Jacinda Ardern 
: Did the Minister ask the select committee to delay the report back of the Children Young Persons and Their Families (Youth Courts Jurisdiction and Orders) Amendment Bill which included many of the announcements she made just yesterday; if so why? 
Hon BILL ENGLISH 
: No. 
Health Care—Policy 
3.  
Hon RUTH DYSON (Labour—Port Hills) 
 to the  
Minister of Health 
: Does he still stand by his policy to deliver better sooner and more convenient health care? 
Hon TONY RYALL (Minister of Health) 
: 
 Despite the fact that the previous Government left the current Government with $160 million of unfunded health services and stripped $150 million out of the health budget pre-election yes. 
Hon Darren Hughes 
: How come the Minister thinks that small primary health organisations like the one in Otaki cannot deliver better sooner more convenient health care when it has managed to get main services for local people under one roof; enrolled almost the entire population including 100 percent of Maori residents; and won awards for its innovative services; and has managed to do all that for meeting fees of $1300 per year—not the $1800 per meeting that he has been claiming small primary health organisations get just in order to undermine them? 
Hon TONY RYALL 
: First of all the premise on which that member asks his question is incorrect. 
Hon Ruth Dyson 
: No it’s not. 
Hon TONY RYALL 
: If members read the question they will find out that it is. This Government is very keen to achieve the full vision of the Primary Health Care Strategy. As the Hon Pete Hodgson said in 2006 other than cheaper doctors’ visits and the formation of 82 primary health organisations very little was achieved by the previous Government with the Primary Health Care Strategy. 
Michael Woodhouse 
: What recent reports has the Minister had in relation to progressing his goal of more convenient health care? 
Hon TONY RYALL 
: I have received a number of reports on people’s views on progressing sooner more convenient health care. In fact one of the reports that focus on better health care is the release of the  
Surgical Safety Checklist 
 at Parliament this morning. I am advised that last year 19 New Zealand patients were either operated on on the wrong side or got the wrong operation. That is unacceptable. So this morning I joined clinicians in New Zealand to launch the  
Surgical Safety Checklist 
 developed by the World Health Organization and including New Zealand clinicians. It is a set of questions surgical teams ask before and after an operation much like a pre-flight aeroplane check and it is already saving lives. 
Jacinda Ardern 
: If the Minister believes in better sooner more convenient health care why is he allowing youth health centres like 198 Youth Health Centre in Christchurch which sees 3700 young people per year to face closure due to a lack of funding? 
Hon TONY RYALL 
: We have been in touch with the Canterbury District Health Board about that issue. It advised us that it has been funding those young people involved twice. The youth centre will no longer receive a lump sum of funding per annum; it will now operate I am advised like a normal primary health organisation with a capitation basis. The funding change is expected to free up resources for the front line. 
Moana Mackey 
: How will Tairawhiti District Health Board’s cutting of eight services including transport assistance for rural patients result in better sooner and more convenient health care for the people of Tai Rawhiti? 
Hon TONY RYALL 
: Those facts would have to be checked because in the House on Tuesday that member’s colleague got up and said that when one compares December with May one sees that 12 percent of people were waiting longer for a first specialist assessment. If the member had compared it with June she would have found that people were waiting for less time. 
Su’a William Sio 
: How will nurses and doctors find time to do the photocopying answer the phone and file papers when the staff doing that work at Middlemore Hospital one of the busiest hospitals in the country lose their jobs? 
Hon TONY RYALL 
: It is quite clear that the Government is determined that we should have less administrative overhead in the New Zealand public health system. Under the previous Labour Government the number of managers and administrators in the public health system grew from 8000 to 10500. This Government would rather move the resources to support doctors and nurses on the front line and improve services for patients. 
Hon Ruth Dyson 
: What is more convenient for the people of Timaru who have been told that all their general practitioners have closed their books to new patients at the same time as Timaru Hospital has cut 5000 visits per year to its accident and emergency department? 
Hon TONY RYALL 
: It is my understanding that South Canterbury general practitioners closed their books to new patients under the previous Government. We have inherited a situation whereby in many ways there are no more general practitioners practising in New Zealand today than there were in 2000. It is quite clear that Timaru Hospital cannot turn away 5000 patients. The hospital wants to work more constructively with primary care so that many of those people can receive care better sooner and more convenient closer to home. 
Moana Mackey 
: For the Minister’s benefit I seek leave to table an article from the  
Gisborne Herald 
 outlining the services that are to be cut. 
Mr SPEAKER 
: Of what date? 
Moana Mackey 
: It is dated 22 August 2009. 
Mr SPEAKER 
: Leave is sought to table an article from a newspaper dated 22 August of this year. Is there any objection to that course of action? There is objection. 
Maori Training Providers—Cuts to Training Opportunities Programmes 
4.  
RAHUI KATENE (Maori Party—Te Tai Tonga) 
 to the  
Minister for Tertiary Education 
: What support is being offered to Maori training providers to remain viable following cuts to the Training Opportunities Programmes? 
Hon CHRISTOPHER FINLAYSON (Attorney-General) 
on behalf of the  
Minister for Tertiary Education 
: Funding for the Training Opportunities Programme was reduced by the previous Labour Government in Budget 2008 from around $86 million to around $78 million. This has reduced the overall number of places available in 2010. All providers including Maori training providers have only recently been given their indicative funding allocation for 2010 so questions of viability support are premature. Their indicative allocations are based on an assessment of provider performance in 2008 against labour market outcomes and student attendance. If providers do not agree with their indicative funding allocation they are able to seek a review of their allocation. 
Rahui Katene 
: What support can be provided to Dunedin’s Arai Te Uru Kokiri Training Centre the only registered Maori training provider left between Christchurch and Invercargill which has run a very successful chef training level 3 programme for the last 11 years with Skill Enhancement funding which is not eligible for Youth Guarantee funding and which is likely to lose up to 20 percent of its funded places? 
Hon CHRISTOPHER FINLAYSON 
: In respect of training opportunities I am advised that overall allocations are made in a way that ensures good coverage across the country. With regard to an individual provider the Minister for Tertiary Education is barred by section 159J of the Education Act 1989 from interfering with funding allocations for individual providers. The Tertiary Education Commission makes these decisions on the basis of past performance. 
Hon Maryan Street 
: How does the Minister expect not only the kokiri centre referred to by my colleague in the previous supplementary question but also the Pathfinders programme in the Eastern Bay of Plenty which is also known for the successful provision of training to young Maori to continue when not only the Skill Enhancement programme—which upholds the kokiri centre—but also the Pathfinders scholarships funding has been axed? 
Hon CHRISTOPHER FINLAYSON 
: As I said in answer to the previous supplementary question section 159J of the Education Act bars the Minister from getting involved in funding decisions regarding individual providers. If providers are not happy with their indicative funding allocation there are established procedures to seek a review. That is as far as the Minister can go. 
Rahui Katene 
: When they have taken these steps what support can be provided to for example Te Atatu Tu Tangata Academy which was founded by June Mariu in 1982 and which has had to close its Training Opportunities Programme course after its 33 places were cut to six leaving only one remaining Maori provider in central Auckland? 
Hon CHRISTOPHER FINLAYSON 
: With regard to training opportunities in Auckland I am advised there are still 677 places available in central Auckland next year. With regard to the individual provider I am advised that the Minister for Tertiary Education is barred by section 159J of the Education Act from interfering with funding allocations for individual providers. The Tertiary Education Commission makes these decisions on the basis of past performance. 
Hon Maryan Street 
: I seek leave to table a compendium of statements from Wairoa College Opotiki College Kawerau College and others lamenting the loss of the Pathfinders scholarships and the risk that that poses to young Maori. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 
Document by leave laid on the Table of the House. 
Land Transport—Investment 
5.  
DAVID BENNETT (National—Hamilton East) 
 to the  
Minister of Transport 
: What investments have been announced today in New Zealand’s land transport network? 
Hon STEVEN JOYCE (Minister of Transport) 
: 
 I am very pleased to inform the House that today the Government announced an $8.7 billion programme of investment in the New Zealand land transport network by the New Zealand Transport Agency that will be managed through the National Land Transport Programme for 2009 to 2012. It is the largest land transport investment in New Zealand’s history. It also represents a 17 percent increase or $1.4 billion increase on the previous 3-year period and is a crucial milestone in securing New Zealand’s future growth and productivity. 
David Bennett 
: What are some of the highlights of the 2009 to 2012 National Land Transport Programme? 
Hon STEVEN JOYCE 
: This excellent document records a number of highlights. Over the next 3 years $4.6 billion will be invested in building and maintaining the State highway network; that is a nearly 20 percent increase. There will be a $1.9 Crown investment in local roads which is a 14 percent increase and a $900 million investment in key urban public transport networks which is a 21 percent increase and is in addition to the $1.85 billion capital investment the Government is supporting into the Auckland and Wellington rail networks. The Government believes land transport plays a pivotal role in underpinning the economic performance of this country. This investment will help drive long-term economic growth through improvements to key freight and tourism routes access to markets journey times and easing severe congestion. 
David Bennett 
: What progress will the National Land Transport Programme see on the roads of national significance? 
Hon STEVEN JOYCE 
: Within the National Land Transport Programme priority has been given to advancing the Government’s seven roads of national significance. It will improve access and safety within and through New Zealand’s largest cities. Around $1.36 billion will be invested in those vital routes over the next 3 years. Priorities include completing the Victoria Park project; advancing the western ring route with construction on the first stage of the Waterview Connection; the Waikato Expressway; getting work on the Te Rauparaha bypass under way this year; construction of the Rangiriri and Ngaruawahia sections; construction on the Tauranga Eastern Motorway subject to tolling approval; and construction of the Christchurch southern motorway extensions. 
Hon Darren Hughes 
: If the Minister plans to spend an increased amount on building roads knows that there is a projected rapid growth in freight movement and is floating ideas to allow heavier longer and wider trucks on our roads how does freezing the spending on the maintenance of roads in years 2 and 3 of this plan make any sense at all? 
Hon STEVEN JOYCE 
: The New Zealand Transport Agency has taken a view to not allow cost pressures to be passed on automatically in years 2 and 3 of the programme. The economic environment has changed there is a lowering of cost pressures in most categories of the programme and the agency is quite entitled to expect continuing improvements in efficiency. The other side of the House will not be familiar with the concept but it is called value for money. 
Hon Darren Hughes 
: What percentage in ticket price increases for public transport passengers does the Minister expect given the plan announced today is funded for patronage at current levels and does not allow for cost escalations meaning that all the cost of public passenger growth—and in Auckland alone it is the highest in 20 years—will be falling on the travelling public? 
Hon STEVEN JOYCE 
: I do not accept the member’s proposition on public transport revenue growth but I can tell him that unlike the previous Government we will expect a fair box policy to be developed in the process of applying for public transport funds. That seems only reasonable and appropriate. 
Question No. 2 to Minister—Amended Answer 
Hon BILL ENGLISH (Deputy Prime Minister) 
: 
 I seek leave to correct an answer I gave earlier. I am advised that the Hon Paula Bennett did write to the select committee chair in June or July asking for the report back to be delayed. 
Education (Polytechnics) Amendment Bill—Consultation 
6.  
Hon MARYAN STREET (Labour) 
 to the  
Minister for Tertiary Education 
: What consultation did she undertake in preparation for the Education (Polytechnics) Amendment Bill? 
Hon GERRY BROWNLEE (Leader of the House) 
 on behalf of the  
Minister for Tertiary Education 
: The Minister met with representatives of Institutes of Technology and Polytechs of New Zealand and representatives of the Metropolitan Institutes of Technology and Polytechnics group. The Minister has also had discussions with individual polytechnic chief executives chairs and councils. 
Hon Maryan Street 
: Did the Minister consider approaching the Eastern Institute of Technology as a well-run polytech that has never been in difficulty for advice on how a well-run institution manages and whether a cut in council numbers was desirable; if not why not? 
Hon GERRY BROWNLEE 
: The Minister has consulted widely on this matter and made determinations that are reflected in the current Government position. 
Allan Peachey 
: What reports has the Minister received of members of Parliament seeking to interfere with the decisions of tertiary education institutions? 
Hon GERRY BROWNLEE 
: The Minister has seen a report about the intended building upgrade at Aoraki Polytechnic in Timaru. The report says that one member of Parliament has stated “she would visit Aoraki Polytech next month and would then decide if the upgrade was necessary.” That member of Parliament is Maryan Street. It is not currently possible for the Minister for Tertiary Education to intervene in this way. It is clearly Labour policy that Maryan Street should be able to intervene in this way. 
Hon Maryan Street 
: Would the Minister even now consider consulting model polytechnics about their recipe for success; and if the presence of more representative groups on councils is desirable in their experience would she consider amending her legislation accordingly? 
Hon GERRY BROWNLEE 
: The bill is currently before a select committee. The Minister will of course be interested in submissions to that select committee. 
Hon Maryan Street 
: Is the Minister saying by that answer which was a bit indeterminate that it does not matter what submitters to the Education and Science Committee say about representation on polytechnic councils because she will not be listening to any views that differ from her own? 
Hon GERRY BROWNLEE 
: No. 
Hon Maryan Street 
: I seek leave to table a letter from Robert Anderson of Hastings who is a member of the Eastern Institute of Technology council published in the  
Dominion Post  
this morning saying that the Minister does not want to talk to successful councils. 
Mr SPEAKER 
: Leave is sought to table a letter that has been published in the newspaper. Is there any objection to that course of action? There is objection. 
Crimes Act Section 59—Operational Tolerances 
7.  
JOHN BOSCAWEN (ACT) 
 to the  
Minister of Police 
: Who decides what the operational tolerances are when deciding whether to investigate or prosecute people for smacking children? 
Hon JUDITH COLLINS (Minister of Police) 
: 
 I am advised that the attending and/or investigating officer decides whether to prosecute people for smacking children. Operational tolerances are outlined in the  
Police Practice Guide for New Section 59 
 in relation to the Crimes (Substituted Section 59) Amendment Act 2007 and the  
Solicitor-General’s Prosecution Guidelines 
. 
John Boscawen 
: What advice would the Minister give to members of the New Zealand Police who are confused by a law that forbids a smack for the purposes of correction and by a Prime Minister who has expressly told the police to ignore that law? 
Hon JUDITH COLLINS 
: That would be an operational matter but I have to say that good advice would be to follow the police guidelines that I outlined in my answer to the primary question. 
John Boscawen 
: How can we expect the public to take the law seriously when the Prime Minister tells the police to disregard it? 
Hon JUDITH COLLINS 
: I do not believe that the Prime Minister made any such statement. I believe that the Prime Minister takes this issue extremely seriously and I think that any reflection on police practice and Child Youth and Family practice will show that the law has been working. 
Questions for Oral Answer—Answers on Behalf of Minister of Labour 
8.  
Hon TREVOR MALLARD (Labour—Hutt South) 
 to the  
Minister of Labour 
: Does she stand by all answers to supplementary questions given on her behalf in the House yesterday; if not which were not accurate? 
Hon KATE WILKINSON (Minister of Labour) 
: 
 Yes. 
Carol Beaumont 
: How does the Minister reconcile her statement to the Auckland District Law Society that her reason for not attending a National Distribution Union executive meeting was diary clashes with a message to the union secretary left by the Minister’s staff member saying that the Minister would not attend because the risks of attending were too high given that another union had been involved in strike action against Telecom? 
Hon KATE WILKINSON 
: There was obviously some confusion in my office. I will take responsibility for that because I actually believe in good employment relationships and I believe in backing my employers. But at the end of the day it was a diary clash. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I think the member made a mistake. I am not trying to be disruptive. I think she meant “employees”. 
Mr SPEAKER 
: No the member cannot do that! 
Hon Trevor Mallard 
: Where was the Minister between 10 o’clock and 11 o’clock yesterday morning? 
Mr SPEAKER 
: If the Minister is happy to answer the question she can but I am not sure about its direct relationship to the primary question. 
Hon KATE WILKINSON 
: I was in Auckland. I was at a meeting that involved one of my other ministerial portfolios. 
Hon Trevor Mallard 
: Who decides whether the Minister cancels meetings—her or her staff? 
Hon KATE WILKINSON 
: The decision to reprioritise my diary was mine. 
Hon Trevor Mallard 
: Why did the person who left the message on the Minister’s behalf tell the National Distribution Union that the risks of her attending the meeting were too high? 
Hon KATE WILKINSON 
: Unfortunately the department did advise that there were some risks but as I said there was confusion in my office. I find it really disappointing that a union that stands for protecting employees and employees’ rights is prepared to drag one of my staff through the media just as a political ploy for the Labour Party. 
Question time interrupted. 
Points of Order 
Emissions Trading Scheme Review Committee—Report Back 
Hon DAVID PARKER (Labour) 
: 
 I raise a point of order Mr Speaker. I seek leave to table an email from the Clerk’s Office today dated Thursday 27 August that states: “The minority view of the Maori Party has been pulled from the report this morning.” 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. 
Hon DAVID PARKER (Labour) 
: 
 I seek leave to table the draft minutes of the Emissions Trading Scheme Review Committee meeting of last week which record that the report was deliberated on including the minority report of the Maori Party tabled by 5 p.m. that day. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. 
Hon DAVID PARKER (Labour) 
: 
 I raise a point of order Mr Speaker. In light of those two documents which I had not sighted when I raised my points of order earlier today I ask you to look at that issue. I will provide the documents to you. They clearly show that the committee did deliberate and that the report includes a minority report from the Maori Party and that report should be published in this House. 
Mr SPEAKER 
: I have already undertaken to look at the particular issue raised by the Hon Trevor Mallard and the Hon Pete Hodgson. Obviously in doing that I will be looking at the wider issue but what I have said to the House previously is quite correct: it would appear from what we have been told that the committee’s adoption of the report was conditional. Where there is confusion about those conditions the committee has not finally agreed the report and needs to resolve the confusion. It is not a matter for this House. 
Hon DAVID PARKER (Labour) 
: 
 I raise a point of order Mr Speaker. There has been no suggestion that the committee deliberated conditionally and indeed the minutes show that that is not the case. I ask you to look into the matter. 
Mr SPEAKER 
: I invite the member not to argue with the Speaker. 
Question time resumed. 
Questions to Ministers 
Prisons—Increase of Existing Capacity 
9.  
SHANE ARDERN (National—Taranaki - King Country) 
 to the  
Minister of Corrections 
: Is she aware of any initiatives to increase capacity at existing prisons? 
Hon JUDITH COLLINS (Minister of Corrections) 
: 
 Yes. Earlier today I announced that a container cell block capable of housing up to 60 prisoners is to be built at Rimutaka. That new block will be used as a trial to determine whether that type of prison accommodation can be used across the wider prison estate. 
Shane Ardern 
: When will the new cells be available to house prisoners and why is the increase necessary? 
Hon JUDITH COLLINS 
: The tender process for the construction will commence immediately and it is expected that the new cells will be ready to house prisoners by March next year. The increase is necessary because this Government has no choice. We have inherited a capacity crisis from the previous Government. Its failure to plan means that the number of prisoners will soon exceed the number of beds available in our prisons. 
Drinking Water Assistance Programme—Community Funding 
10.  
BRENDON BURNS (Labour—Christchurch Central) 
 to the  
Minister of Health 
: Can he confirm that his review of the Drinking-water Assistance Programme to see whether it “aligns with Government priorities and provide(s) value for money in the health sector” will mean only the poorest of communities will soon be eligible for already funded money to make their water safe to drink? 
Hon TONY RYALL (Minister of Health) 
: 
 It is not clear what the member means by “the poorest of communities”. The programme is already weighted to more deprived communities over more prosperous communities. As I have said from the very beginning because we inherited $160 million of unfunded health services from the previous Government and $600 million of capital requests with little to meet those requests some programmes will be stopped some will be changed and some will be deferred. 
Brendon Burns 
: Has the Minister alerted his ministerial colleague the Minister of Maori Affairs that a $1000 per capita ceiling on contributions is proposed meaning that many small marae will be unable to bring their drinking water up to World Health Organization minimum standards or is this just another example of the Government ignoring Maori? 
Hon TONY RYALL 
: I have had discussions with numerous colleagues on this matter including Minister Turia in particular. We have inherited a situation whereby this very important drinking-water subsidy is based pretty much on a “first come first served” basis. What concerns me is that a lot of lower-income communities many of them represented by members opposite may not be in a position to get those funds compared with communities that are more advanced. If the member wanted to represent many of those poorer communities he would be concerned that the scheme currently runs on a “first come first served” basis. 
Dr Paul Hutchison 
: Is the Minister aware of any other subsidy schemes that are limited to the poorest communities? 
Hon TONY RYALL 
: Yes I am as a matter of fact. The previous Labour Government announced extra funding for sewerage subsidies in Budget 2008. They were specifically targeted to those who were ranked 7 and above on the deprivation index. We have to note that in health the deciles are the reverse of those in education which means that the previous Government wanted to target the poorest communities. I have no doubt that the member opposite does not want to subsidise water schemes for the richest coastal communities while poor people miss out. Mind you his leader wanted to pay the unemployment benefit to millionaires. 
Brendon Burns 
: Has the Minister consulted Local Government New Zealand which supported his earlier 3-year moratorium on meeting minimum drinking-water standards because of the costs but which now faces losing subsidies that the previous Labour Government put in place to assist it to make water safe? 
Hon TONY RYALL 
: There is an allocation of funding. The subsidy is already targeted but some communities are better prepared to apply for money than others. This Government wants to avoid the risk that many needy communities will miss out. That is part of our consideration together with the quite substantial financial pressures that we inherited in the health portfolio. I remind the member that we came to office with $160 million of health services for which there was no money. 
Brendon Burns 
: Does the Minister still maintain that providing safe drinking-water is a local government responsibility and how can he say so when the Government commits to meeting minimum standards delays them for 3 years and then cuts already established funding to help councils and small communities meet the world standards his Government is committed to meeting? 
Hon TONY RYALL 
: The problem with the member’s question is that members of the previous Government went around the country saying: “We’re going to apply these much higher water standards and we’ll subsidise you to do it.” but it turned out that the cost of that for local government was many hundreds of millions of dollars more than the previous Labour Government pledged. We are trying not only to make sure that the most disadvantaged communities in New Zealand are assisted but also to ensure that communities are given time to assist with their planning in this area. Things are very tough for many of our poorest communities and I do not think they want a substantial increase in their rating burden at this time. 
Brendon Burns 
: Will the Minister accept that when a serious outbreak of water-borne illness occurs he will not be able to wash his hands of responsibility? 
Hon TONY RYALL 
: As the member knows responsibility in that area rests with local government. There is still a requirement on local government or water suppliers to take remedial action where they want to. I would be surprised if the member truly believes that we should have a water subsidy scheme for millionaire communities. If that is what Labour wants it is not what it did in 2008 but it is consistent with Phil Goff’s pledge to pay the unemployment benefit to the wealthiest New Zealanders. 
Treaty of Waitangi—Settlement Progress 
11.  
SIMON BRIDGES (National—Tauranga) 
 to the  
Minister for Treaty of Waitangi Negotiations 
: What progress is the Government making towards its goal of settling historical Treaty claims by 2014? 
Hon CHRISTOPHER FINLAYSON (Minister for Treaty of Waitangi Negotiations) 
: 
 Tomorrow the Prime Minister and other Ministers will be attending the apology ceremony with affiliate Te Arawa iwi and hapu where the Prime Minister will formally deliver an apology on behalf of the Crown for breaches of the Treaty. The apology marks the completion of the affiliate Te Arawa iwi and hapu comprehensive Treaty settlement process. Te Pumautanga o Te Arawa and the Crown will be able to move forward together building a new relationship and a new future having settled the past. 
Simon Bridges 
: What other progress has the Government recently made towards its goal of settling historical Treaty claims by 2014? 
Hon CHRISTOPHER FINLAYSON 
: This week the Government introduced the Ngati Apa North Island Claims Settlement Bill and the Whanganui Iwi (Wanganui (Kaitoke) Prison and Northern Part of Wanganui Forest) On-account Settlement Bill. This follows on from the recent passing of the Taranaki Whanui settlement legislation the signing of joint terms of negotiation with the Nga Punawai o te Tokotoru iwi the signing of terms of negotiation with Ngai Takato the transfer of assets to Central North Island Iwi and the signing of an agreement in principle with Ngati Whare. 
Simon Bridges 
: What support has the Government received in reaching these and other recent milestones in Treaty settlements? 
Hon CHRISTOPHER FINLAYSON 
: I have received invaluable support from the Maori Party whose members are extremely committed to progressing Treaty settlements. With their support I have been able to secure an extra $22 million in this year’s Budget to help speed up Treaty settlements; additional claimant funding especially for those claimant groups not eligible for Crown Forestry Rental Trust funding; and promoting greater use of chief Crown negotiators and independent facilitators. Those initiatives sit alongside the two Treaty settlement hui I hosted alongside the Minister of Maori Affairs this year. Together we are committed to a process that enhances the mana of the Crown and of claimant groups and makes up for the shameful performance of the previous Government. 
Dairying—Use of Palm Kernel for Stock Feed 
12.  
SUE KEDGLEY (Green) 
 to the  
Minister of Agriculture 
: Does he share the concerns of the New Zealand Grain Council that New Zealand’s use of a million tonnes of palm kernel to feed dairy cows is “aiding and abetting the destruction of the South East Asian jungle habitat” and the concerns of Federated Farmers that “palm kernel is also threatening the viability of [New Zealand] maize production for stock feed”; if so what course of action will he take to address these concerns? 
Hon TIM GROSER (Minister of Trade) 
 on behalf of the  
Minister of Agriculture 
: The Government is extremely concerned about the destruction of rainforests and indigenous forests whether in Sumatra or in any other place on the planet. The short-term surge in the waste product palm kernel as a consequence of the drought is functionally irrelevant to any long-term solution. The long-term solutions lie in careful diplomacy internationally around illegal logging sustainable certification procedures which are—a plethora of them—lacking robustness and most interestingly of all progress on the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries which will give developing country economies an alternative stake in their forests. 
Sue Kedgley 
: Does the Minister agree that New Zealand dairy exports are sold overseas as being clean and green with cows being fed on grass pastures and that if consumers realise that our dairy herds are one of the largest consumers—consuming a quarter of the world’s supply last year—of a product that is causing the destruction of the last great rainforest in the world and that is destroying the habitats of endangered species such as the orang-utan it will seriously damage the image of New Zealand dairy and other agricultural exports? 
Hon TIM GROSER 
: Ninety-nine percent of the feed of the dairy industry according to the advice I have received is still pasture. There was a temporary blip because of the drought. But the one thing of which I can assure the member is that the Government and I absolutely agree that the long-term sustainability branding image of New Zealand needs further work. This is a work in progress. 
Sue Kedgley 
: Can the Minister confirm that we imported 400000 tonnes—equivalent to 800 million packs of butter or 73000 large elephants—in 2007 before the 2008 drought; and that we continued to import a quarter of a million tonnes in the first 4 months of this year so that whatever way we look at it we are importing huge amounts of a feed that destroys the rainforest and the habitats of endangered species like the orang-utan poses a biosecurity risk in New Zealand and hurts Kiwi farmers? 
Hon TIM GROSER 
: I cannot confirm without further advice the exact ratio for converting kernel imports into elephant-tonne equivalents but I can certainly confirm that we are encouraging the industry to continue to move towards greater sustainability and working on the underlying problems that the member is concerned about through the proper international processes. 
Hon Damien O’Connor 
: Does the Minister consider that contaminated containers of palm kernel and the other 600000 containers that passed through New Zealand ports without any physical inspection over the last year pose a serious risk to New Zealand biosecurity; if so how does the sacking of 60 skilled front-line people from his department help reduce that risk? 
Hon TIM GROSER 
: I can confirm that the advice I am receiving is that the Ministry of Agriculture and Forestry’s biosecurity division investigated those imports. There was fumigation and the situation is fully under control. 
Sue Kedgley 
: Is the Minister aware of an AgResearch report from May 2006 that concluded that toxin-producing moulds in palm kernel shipments could “affect the health of animals if consumed over extended periods of time be passed into milk therefore pose a threat to human health.” and “even small quantities of leucotoxins present in dairy and meat products could lead to difficulties in exporting primary produce and create an export issue for New Zealand’s dairy industry.”? 
Hon TIM GROSER 
: I am personally not familiar with that particular toxic mould but I am confident that our scientists are. 
Sue Kedgley 
: Given consumers’ strong reaction to the news that Cadbury’s was using palm oil in its chocolate is the Minister concerned that the international reputation of Fonterra and indeed of New Zealand’s “100% Pure New Zealand” image could suffer if it is known that our dairy farmers are one of the largest consumers of palm kernel and consumed a quarter of the world’s palm kernel last year; if not why not? 
Hon TIM GROSER 
: No I am not familiar with what goes into Cadbury’s chocolate. But I must congratulate the company on its adoption of fair trade policies recently in respect of its cocoa. 
Sue Kedgley 
: I seek leave to table a letter from the New Zealand Grains Council outlining its concerns about the impact of massive palm kernel imports on the grain industry’s viability. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is none. 
Document by leave laid on the Table of the House. 
Sue Kedgley 
: I seek leave to table an internal report from AgResearch dated May 2006 showing that fungi in palm kernel is harmful to cows and humans who consume milk products as well as containing biosecurity risks. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is none. 
Document by leave laid on the Table of the House. 
Sue Kedgley 
: I seek leave to table a letter from Biosecurity New Zealand to Federated Farmers dated 17 February 2009 showing that palm kernel imports into Bluff contained maize seed that had to be destroyed which has prompted a review of biosecurity risks from palm kernel. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is none. 
Document by leave laid on the Table of the House. 
Sue Kedgley 
: I seek leave finally to table a second letter from Biosecurity to Federated Farmers dated 14 April 2009 confirming that 106 insect identifications were found in palm kernel including biosecurity risk organisms. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is none. 
Document by leave laid on the Table of the House. 
Taxation (International Taxation Life Insurance and Remedial Matters) Bill 
In Committee 
Debate resumed from 26 August. 
Part 1 Amendments to Income Tax Act 2007 ( 
continued 
)  
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 In a rare show of unity in the Chamber it is common ground that it is my turn. I forget who it was who said something like: “I would have written a short article if I’d had the time but I didn’t so I wrote a long one.” 
Hon Members 
: Winston Churchill. 
Hon DAVID CUNLIFFE 
: Thank you. Someone had a better private school education than me I fear. 
This is it: the longest and no doubt densest legislation in the tax area since the rewrite. Yes that excludes the rewrite—the Minister of Revenue is nodding. This legislation is the product of a process where we did not have time to write a short bill so we wrote a long one. Every page of this bill is complex technical tax legislation. But in my 10 years in this Parliament I regret to say that I have never seen a worse process for bringing a bill to this House—never in 10 years. That is not to say that the substance is not in general worthwhile and with the exception of Supplementary Order Paper 34 Labour will be supporting this bill. We do so because the bill had its gestation in the previous Labour Government and has been brought to fruition by the same officials under this Government. 
There is broad consensus on the aims and purposes of the bill: to modernise our international taxation and our associated persons rule and to put through some consequential amendments and clarifications. But we have been unduly reliant upon the professional advice to the Finance and Expenditure Committee and I think it is a fair comment to say that all members of the select committee share a certain sense of consternation that in this “phone book” there lurk dangers of which we are not yet fully apprised. I have to say that the rush was compounded by the Government in setting before this House an unduly fast report-back date for the select committee and that put immense pressure on officials. It meant that on the day of a meeting the select committee was receiving reports that members had not had the opportunity to read the night before which frankly is not good practice for this House especially on a matter as technical as this. 
To add insult to injury we have come to two substantive Supplementary Order Papers which have been tabled in this House since the bill was brought forward. We will be voting against Supplementary Order Paper 34 dated Tuesday 4 August. There are a number of substantive matters in there including in particular the use of mortgage-backed securities and their tax consequences information about which the select committee never received. These things are not developed in a vacuum nor are they developed in the few weeks between the deliberation on the main bill and the presentation of the Supplementary Order Paper. I warrant that officials had these matters under consideration while they were briefing the select committee on the rest of the bill but no mention was made that a 52-page Supplementary Order Paper would be forthcoming. When the main bill is an incredibly truncated and complex process that is simply inappropriate. We will be voting against this Supplementary Order Paper not primarily because of its substance but because of this terrible terrible process. 
I would recommend that the Supplementary Order Paper be sent back to the Finance and Expenditure Committee for proper consideration in the normal way. Whether or not the Government will agree to that—and I invite the Minister to take a call—let me say that the risk that is borne from the detail in this “phone book” being wrong is risk that is borne by the National Government because it is the National Government that is rushing the bill through the House. As the effective dates of this bill have been changed by recommendation of the select committee because it was already apparent that the bill could not possibly meet the start of the tax year deadline I ask why we did not push the dates out far enough so that the select committee could give proper and due consideration to these matters. That is the key question. The point is that we are changing the effective implementation dates anyway. 
My colleagues on the Finance and Expenditure Committee are going to be taking a number of calls on the substantive issues that are raised in the bill. I will mention just three very briefly. The first is the associated persons rule. It is a longstanding part of our tax law that parties associated with a company must be co-liable for certain aspects of its tax liability. That rule has by consensus been too broad so this legislation by consensus narrows the associated persons rule. It does so having had detailed feedback from officials and on that point the committee did spend sufficient time to reach a good point. 
The second aspect I will mention concerns the international tax rules. For many years now the “grey list” has been an archaic convention based upon the idea that there were certain countries whose tax laws were similar to our own and could be treated in a much more equivalent way and other countries for whom we needed different and specific provisions. This bill updates a great deal of the complex tax law around our international taxation and the use of the “grey list” and within that a number of issues cropped up. I will mention one around the tax treatment of petroleum mining—an issue I understand that the Minister has given substantial thought to and around which there was some discussion at the select committee table—which is the need to ensure that there are not any unintended consequences should it prove in the fullness of time under the common law that there are pre-existing contracts that predate 4 March 2008. I think it was a commonly held view of committee members that we would not want any established pre-existing contracts to be caught by that rule to the detriment particularly of New Zealand companies. I invite the Minister of Revenue to confirm in his remarks whether indeed a contract that does exist before that date is a matter of common law and is not a matter for the particular deliberation of this House. 
I say in summary that this bill is a “phone book” full of important detail. Upon the interpretation of this detail rests the age-old game of poacher and gamekeeper where companies pay high-priced tax lawyers to find a way around what is written in this document and we pay officials to ensure that the integrity of the tax base is maintained and that the equity of the treatment of taxpayers is maintained with it. The point is that it is unfortunate at the least to say that the largest tax bill in New Zealand history outside of the rewrite has been rushed through this House to the detriment of the quality of the consideration of the Finance and Expenditure Committee. This process has been a low point of legislative practice and as a token thereof we will vote against Supplementary Order Paper 34 although we support the intent of the bill. 
JOHN BOSCAWEN (ACT) 
: 
 The Taxation (International Taxation Life Insurance and Remedial Matters) Bill is a very big bill and it took many months of consideration. When Mr Foss rose to speak on the bill last night the first thing he did was acknowledge the work of the officials. I also acknowledge their work in particular that of the deputy commissioner of policy advice of the Inland Revenue Department Robin Oliver. 
Mr Cunliffe referred to the taxation of petroleum companies and raised the concern that in respect of petroleum companies in particular some unintended consequences may arise out of pre-existing contracts. I put on record a circumstance relating to one particular taxpayer which has been the subject of discussions of members of the Finance and Expenditure Committee over the last couple of weeks and in particular the last 2 or 3 days. 
A New Zealand taxpayer called Greymouth Petroleum had been looking to explore for oil for the benefit of its own shareholders and for New Zealanders generally. In October 2007 it lodged a bid with the Government of Chile. It bid for five petroleum exploration blocks and put up five bonds of US$100000 each. Five weeks later on 16 November having lodged the tender on 10 October Greymouth Petroleum was advised by the Chilean Government that it had been successful in respect of four of those blocks. At that time the Chilean Government released it from its tender in respect of the fifth block but retained the four bonds of US$100000. 
On the basis of those bonds Greymouth Petroleum was obliged to complete the formal contract with the Chilean Government which it did on 30 April 2008. The key thing is that as at 16 November there was an absolute commitment on behalf of Greymouth Petroleum to complete the contract. Had the company not done so the most immediate consequences would have been that it would have forfeited those four US$100000 bonds it would have exposed itself to being sued for breach of contract and of course it would have suffered a massive lost of reputation both for itself and for New Zealand generally. 
The concern amongst members of the select committee has been that between 16 November when the company was advised that it had been successful in its tender and 30 April when the company formally signed the contract the New Zealand Government announced on 4 March that the law was to change. Although the contract had not been officially signed the key point is that without doubt there was a binding commitment from Greymouth Petroleum to enter into the contract. Members of the committee and certainly members of the ACT Party have been particularly concerned that if we were to pass the bill in its current form an element of retrospective tax liability may have accrued to Greymouth Petroleum—as Mr Cunliffe said there would be unintended consequences. 
I have been working on a Supplementary Order Paper over the last 3 or 4 days. I discussed it with various members of the select committee and it had been my intention to put forward that Supplementary Order Paper. I sought support from all members of the House including the Minister of Revenue. But I understand that in recent days there have been discussions between representatives of Greymouth Petroleum and the officials of the Inland Revenue Department and I understand that the department is now satisfied that there was a binding commitment from Greymouth Petroleum. Although the contract had not actually been signed when the law changed without doubt there was a liability on Greymouth Petroleum having been advised that its tender had been accepted to complete the contract. Certainly I know that the Inland Revenue Department is absolutely satisfied that had Greymouth Petroleum not done so then it would have lost its US$400000 in bonds. There would have been a huge cost to Greymouth Petroleum if it had not completed the contract it is bound to. 
I understand as I said from Greymouth Petroleum officials that the Inland Revenue Department has given some comfort in this regard so I do not intend now to put forward my Supplementary Order Paper. I am optimistic that the matter will be resolved to the satisfaction of both Greymouth Petroleum and the Inland Revenue Department. That is all I have to say at this stage. Thank you Mr Chair. 
DAVID BENNETT (National—Hamilton East) 
: 
 In relation to the Taxation (International Taxation Life Insurance and Remedial Matters) Bill I think that the first point that all members of this Committee would agree on is that we should acknowledge the hard work of the officials and thank them for the support they gave to the Finance and Expenditure Committee. It is a tremendously big bill on a very complex subject area so we were very grateful for their advice and wisdom. 
However I disagree with Opposition members. They feel the bill is beyond the scope of Parliament and it has been rushed through. That is simply not the case. The reality is that with any kind of legislation dealing with taxation matters that are complex and engaging parliamentarians find it difficult because they do not have the experience that tax officials have. We had specialist tax officials who basically spend their whole lives on this kind of legislation trying to find holes in it and trying to understand it. Even they admitted that they do not understand everything about taxation legislation in this area so heaven knows how politicians are supposed to know everything about anything. 
It is a matter of concern when Labour members try to be detrimental about the nature of this legislation and say that it has not been through a thorough process when it has. We had the best legal minds that we could engage to do that. With their help and the help of the Inland Revenue Department we came to the conclusion of this bill. Taxation legislation in this area is not something that is easily maintained in a watertight container. There is always room for tax lawyers and accountants to try to take advantage of the legislation and that perennial problem will go on for ever and a day. Probably the only way to avoid that is to have a huge rewrite and restructure of the way we do taxation law and that was well beyond the scope of this bill and of the select committee at this stage. 
However some fundamental concepts were considered by the select committee. I will touch on just a few of them because they are important for those who are looking at taxation law in this area going forward. One of them was the active business test for controlled foreign companies commonly known as CFCs. The active business test is an important process in working out whether any income will be attributed to New Zealand residents. 
Hon Maurice Williamson 
: Don’t CFCs make holes in the ozone? 
DAVID BENNETT 
: No they do not make holes in the ozone; they are controlled foreign companies. Another part of that important test is the definition of passive income. For the layperson out there passive income is income like interest and dividends that one does not have to work to earn. 
Hon Member 
: The Labour Party would know about it. 
DAVID BENNETT 
: They know about being passive but they do not know about income. That is probably why they could not understand the legislation. Some of the terminology resonated with them but some of it did not. The definition of passive income for controlled foreign companies is an important concept that was looked at in this legislation. 
Some of the other things in the legislation are interest allocation rules for outbound international investment foreign dividend exemptions for certain companies and other tax measures regarding conduit tax relief in “grey list” countries. David Cunliffe one of the members opposite mentioned the “grey list”. It has been a source of great favour for many law and taxation students for many years and now it does not have the same ability to stress their minds as it had in previous generations. The taxation of life insurance business was another key component of the legislation. It is a very important business and it is very complex because many structures are engaged when it comes to people’s life insurance matters. There was also some subsidiary policy around reallocation payments and payroll giving. 
One of the big things the select committee considered was changes around the definition of associated persons. Associated persons is an aspect where tax lawyers will engage themselves in trying to work out scenarios where they can get through the boundaries that this legislation now presents for them. Some innovative schemes will arise. It is just a matter of time before the Government and the Inland Revenue Department become aware of those schemes and will have to change them again but that is life and taxation. 
STUART NASH (Labour) 
: 
 First of all I acknowledge the presence of Emma and Jim and Robin who was here before from the Inland Revenue Department as has been mentioned by I think everyone. 
Simon Bridges 
: What about me? 
STUART NASH 
: No I say to Mr Bridges that he does not warrant a mention I am afraid. But on behalf of everyone on the Finance and Expenditure Committee I say that the officials did a fabulous job as has been mentioned and we thank them very much. 
As a new member of Parliament I found that this Taxation (International Taxation Life Insurance and Remedial Matters) Bill was a brilliant bill to start select committee life on. That is a perverse sort of thing to say but I mean that I believe that select committees ought to go to bed at 2 a.m. set the alarm for 5 a.m. and then get up; that is what it was about. To have this bill over but to now get reading lists of such a size makes me realise that that seems like nothing now. So I go to bed at 1 a.m. and get up at 5 a.m. and I am fine. As my colleague the Hon David Cunliffe mentioned this is a very very large piece of legislation. 
I speak in support of the bill but I will quickly outline the purpose and objectives of tax legislation if I may. First and foremost tax legislation has to be effective and it must not hinder growth. Secondly there must be equity. By that I mean we must look at who bears the burden of taxes. A bill of this size is slightly less relevant to the majority of ordinary income-earning New Zealanders but it is still very important for those who are affected by the provisions in it. Thirdly the bill has to have fiscal integrity. By this I mean that tax legislation cannot provide incentives for people to restructure their affairs in order to perpetrate tax avoidance. Fourthly there must be compliance in administration. Citizens must understand their rights and must be able to access the information that allows them to be informed of their rights. Compliance costs should be kept to a minimum without compromising the integrity of the system. Finally any tax legislation needs to take into account the fiscal implications and by this I mean how much revenue the Government will gather or how much it will miss out on by the implementation of any tax law. 
When the Finance and Expenditure Committee approached its deliberations on this bill we members had to take into account all of these points. I think that is what Mr Cunliffe was saying in the sense that when we had a bill that was so large so wide and so varied at times select committee members certainly on the Labour side felt there was not enough time to give proper and effective deliberation to many of the important clauses in the bill. I reiterate however that due to the size of the bill its depth and our time constraints it was difficult to give each separate clause its due consideration. I do believe that. This is why we have some concerns over the Supplementary Order Papers which were not put before the committee for consideration or for expert opinion. That is why we are reluctant to support those Supplementary Order Papers as my friend David Cunliffe mentioned. 
After having said that I will talk about an area of international tax law. To read out the clauses in this bill that affect international tax law would take about 5 minutes anyway. There are over 100 clauses there; members do not all know the legislation but they should believe me. The area is incredibly complex and probably deserves more attention for the reasons given. We quite quickly get into layers of complexity that reflect the ongoing game of poacher and gamekeeper. Many private entities hire very very expensive and the best tax advisers to ensure that their tax is minimised so that their tax efficiency is maximised. The Crown’s officials are required to stay one jump ahead of that practice which is why the advice from our expert consultants was so valuable in the deliberation of this bill. But the bill still strikes a reasonable balance between the need to remain internationally competitive which is vital to the sustainable growth of the economy and the need to provide clear rules that will allow the tax base to be preserved. 
I will go through just a couple of things in the bill. The bill will ensure that key provisions relating to controlled foreign companies—CFCs as Mr Bennett outlined—are set in one place in legislation. That will hopefully make the rules more accessible. The bill puts in place technical amendments to the accounting-based active business test for controlled foreign companies to reduce the cost of applying the test. The bill also provides that for the purpose of the tax-based active business test consolidation is permitted only when a taxpayer has income interest of more than 50 percent in each of the controlled foreign companies to be consolidated. These things are reasonably technical but are in fact very important for controlled foreign companies. The bill provides that income from personal services that are not essential support for a product supplied by a controlled foreign company is attributed but then is disregarded for the purposes of the active business test. We recommend that currency conversion rules also apply to the active business test. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I take a call at this stage just to highlight what a number of members have referred to already which is the significant nature of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. I will then comment on the matters that another speaker raised earlier on. 
I cannot let the criticism that this bill was somehow rushed go unchallenged. The bill was introduced in July 2008; admittedly a general election intervened. The submissions were all called for and received by the previous Finance and Expenditure Committee. The new select committee began work on the bill early this year. To have a bill reported back by August 2009 in that context no matter its significant weight is not in my view rushing legislation. It was not rushed for this reason as well: many of the issues that this bill contains have been the subject of a long period of gestation and public consultation. The international tax rules changes have been the subject of review consultation discussion and debate since at least 2006 and by the time the proposals came to be incorporated in the bill and referred to the select committee most of the major issues of principle had been resolved and the committee’s work was in essence around the drafting and the detail. So I do not think it is fair to claim that the process was rushed. Similarly the life insurance rules are long overdue for reform. Again those changes had gone through a process that included a discussion paper an issues paper and technical consultations over a long period of time before finding their way into this legislation. Even as that process was continuing discussions with interested parties were ongoing. Issues such as payroll giving had been foreshadowed as early as 2006—also in a discussion document—and had been included and worked through. 
In recognition of the fact that an election had intervened and a change of Government had taken place I wrote to the select committee—I cannot remember precisely when but some months ago—recommending that it give consideration to changing a number of the application dates which originally were to be 1 April 2009. I am grateful for the committee’s acceptance of those recommendations because I think they give taxpayers who will be affected by the changes a greater degree of comfort and time to adjust to the significance of them. 
I now turn to the points made by Mr Boscawen in particular relating to petroleum mining situations. I say at the beginning that I will not discuss the affairs of any particular company. I think it is extremely unwise in tax debates in this Chamber to start drawing the circumstances of individuals or of companies into public debate. Those matters are worked through with officials and with the appropriate authorities. What I will say—and in this instance I have said this to the company involved on a number of occasions in the last few months—is that once this legislation is passed I am more than happy for it to work through with the relevant tax policy officials in its particular instance precisely what their contractual obligations were and the implications that arise from those obligations. 
Hon David Cunliffe 
: On principle of retrospectivity. 
Hon PETER DUNNE 
: I will come to that point in a moment if I may. I am not prepared to say more than that at this stage because that is then bringing that company’s affairs to the floor of this Chamber which I think is grossly inappropriate. 
The member interjects: “On principle of retrospectivity.” The position in the bill is quite straightforward. On 4 March 2008 we announced a change in the regime. My understanding is that everyone in the Chamber agrees with that particular change. We indicated when the bill came in in the middle of 2008 that the change would be retrospective if you like to the date of the announcement—4 March 2008. As I understand it everyone agrees with that position and the signal that was sent. The question that arises is with regard to that period of indeterminate length prior to 4 March 2008. I am saying in respect of this company in this particular instance that they need to start talking to officials about how they are affected contractually by the change in the law and as I said before what the implications of that change might be for them. I am not prepared to discuss on the floor of the Chamber the ifs and buts that might arise from that and the technical details of that case because it is simply not appropriate for me to do that. 
Hon David Cunliffe 
: What about at a principled level? 
Hon PETER DUNNE 
: I think we need to be very careful about drawing that line too tightly because of the nature of the rules that were in place prior to 4 March. I am saying that anyone who feels that they have been caught by this change should once the law comes into effect talk with the Inland Revenue Department to determine how they might be affected and what the implications for that company might be. I offer that advice in respect of the particular company Mr Boscawen referred to and any other companies who may feel that they are in a similar situation. I am not prepared to go beyond that for reasons I think would be obvious to members. 
These are always quite difficult areas to draw boundaries. In this instance there is a considerable elapsing of time between the drawing of that boundary and the passage of this legislation. I would have thought that people who thought they might be affected would be talking about these issues far earlier than the last few weeks when the legislation comes before the House. I make that observation. I also make the point about the action I think is available to those who think they might be affected. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I am very pleased to rise in the Committee stage of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. I firstly acknowledge the huge contribution of officials to the bill in its passage to this point. If the Finance and Expenditure Committee and parliamentarians are pleased to see the bill in its latter stages I can only believe that the Inland Revenue Department and other officials are delighted to see this mother of all bills start to make its way through the process. 
I take a slight point of difference with the Minister in the chair in respect of the issue of the size scope and rushed nature of this bill. I quote from our select committee report in respect of the bill: “The size of the bill and the depth and breadth of the material it covers have made our consideration more difficult than it might have been otherwise. In trying to meet the report due date for the bill we and our committee consideration processes have been put under considerable pressure. We do not consider it desirable to put a number of very distinct and significant proposals into one bill simply because they relate to one area of law.” I think that deserves some underlining. Particularly in a select committee where most of the members were new getting to grips with a hugely complex bill in a matter of just a few months certainly presented its challenges. Unfortunately that situation will inevitably present itself again in this Parliament because of the process and the complexity. We will revisit some of these issues; that is already signalled by a significantly sized Supplementary Order Paper that the Minister has indicated and I also propose to table a Supplementary Order Paper later on. 
That said the bill is important legislation making changes to the area of taxation law. It provides for significant reforms in a number of areas including international tax rules. It aligns life insurance taxation rules closer to the accounting treatment of life insurance profits. It provides for payroll giving. I am particularly pleased to see this measure in the bill at a time when charities in this country are under considerable pressure. The capacity for good-natured people to be able to pay charities through their salary and payroll on a weekly fortnightly or monthly basis is good for them and certainly good for the charities they wish to support. The bill also tackles the complex area of associated persons; I will comment a little more on that area in a moment. It erases tax thresholds for compliance costs for small and medium businesses. It deals with the tax treatment of revocation payment and overtime meal allowances clarifying it for employees. 
Labour supports this bill and has done all the way through. But again I note that when we have large and complex legislation we compound problems for ourselves as a Parliament and a nation. The process was not perfect because of the breadth and depth of the bill at 800-odd pages. Even if this is how it had to be it is a reality that the National-led coalition Government will bear the unintended consequences of the fact that some of these issues have not been given the scrutiny they truly deserve. 
I turn now to the issue of associated persons. This aspect of the bill received considerable scrutiny from the select committee as time provided. We wrestled with the risk that in relaxing the rules it would be possible for the resulting law to not catch people who should be caught by an associated persons rule. We all acknowledge that in the implementation of this provision that will be very important and ongoing supervision and monitoring by officials will be vital. I guess the reality of tax law is that no matter how one writes or defines it—no matter how well one does that job—there is an army of people whose job it is to provide the loopholes and exploit them on behalf of clients. Certainly in this area they are already at work no doubt. But we have proposed amendments to reduce uncertainty and to narrow the scope of the proposed test on associated persons to exclude truly arm’s-length transactions. Narrowing the scope of the tripartite test excludes relatives from that test and creates an additional exception to the test relating to companies. We also recommend that the test not apply for the purposes of land provisions. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I am still reeling somewhat from the lecture given just before by the Minister in the chair the Hon Peter Dunne on correct parliamentary process. I note that in the Taxation (International Taxation Life Insurance and Remedial Matters) Bill there is no minority report despite the fact that there appears to be some disagreement on aspects of the bill across the House. I wonder whether that is because the minority report was removed in between the committee deliberating on the bill and it being reported to the House. 
Craig Foss 
: I raise a point of order Mr Chairperson. We are in the Committee stage. We are talking on Part 1 not the commentary on the bill. I know there will be introductory remarks but I wonder whether the member could move back to Part 1. 
The CHAIRPERSON (Lindsay Tisch) 
: No the commentary is part of a general discussion. 
CHRIS HIPKINS 
: For the member’s benefit I say that the commentary is on the entire bill including Part 1. 
There is no mention of a minority report within the commentary which covers Part 1 so I wonder whether a minority report was actually written. It could be that there was not a minority report or it could now be part of the practice of this House for the minority report to be removed between when the committee deliberates on the report and when it is tabled in the House. That appears to be correct parliamentary practice for this National Government as revealed in the House at question time this afternoon. 
This bill makes amendments to the Income Tax Act 2007 and as my colleague David Cunliffe pointed out earlier the Labour members are very concerned at the rushed nature of this bill. As we know from past experience rushed taxation bills in this House make for bad legislation which we quite often have to come back to and correct later on. When was the last time Parliament rushed through significant changes to the Income Tax Act 2007? I believe we will find that it was in December of last year when the National Government implemented its tax cuts promises which was its core election promise. Yet we found ourselves back in the House under urgency after having rushed those changes through in December prior to Christmas. Fewer than 6 months later we are rushing through a repeal. This highlights the fact that when taxation matters are rushed members end up with egg on their faces such as some of the National members who had quite a lot to say on income tax prior to Christmas when they were rushing through another taxation bill under urgency. National was trying to build trust with New Zealanders by implementing its core election promise of personal income tax cuts. Did National deliver on that promise? No it did not because having rushed the tax cuts through under urgency it then cancelled them 6 months later. 
National has very little credibility when it comes to taxation matters. We know that it simply breaks all of its promises and that is why it is all the more concerning that this bill is being rushed through the House. It has not been given proper consideration and we are concerned about that. It is somewhat humiliating for National members opposite when they have to come back to the House and correct mistakes that they have made on taxation legislation. As David Bennett said one cannot say yes to tax cuts before an election and then say no to them after an election. Yet that is exactly what National did. It made tax cuts the core part of its election manifesto and then it took them away again within 6 months. The National Government broke its promise because it does not believe in keeping its word to New Zealanders. Time after time we are seeing National breaking its promises. I think we are up to four out of 10 promises on the pledge card that have now been broken and I am in no doubt that there is more to come. 
It looks like the chairperson of the Finance and Expenditure Committee Craig Foss will take the next call on this bill and I certainly hope he does so. I hope he canvasses for us whether there was a minority report and if there was one whether it somehow fell out between the select committee’s deliberation and the bill being reported back to the House. I wonder whether the member has any observations on whether he thinks that would be appropriate. Other chairpeople of select committees seem to think that that is appropriate. I do not think that is appropriate and the Labour members do not think that is appropriate. We think that after a committee has deliberated on a bill the chairperson of that committee should report the bill back to the House as it was deliberated on. 
To come back to the intent of the bill I say that it provides for the reform of international tax rules it aligns life insurance taxation rules more closely with the accounting treatment of life insurance profits and at the same time it extends portfolio investment entity rules— 
JO GOODHEW (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
RAYMOND HUO (Labour) 
: 
 I rise to take a call on the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. This bill is so complex that almost all involved got wee wee’d up. The phrase wee wee’d up was invented by the oratorically gifted US President Barack Obama for when people get all nervous for no reason. I certainly got wee wee’d up for good reasons. The bill contains 824 pages. As the Hon David Cunliffe just pointed out it was a huge bill plus huge Supplementary Order Papers that had not even been sent to the Finance and Expenditure Committee at all. The size and the breadth of the bill combined with a tight report-back date put considerable pressure on the deliberation process. I appreciated what the Hon Peter Dunne just explained but it is fair to say that to some extent this is a rushed bill. 
Part 1 of the bill amends the Income Tax Act 2007. There are 431 clauses in Part 1. Some major issues are covered in this part such as emissions units under the Climate Change Response Act 2002 life insurance regimes rules for multi-rate portfolio investment entities associate persons etc. The committee recommends changing the application dates proposed in the bill to sufficiently allow for the progress of the bill through Parliament. Certain amendments were made in clauses 9 31 and 48 and in seven other clauses to provide for the tax treatment of emissions trading units. Most costs of emissions trading will be tax-deductible and the Government subsidy of emissions costs will generally be assessable. 
The specific taxation treatment depends on the emissions type. There are four such types Speaking on that point it is worth quoting what the chairman of the Environmental Defence Society Mr Gary Taylor said in the  
New Zealand Herald  
that the recent announcement by the National-led Government of a target of 10 to 20 percent reduction in greenhouse emission by 2020 was a big disappointment and continues a disturbing recent trend of bad decisions for the environment. 
More relevant to the various issues this bill aims to cover scientists say that developed countries need to reduce emissions by 25 to 40 percent by 2020. New Zealand is not yet even at the lowest point of that range with the offer announced by the Government. The overall costs to the economy of reaching the 2020 targets would be lower if we start now rather being forced to make big cuts later. Thank you Mr Chairperson. 
CRAIG FOSS (National—Tukituki) 
: 
 I move  
That the question be now put 
. 
STUART NASH (Labour) 
: 
 I would also like to respectfully disagree with the Minister of Revenue the Hon Peter Dunne. He said this bill was not rushed but I think the feeling of those on the Labour team is that there was not enough time to give considered deliberation to very important parts of the bill. I would also like to elaborate a little further on something that Peter Dunne David Cunliffe and John Boscawen have spoken about and that is do with petroleum mining rules. I would like to outline a bit about why we are implementing what we are implementing or suggesting in this bill. 
The current petroleum mining legislation allows an upfront deduction for exploration expenditure that is of a capital nature. This is to encourage petroleum exploration and development in New Zealand. It is becoming a very important industry for this country and these rules were put in place to encourage that. The primary reason though why we did not support limiting the scope of the proposed amendment is to ensure that New Zealand receives its proper share of benefit from New Zealand petroleum resources. Given the substantial increase in oil production in recent times the Government considers it is critical to protect the New Zealand petroleum mining base. I stand to be corrected when I mention this but I think a lot of this comes out of a very large multinational company that incurred significant expenses offshore but claimed expenses against New Zealand income in the millions of dollars— 
Hon David Cunliffe 
: Hundreds of millions of dollars. 
STUART NASH 
: In the hundreds of millions of dollar—that is my understanding. That was a loophole that needed to be closed off and that is why the matter was addressed in this bill. 
Petroleum mining generally involves large amounts of expenditure incurred by companies that operate in a number of countries. Two or three I think of the 10 largest companies in the world are petroleum mining companies. The reality is that these companies by their very nature have considerable flexibility over what jurisdiction they structure expenditure through. The costs of a significant foreign exploration or development programme could eliminate in New Zealand a petroleum miner’s tax liability on its New Zealand income. This is what did occur this is why we needed to address it reasonably quickly and it is why it has been addressed in this bill. 
This concern applies whether the company is owned by residents or non-residents. The current provision in the bill is in line with practice in a number of other countries such as the United Kingdom that do not allow foreign petroleum mining expenditure to be offset against domestic mining income. We are not leading in this; we are putting into place global best-practice tax legislation. 
The current tax treatment of petroleum mining expenditure is arguably concessionary. The concern is that the concession is not working as intended because some New Zealand - resident companies are in effect gaining a significant subsidiary from the New Zealand tax base for overseas petroleum exploration. Officials were alerted to taxpayers using foreign branches to shelter significant amounts of New Zealand petroleum mining income in late 2007 and the proposed legislation merely ensures that the concession is available only for the exploration and development of New Zealand’s petroleum resources. Clauses 71 74 93 and 97 relate to these changes. 
I would also like to talk about another area that the Minister mentioned and that is the taxation of life insurance businesses. The words “life insurance” are actually in the title of the bill so I think it is important that we discuss that as well. Minister Dunne has alluded to the fact that significant changes are being made to the life insurance business. Those changes result from work that began in July 2006. This has been an ongoing process it has been a consultative process and it is in response to submissions and comment received on two officials papers and one Government discussion document. 
In terms of this part of the bill wide industry consultation has been undertaken and the officials have released discussion documents and sought feedback. Life insurance companies carry on the business of life insurance and they are registered under their own Act the Life Insurance Act 1908 to write life insurance policies. 
JOHN BOSCAWEN (ACT) 
: 
 I would like to comment on what Mr Nash has just talked about. He talked about the reason for the change to the taxation of mining by petroleum companies arising out of a loophole in the legislation. Let us be absolutely clear that the ACT Party supports the decision to close that loophole. The ACT Party supports that decision and I believe that is the position of all parties in the House. As Mr Nash said we understand there was an incident where many hundreds of millions of dollars of expenditure were deducted against New Zealand petroleum income against the New Zealand tax base and that that loophole needed to be closed. The ACT Party is absolutely clear on that issue. However the ACT Party is also absolutely clear that there should be no retrospective tax legislation. A company should be able to plan its affairs based on the taxation legislation and not have the law changed so its tax position subsequently changes. 
I listened very carefully to the Minister’s comments when he said he certainly would not be commenting on individual taxpayers’ positions. He said it would be very unwise for him to do so. I think he also said it would be very unwise for other members of this House to do that. But I have previously alluded to Greymouth Petroleum and I want to talk for a few more minutes about that situation. I do so because Greymouth Petroleum is a New Zealand company that we should celebrate. It is a small petroleum-mining company and I understand it employs around 100 people. A lot of its exploration is in the Taranaki region. That company has gone out to South America and lodged bids for petroleum-mining rights in Chile. It has been successful in doing that against worldwide competition. That is the sort of thing that we should promote and support. I note that the then Minister for Economic Development in the previous Labour Government congratulated Greymouth Petroleum on winning and securing that tender and the right to explore for petroleum off the coast of Chile. 
The current Minister has been helpful by saying he wants to see evidence of contractual commitments and he talked about the need for Greymouth Petroleum to start talking. I think his words were that the company needed to start talking to officials. But the company has been talking to officials for close to 18 months. It was talking to officials about the taxation treatment of its mining exploration costs before 4 March 2008 when the law was changed. For example it wrote to the Inland Revenue Department on 4 May this year to advise that it had lodged its tenders on 9 October 2007 and it recorded the fact that it had issued a press release on 17 November 2007 advising it had been successful with the tenders. 
The ACT Party is concerned about a New Zealand company that has gone out on the worldwide stage entered into tenders posted what has since become a US$400000 bond then under fear of forfeiting that bond subsequently formally signed contracts. We should be in no doubt whatsoever that as of 16 November 2007 when the Government of Chile announced that the tenders had been accepted first the company was up for the loss of its US$400000 of bonds if it did not complete the work second it could have been sued for non-performance and for damages and third it suffered the loss of its reputation. One of the problems I understand that the Inland Revenue Department has had is that the contracts concerned are in Spanish and I believe a letter was delivered to the department yesterday. It was certified by a senior associate of Minter Ellison Silvana Schenone who speaks Spanish. That person certified what those contracts said. 
Let me finalise my speech by saying the ACT Party does not support retrospective taxation legislation. We are under no doubt whatsoever that there was a binding commitment on Greymouth Petroleum to proceed once those tenders were announced as having been accepted on 16 November 2007 which of course is some 4 months before the taxation change was alluded to. Thank you Mr Chairman. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I would like to comment in a moment about the amendments I have tabled in respect of clauses in Part 1 of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. But first I make the observation that a tax bill is no more the appropriate place to start commenting upon the individual tax affairs of a given mining company than it would be for a bill that reviews the operation of finance houses to be used to single out in the Chamber a finance house for praise. The issue I want to comment on relates to clause 69 and clauses 89 to 92 in Part 1. Those relate to the tax regime that will apply to films made in New Zealand and that have benefited from the Screen Production Incentive Fund which was established in the Budget last year. 
I first acknowledge the discussions that the Minister has entertained in respect of that issue and I appreciate that and also his making available officials to discuss those matters for us. But the Labour Opposition believes that there is an issue here that deserves to be addressed and we are attempting to do so through the amendments I mentioned. In essence the Screen Production Incentive Fund provides a 40 percent grant to New Zealand films. In the treatment of those films in terms of tax what is proposed by the bill in front of us is that any investor who invests in a film that receives what is known as a Screen Production Incentive Fund grant will not be able to claim any tax deductibility until after the film is made and then over a 2-year period. I think the logic of the officials is that where the Government is making a 40 percent contribution to a film then that effectively should be a sufficient contribution by the Crown. The issue that arises however is that the film industry is notoriously fickle; people either make a bundle or lose a bundle. They never really know what they are going to get; even Peter Jackson has been known to make a film or two that has not been a great hit. People who are prepared to be film investors and there are not that many of them are then having to wait 2 years to receive the deductions and most notably if the film is a flop which happens fairly regularly. 
The amendments tabled this afternoon propose that the tax regime applicable under this bill will exclude grants made by the Screen Production Incentive Fund. That would mean that investors who support films made using one of those grants will be able to benefit in the same way as investors who support other New Zealand films benefit such as those that are made using Film Commission money. Admittedly there is a difference between the two grant schemes. In one case it is a grant up front and in the other it is an investment by the Film Commission. In the latter case if the film makes money the commission gets a return; if it is a flop the commission has to wear that loss. Again I make the point that those who invest in the film industry are taking a punt; they often will lose money. 
We want to encourage our film industry; it is a great way to promote New Zealand. If investors are engaged in various other activities they are able to get the write-off for their investment in the year that the costs are incurred. So I encourage members opposite to consider these amendments. We were advised by officials that the amount of money is not large it may just make seven figures but it is something that the film industry believes will assist it in continuing to promote and expand the film industry. If people invest in the film industry and they have to borrow money to do so because of the high risks involved they sometimes have to pay 17 percent on money borrowed for films because there is not a lot of asset that it can be based against. Therefore the need for a tax write-off to offset those kinds of high interest rates is very high. I commend these amendments to the Committee. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 In taking another call on the Taxation (International Taxation Life Insurance and Remedial Matters) Bill I will firstly recap on two matters discussed earlier. The first is that I was at pains to stress the rushed nature of the process—and those comments still stand—but I omitted to acknowledge which I should have done the extensive and dedicated work of the officials the cooperation across the Finance and Expenditure Committee the excellent job the chair did under trying circumstances and the sterling work of the independent tax adviser Therese Turner and the drafting adviser David McLay both of whom did a very very good job for us in difficult circumstances. I would like to get that on the record. 
The second thing I will recap on briefly is the debate we have had about petroleum mining. I echo the statement made by my colleague Mr Burns that the Chamber is not the place for discussing the affairs of individual taxpayers and that the Labour Party like several other parties has refrained from doing so. However I also reiterate what we think are important principles that we hope following the comments made by the Minister of Revenue officials will take into account when considering the affairs of any taxpayer caught by this transitional provision. 
A long-held principle that is particularly important with regard to tax legislation is that we do not have non-taxpayer-friendly retrospective effects. There is a clear agreement that the effect of the rules as with all of the bill goes back to 4 March 2008. It is therefore a common law question for resolution if necessary about whether any particular taxpayer had a contractual situation that predated that point. If that situation can be established then my Labour colleagues and I take it—and I understand that this is the view of the Minister and I see officials nodding—that therefore the presumption at least is that it follows that any company in that situation would not be caught by the provisions that follow. That is a good starting point. I think we have an effective consensus at the level of principle that is independent of any particular taxpayer and that is all I will say on the matter in the Chamber. 
So many aspects of the bill merit consideration by the Committee that I hope it will entertain further discussion on them. I mentioned in my earlier brief contribution the “grey list” rules and the foreign tax review. That is a particularly important area for New Zealand when our current account deficit is climbing as steeply as it is and much of that deficit is made up of a financial deficit of about $8 billion out of $12 billion. It is therefore essential that we understand the impact of tax law on those financial flows. 
With regard to the substance of Part 1 the bill provides an active business test for controlled foreign companies. Controlled foreign companies that pass the test will not be required to attribute any income to New Zealand residents. Controlled foreign companies pass the test if less than 5 percent of their gross income is deemed to be passive income. The bill defines passive income. In the legislation it is referred to as the attributable controlled foreign company amount and it is central to the new controlled foreign company rules. 
The definition may apply in the first instance if the active business test is to decide whether a controlled foreign company is active or passive and thus whether it should be exempt from attribution. It is primarily used when the controlled foreign company fails the active business test and if that occurs then the controlled foreign company has to attribute its passive income as defined in the legislation unless the controlled foreign company is resident in Australia. It is an important principle underlying the redesigning of the rules that we need to reflect the special economic relationship with Australia and that harmonisation where practicable and in New Zealand’s national interest is desirable. 
I come now to the interest allocation rules for outbound international investment. Amendments are made to Subpart FE of the Income Act 2007 that extend the existing interest allocation rules to New Zealand residents. Interest allocation rules that have an income interest in a controlled foreign company have been extended unless the company has 90 percent or more of its assets in New Zealand or less than $250000 of interest deductions—that is in clauses 154 to 174 and clause 408. 
There is a foreign dividend exemption for companies. The bill provides in general an exemption from tax when most foreign dividends are received from companies and there are extensive clauses on that matter ranging from clause 5 in Part 1 through to clause 515 of Part 1. 
STUART NASH (Labour) 
: 
 I first speak in favour of the Supplementary Order Paper in the name of my colleague Brendon Burns on the Screen Production Incentive Fund. It comes down to a matter of principle and that principle is whether we believe that the film industry requires nurturing and growth as a special interest—that is whether it is important to the inherent nature and belief of our country. The issue around this is the ability to claim back expenses in the year they were incurred. Peter Jackson is often held up as the film-making guru but as we all know we have produced a lot of very competent and well-known film producers throughout the years. I suppose the question that has to be asked is whether these film producers would be where they are today if this industry had not been incentivised to the level it is. The film industry itself believes that they probably would not be. 
This amendment is fiscally neutral. As my colleague Brendon Burns has done I thank the Minister and Jim Gordon for conversations around this amendment. I think we all agree that this is a fiscally neutral position and I say to Jim that I think I am right in saying that. Perhaps I should say that the fiscal implications are very very small. So it really comes down to a matter of principle. Is this an industry that we want to nurture? I absolutely believe that it is. On that basis Labour certainly will be supporting Brendon Burns’ Supplementary Order Paper. 
As I started to say before I think it is important that we talk about the life insurance provisions in the Taxation (International Taxation Life Insurance and Remedial Matters) Bill considering that “life insurance” is actually part of its name. Significant changes are being made to the taxation of life insurance business. As I mentioned the changes are a result of work that began in July 2006 in response to submissions and comment received on two officials issues papers and one Government discussion document. So this issue has been out there a long time. The industry has had a lot of opportunity to comment on it—and they have done so through the select committee process—and it comes through a well-informed process. 
Life insurance companies are companies that carry on a life insurance business—that makes common sense—and are registered to write life insurance policies under their own Act which is the Life Insurance Act 1908. That is not quite as old as the Speaker’s ruling my colleague quoted before question time. When the current life insurance rules were enacted most of the large insurance companies in New Zealand were actually mutual entities meaning they were owned by their policyholders and premium contributions as well as retained investment income built up over the years contributed to the capital base of the life insurer. All of the large life insurers are now limited liability companies though some operate in New Zealand as branches of foreign companies and most are owned by foreign companies. Some subsidiaries of banks are now involved in writing life insurance policies. 
That is one of the main reasons why this law needed updating in respect of this part of the economy. Since the current life rules have been in operation term insurance business has increased from being less than 10 percent of total industry premiums to being now over 50 percent. The nature of the business has changed significantly. Term insurance is a pure risk product and pays out only on death. There is no savings component which means that these policies have more in common with general insurance such as motor vehicle insurance or home and contents insurance than traditional savings-related policies. The net assets of a life insurer are owned by the shareholders. The rights of the policyholders are by way of contract with the life insurer and do not extend to specific assets at all. The economic policyholder ownership rights in the company are generally reflected in the unvested policyholder liabilities—very riveting! 
The current rules tax life insurers on a two-tier basis. The first tier the life office base taxes the income earned for the benefit of both shareholders and policyholders of the life insurer as a whole. It consists of investment income less expenses and underwriting income. Income accruing to policyholders is taxed to the life insurer on a proxy basis under the policyholder base. Income is calculated by a formula equal to the increase in reserves plus benefits such as claims paid plus underwriting income less premiums. Tax paid on the life office base generates imputation credits that can then be used to meet the policyholder base liability—thus avoiding double taxation—or as tax credits on dividends paid to shareholders. Individuals generally cannot claim a tax deduction or get a tax credit for life insurance premiums paid as happens in some countries. On the other hand they are not taxed on insurance proceeds. 
There are two fundamental problems with these rules. The first is that they under-tax term life insurance profits. The second is that they overtax savings income. I think we would all agree that it is bad policy to under-tax but it is also very bad policy to overtax. 
Aaron Gilmore 
: Oh my gosh! 
STUART NASH 
: I know that that is a revelation to some members on that side of the Chamber because they want to overtax. It is what they want to see in some areas but members on this side of the Chamber personally believe that under-taxing is bad policy. So we are right into this. The proposed new tax rules—[ 
Interruption 
] If members on the other side listen they may in fact learn something. They did not learn anything during the select committee process so if they keep quiet they may learn something now. I will talk about the proposed new rules because they are very important. Members need to remember that these pay out only on death; some of those guys opposite may need to know that soon. [ 
Interruption 
] It is not political death which is what some members will experience in about 2 years 3 months 3 weeks and 5 days’ time. 
The proposed new rules tax life risk business on actual profits in a manner similar to the way that other businesses are taxed. If I remember rightly I think the only party that has dropped corporate tax in the last two generations is the Labour Party. Of course it also extends the tax benefits of portfolio investment entity rules to all savers in life products. Under the new rules life insurers will be taxed on two bases: a shareholder base which represents income derived for the benefit of shareholders; and a policyholder base which represents income derived for the benefit of policyholders. That is a very important distinction. Detailed provisions apply to taxing participating policy income between the shareholder and the policyholder bases. Policyholder base income cannot be offset with losses or credits from either the shareholder base or any other company in a life insurer’s tax group. The amendments in this bill also extend the benefit of the portfolio investment entity rules to the policyholders in all life insurance saving products. Under the new rules life insurers can also elect to attribute income in investment-linked products to policyholders at their individual portfolio investment entity rates. 
The nature of life insurance gives rise to complexities in applying tax concepts. The long-term nature of most policies makes it difficult to match income and expenses appropriately therefore complex legislative provisions are required to equitably bring to tax income and expenses to the correct period. As I mentioned before the Labour Party is very clear—which is why we support Mr Burns’ Supplementary Order Paper—that tax legislation should be equitable. In addition complexities in determining the relevant mix of savings return savings and risk intermediation and risk pooling inherent in some life policies also require detailed rules to appropriately allocate the tax burden between shareholders and policyholders. I think members on the other side of the Chamber would agree that is a very important legal distinction. 
Moving from the current life tax rules to the proposed rules will affect life insurers’ businesses and accounting processes. We have taken this into account and to mitigate the impact detailed transitional rules will apply; I will not read those rules out— 
Carmel Sepuloni 
: Perhaps you should. 
STUART NASH 
: Does the member think I should? 
Carmel Sepuloni 
: I think Chester wants you to. 
STUART NASH 
: Would the member like me to read them out? OK. Those rules will apply for term insurance products sold before the application date. I think that was a very important point that Ms Adams brought up in the select committee. Policies cannot be subject to any fundamental change in their terms during the transition period otherwise a new policy is created and it is fully subject to the new rules. The proposed portfolio investment entity benefits will apply immediately on the application date which again I think is a very important point. Generally subject to ordinary shareholder continuity and other specific rules tax and credit balances and losses from the life office base can be carried by the life insurer into the new rules. Thank you very much. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I want firstly to comment on the tax treatment of Kyoto emissions units in Part 1. Of course it is a salient day to be considering the emissions trading scheme given the extensive discussion earlier around the Standing Orders and the presentation or otherwise of the special select committee report in that regard. I am sure I would express the hope also of members opposite that the report of the special select committee will be made available to members for consideration at the earliest possible opportunity. The chairman of the committee the esteemed “permanent” Minister of Revenue the Hon Peter Dunne is no doubt on the horns of a dilemma having had a minority report presented by the deadline and then withdrawn again. But let us get back to Part 1. 
There was a question before the committee as to whether the tax treatment of Kyoto emissions units ought to be equivalent to that of non-Kyoto emissions units. That is a pretty important point because all emissions units are not equal. For a start the Kyoto regime codifies much more closely not only the tradability but also the verifiability of emissions units to a much higher degree than normal Kyoto units and the quality variation in non-Kyoto units like assigned amount units for example is very high. So depending on the source country of origin—and some would say that perhaps Russia is one of the more dubious in terms of its accounting and verifiability—we question whether those units equivalent to a climate junk bond ought to receive the same tax treatment under this bill. There was extensive debate about that because we do not want to see the emissions trading scheme sold short either by placing excessive reliance on unverifiable emission credits or at worst—and here I think it is fair to say that the NZX has made a big push—by creating a secondary market of derivatives for those units that end up in a bubble of risk that could be akin in 10 years’ time to the bubble of risk that has imploded now around real estate bonds and collateralised debt obligations. We do not want the next recession to be caused by the implosion of emissions unit derivatives—and that is a really important matter that the committee considered. In the end on balance we felt that the complexities that would arise by differentiating between the two classes of units in tax law were a worse evil than the recognised variability and quality of the non-Kyoto units. So although we want to deal with the primary issue we do not believe that this is the place. But I am sure that officials will keep that distinction in mind. 
I will turn to the issue of portfolio investment entities or PIEs—a cute name for a relatively simple concept once we get our heads around it. A portfolio investment entity is a vehicle that is designed to allow savings to be taxed at the marginal rate of the saver rather than at the corporate rate of the savings vehicle. It is a walk-through provision which is important because for a child without much income who is saving hard in his or her piggy or Kashin elephant bank—and we want to acknowledge the passing of Kashin this week a much loved elephant in Auckland Zoo— 
Craig Foss 
: Cash is king! 
Hon DAVID CUNLIFFE 
: —cash in honour the members opposite say—we need to recognise that portfolio investment entities in principle are a good idea. But besides the technical aspects of portfolio investment entities which are related in this bill there is one significant issue of policy that we believe merits the further consideration of the Committee—it is relevant to this bill and it comes up again in the tax bill currently before the select committee—that is whether the top portfolio investment entity rate ought to be equivalent to the top company rate or the top personal income rate. It is our view on reflection that in fact the top portfolio investment entity rate should be equivalent to the top personal income rate not to the company rate of 30 percent. The risk is that this well-intentioned set of vehicles could simply become a way of disguising tax liabilities for upper-income individuals who would otherwise be paying 38 percent. They could just channel income through a portfolio investment entity and hey presto the maximum rate would be 30 percent. Some people say that that does not matter because a high-wealth individual can already use a trust structure. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 Can I just say that it is this Government’s long-term objective—or medium-term objective actually—to bring down the top personal tax rate to 30c so that it aligns with the portfolio investment entity rate. 
Hon David Cunliffe 
: I think it was medium now it’s long. 
Hon PETER DUNNE 
: No I can assure the member that it is a medium-term objective. 
Just as we bring the debate on this part to a close I will come back to Mr Burns’ speech and his proposed amendments regarding the Screen Production Incentive Fund. I need to advise the Committee at the outset that the Government will not be supporting the amendments. In fact we do not think they are in order in terms of Standing Order 320. The amendments were not lodged within the prescribed period of time and they have an impact on the fiscal aggregates. 
But beyond that I say to the member that the issue he raises is somewhat ironic given that the policy being implemented here was the policy of the previous Minister for Arts Culture and Heritage the Rt Hon Helen Clark. I appreciate that some things have changed; we on this side of the Chamber are simply being the faithful adherents of her policy and it is ironic that her own party wants to change it. Be that as it may let me say to the member that the issues he raised with me and my officials in recent days do warrant consideration. I do not believe that his amendments address the points satisfactorily and that is why and for other reasons we are not supporting them. 
I am prepared to look at the issue in the context of the current tax bill that the Finance and Expenditure Committee has before it and if we come to the conclusion that an amendment along the lines the member is proposing is desirable then I am prepared to address it in the context of that bill. The point at this stage is that his objectives are not achieved by his amendments in our view and in any case they do not quite meet the parameters of the Standing Orders. 
Beyond that I simply acknowledge the contribution of members to the debate on this part. There have been some useful contributions from members from both sides of the Chamber and I concur wholeheartedly with their accolades towards the officials who serviced the committee including the independent adviser the independent drafting adviser and the officials from the Inland Revenue Department who have lived with this legislation far longer than any of us and who know its intricacies far better than any of us. They are a dedicated bunch of people. They work very very hard and they work without fear or favour to develop the best tax law for this country. 
I must come back to one point as I conclude. I cannot resist a final retort on the subject of rushed legislation. I am tempted to say that if members want to talk about rushed legislation I can give them an example of it. I see my honourable friend Sir Roger Douglas at the back of the Chamber. I recall coming into this House on Budget night in 1984 when at 7.30 p.m. I think Sir Roger introduced his Budget. By the time the Budget-related urgency associated with passing the legislation on tax and other matters was over it was some time on Saturday afternoon and in those days we sat day and night. Members may like to draw some comparisons. 
This taxation bill came in over a year ago. It has been before a select committee this new select committee for most of this year. The Government did not put a report-back date upon it. Members dealt with it at their own pace. They dealt with it efficiently and speedily. Yes it is a big bill and I have conceded at other times that we will not repeat the experience—we will not have a bill of this size in the future—but I do not think that any reasonable assessment can say that this process has been rushed. 
Other members have referred to the fact that a number of the issues in the bill have been around for consultation since 2006 or earlier in some cases. By my feeble mind that is at least 3 years if not 4 years. Most of the stakeholders have been well and truly consulted. In fact the message I have been getting from people is not that this legislation is rushed but they have been asking when on earth the Government will pass it. They want to know when its provisions will be put into effect. People in insurance people who are affected by the international tax regime and people who are affected by the charitable tax changes all want to see the benefit delivered. That is what we are about doing right now and I acknowledge the contribution that members are making towards that but I will not accept the allegation that this is rushed legislation. 
The CHAIRPERSON (Lindsay Tisch) 
: Amendments in the name of Brendon Burns have been tabled. These amendments are out of order as 24 hours’ notice has not been given. We now move to the Minister’s amendments— 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I raise a point of order Mr Chairperson. We gave notice earlier that on procedural grounds the Labour Opposition would be voting against the amendments set out on Supplementary Order Paper 34 because it was not referred to the select committee. We accept that the Supplementary Order Paper 35 amendments are of a purely technical and drafting nature and we do not wish to oppose those. I seek through you Mr Chairman the Minister’s concurrence to putting the amendments on Supplementary Order Paper 34 separately so that we may not find ourselves unintentionally voting against matters that we otherwise support. 
The CHAIRPERSON (Lindsay Tisch) 
: The Minister needs to give approval to that and I will need to reshape the motion. 
Hon PETER DUNNE (Minister of Revenue) 
:  
In response to the member’s request I am happy to concede to the separation on the condition that the amendments in Supplementary Order Paper 34—and they transcend the parts—are in each case taken as one question and that the amendments to Supplementary Order Paper 35 are taken similarly. 
The CHAIRPERSON (Lindsay Tisch) 
: This is at the Minister’s discretion so I will just get the format in which to put the question. 
CHRIS TREMAIN (Senior Whip—National) 
: 
 Once the decision is made can you be very clear so that I can understand how each amendment will be put. And is Supplementary Order Paper 35 still out of order? 
The CHAIRPERSON (Lindsay Tisch) 
: These amendments are not out of order. The only amendments ruled out of order were put forward by Brendon Burns. His amendments have been ruled out of order under Standing Order 320. We have dealt with that matter. We are dealing with the request from the Opposition which was to split the Minister’s amendments. The Minister has agreed to that and we are just waiting for the format. 
The question was put that the amendment set out on Supplementary Order Paper 35 in the name of the Hon Peter Dunne to proposed new clause 214BB set out on Supplementary Order Paper 34 in his name be agreed to. 
A party vote was called for on the question  
That the amendment to the amendment be agreed to. 
Ayes 111 
New Zealand National 58; New Zealand Labour 43; ACT New Zealand 5; Maori Party 3; Progressive 1; United Future 1. 
Noes 8 
Green Party 8. 
Amendment to the amendment agreed to. 
The question was put that the amendment to insert new clause 214BB as amended and the remaining amendments set out on Supplementary Order Paper 34 in the name of the Hon Peter Dunne to Part 1 be agreed to. 
A party vote was called for on the question  
That the amendments as amended be agreed to. 
Ayes 67 
New Zealand National 58; ACT New Zealand 5; Maori Party 3; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 8; Progressive 1. 
Amendments as amended agreed to. 
The question was put that the remaining amendments set out on Supplementary Order Paper 35 in the name of the Hon Peter Dunne to Part 1 be agreed to. 
A party vote was called for on the question that the amendments be agreed to. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I raise a point of order Mr Chairman. I apologise for interrupting the Committee but would it be possible for you to re-specify the nature of that motion before we cast our vote? 
The CHAIRPERSON (Lindsay Tisch) 
: The motion that we are about to vote on is the Minister’s amendments as set out on Supplementary Order Paper 35. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 111 
New Zealand National 58; New Zealand Labour 43; ACT New Zealand 5; Maori Party 3; Progressive 1; United Future 1. 
Noes 8 
Green Party 8. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 1 as amended be agreed to. 
Ayes 111 
New Zealand National 58; New Zealand Labour 43; ACT New Zealand 5; Maori Party 3; Progressive 1; United Future 1. 
Noes 8 
Green Party 8. 
Part 1 as amended agreed to. 
Part 2 Amendments to Tax Administration Act 1994 
AARON GILMORE (National) 
: 
 I rise to talk about Part 2 of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. This bill as everyone who has spoken on Part 1 has said is intimidating by its size more than anything else. As a new member particularly one on the Finance and Expenditure Committee I had the unfortunate experience in my first committee meeting of being given this bill and told that we were deliberating on it the very next day. It was entertaining to pick up certain parts of it and go through and read it the night before and I must admit that it was an education in the realms of arcane tax law. 
I will touch on one particular part of Part 2 where migrant workers are discussed. I will talk about four clauses: clauses 383 408 417 and 454. The interesting thing about the clauses that talk about the changes for migrant workers is that migrant workers are a very important part of the New Zealand economy. Migrant workers are defined as those who are here for a maximum of 7 months or perhaps 9 months in special circumstances within an 11-month period. Part 2 of this bill does a really neat thing for migrant workers I think. Those workers play an important part in seasonal work in New Zealand. The changes that the committee made to this part include putting in a special tax rate for migrant workers taking it from 19 percent to 15 percent. That is a 4 percent reduction and what a neat thing that is to do. For the people and communities that rely heavily on migrant workers that tax reduction will be a great thing. There are six ski fields in the Selwyn electorate of my good colleague here to my right Amy Adams. Ski fields rely very heavily on migrant workers in the winter months. 
This tax reduction will be a great thing for migrant workers. Equally it will be a good thing for people in the electorate of my other good colleague Colin King the MP for Kaikoura—he is the MP whom Paul Henry did not recognise—as vineyards rely very heavily on migrant workers. I know that Mr Burns one of the members opposite is a vineyard owner. He probably has a few migrant workers on his operation across the road. I enjoyed a bottle of that member’s vintage last week I think after taking part in a charity debate. It was not bad I must say. For the migrant workers who come to New Zealand for those thousands of people who come to the ski fields for the winter months or to the vineyards in the summer months or perhaps even for the odd shearer who comes in to fill some gaps we have in looking after other parts of our rural sector that 4 percent deduction in the special tax rate of 15 percent down from 19 percent will be a great measure. 
That is particularly true for our friends from the Pacific who come here from Kiribati Vanuatu and places like that where that little bit of extra income is incredibly important for them to be able to sustain their lifestyle back home. The remittance that they send back to the people in those Pacific countries is a really important part of the income that they use to provide not only for themselves while they are here in New Zealand but also for their families back home. I think equally for those ski field workers—obviously not many ski field workers come from the Pacific Islands; I am yet to hear any property developer come up with any ideas about that—who have that reduction from 19 percent to 15 percent that is an extra 4 percent that they will have to put in their back pockets or to spend on the good parts of the tourism industry in New Zealand which helps a tiny little bit more to keep the economy growing in the way that we want to see. We are all about the economy growing. 
I see that the member from Kaikoura is now in the Chamber—the member whom Paul Henry forgot from the great electorate of Kaikoura. Anyway I want to touch again on another part of this bill and that is the other interesting bit in Part 2 which talks about the international tax rules for insurance companies. In particular we have talked about the controlled foreign company regime. There are some changes in the insurance sector. There are some interesting examples where a growing number of New Zealand - owned companies are looking at expanding offshore or have existing equity-based investments that they operate offshore. I can think of one mutual company in particular in Christchurch that is an iconic New Zealand insurance company. It has increasingly been looking at ways to expand outside of New Zealand. It is one of the dominant players in the New Zealand insurance industry. Part 2 of this bill—this behemoth of 900 pages—has some little things in it that will actually help that company expand and just get a little bit extra for its members. It is a mutually owned company so its members are its policyholders. Again that is a good example of those people being able to reinvest a little bit more profit into their business to keep New Zealanders working in this time of recession and economic problems. 
STUART NASH (Labour) 
: 
 I think Aaron Gilmore was very very unkind to his colleague Colin King. I know who Colin King is and I knew who he was before he came to Parliament because he was a three-time winner of the Golden Shears contest. Paul Henry does not know who he is but who cares what Paul Henry thinks? We certainly do not. No one listens to him. 
The other thing is that Colin King put me to shame. We met in the changing rooms both fully clothed and he asked me whether I was going to play for the New Zealand Parliamentary Rugby Team this year. I said that I was getting a little old and was thinking about it but was not too sure. Colin said to me that he was wondering whether he should this year as he was turning 60. He said maybe he would have 1 more year. It just shows that life begins at 60. I tell Colin not to worry about what Paul Henry says; we do not and no one else does. I think it is dreadful that Aaron Gilmore could question his commitment and who he was. But I come back to the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. 
Colin King 
: It’s a taxing subject. 
STUART NASH 
: It is a very taxing subject I agree and I am very impressed that the member plays rugby at 60. I do not think Aaron Gilmore will be out there when he is 60. In fact he will not be in Parliament when he is 60 so that is OK. 
Anyway I get back to the payroll giving provisions. This is a very important part of the bill. It is quite a nice part. Mr Gilmore waxed lyrical about the wonderful things this bill was doing; well this is another thing. Eleven submissions were received on the proposed payroll giving scheme and five confirmed their support for the concept of payroll giving and the tax credit mechanism of delivering tax relief on payroll donations. Even so most submissions were concerned to ensure that compliance costs of the scheme for employers were kept to an absolute minimum. We agree with that. Earlier I talked about the five basic objectives of tax legislation and compliance was one of them. Otherwise the benefits of the scheme might not be fully realised and I think we all agree that this is very important legislation that allows people’s benevolent spirit to come out. I think the Prime Minister John Key said to people that if they did not like the tax cuts they could give them to charities. Well this legislation allows that. 
A common theme throughout the submissions though was the need to provide greater clarity in the legislation. We addressed this theme in the Finance and Expenditure Committee. The Inland Revenue Department officials came back and gave us great peace of mind that it had in fact been achieved. There was concern that the participation in payroll giving would be voluntary for employers and employees. KiwiSaver was voluntary; it is a shame that the Government cut that off at the knees. But this is voluntary and it allows people to give money out of their pay to their favourite charity. 
There was also concern about the roles and responsibilities of employers employees and donee organisations and also sanctions for non-compliance. This quite important point was brought up and discussed in reasonable depth. This point is around what happens if a company goes broke and money is being contributed by an employee but it is not paid out. Again the Inland Revenue Department officials came back and assured us that employees would not lose their tax deductibility—their tax credit—on this which was fantastic. For the most part officials agreed with the submissions and they ensured that the underlying policy intentions would be achieved and this would provide overall integrity to the scheme which is what I was talking about before. Again tax integrity must be a fundamental part of any tax legislation. 
A further prevailing theme in the submissions was a desire for the legislation to prescribe the details for payroll giving scheme arrangements. As proposed the bill simply provides a tax mechanism to deliver tax relief for payroll donations on a pay period basis. It does not prescribe the nature of the arrangement of relationships between employers employees and donee organisations or how the schemes should be set up. Matters that need to be decided upon between the relevant parties include for example the process for establishing a scheme that works best for all parties concerned the use of intermediaries the level of employee education around payroll giving—again this comes back to the fundamental objective I talked about which is the ability for the taxpayer to be able to access information on tax—and the process for selecting donee organisations to participate in the scheme. I think we said that they had to be registered charities and all registered charities were to be put up on the Inland Revenue Department website so one could determine straight away if a charity was registered which is fantastic. This is a very important part of the legislation and it affects a lot of people. 
I am hoping that once this legislation is put through a lot of Kiwis will donate to these organisations because I think probably all of us—well all of the Labour MPs anyway—have been around a lot of the social service agencies and the charities in our electorates and have found that these guys are suffering. Their workload has increased dramatically as we find that legislation that the National Government has put through begins to erode the social fabric. These charities need the most help at this particular time and this bill does that. 
As I was saying the matters that would need to be decided upon by relevant parties include the process for selecting donee organisations to participate in the scheme—as mentioned they had to be registered charities—the number of donee organisations that can participate in the scheme which came down to registered charity status and that is fantastic; the level of engagement between the donee organisations and the employee donors which refers to how an employee can interact and contribute to the charity itself; and any minimum payroll donation threshold. The non-prescriptive nature of the proposed scheme is intended to provide flexibility to allow relevant parties to work together to establish schemes that work best and to manage the associated costs. I think all members in the Chamber will agree that if someone is to donate money to a charity through his or her payroll it must be done on a voluntary basis. It must be worked through one on one. The vast majority of charities and the vast majority of employees want to know what is going on and how it works. The key policy outcome of payroll giving is that it has the potential to establish a genuine partnership between businesses and the community while supporting employees’ community activities. As mentioned this is becoming more and more relevant in these tough times. 
The voluntary nature of the scheme also reflects the ethos of giving which is very important. It sets up a system that facilitates but does not mandate giving. Anything that would be compulsory around payroll giving would not be acceptable to anyone from employees to employers. That is why this provision was put in. It is not a mandate; it is voluntary. 
Paul Quinn 
: Are you going to give it to my campaign? 
STUART NASH 
: I am sure Mr Quinn gives a substantial part of his salary to a registered charity. This provision will help Mr Quinn to make that transition to giving a lot easier. He will be supporting this I have no doubt. 
The Inland Revenue Department has a very good way of getting information out to the general public. It does this through a  
Tax Information Bulletin 
. The Inland Revenue Department said that it would publish all this information that we are talking about at the moment in a  
Tax Information Bulletin 
 so that taxpayers employees employers and donee organisations could have access to all this information that allows them to optimise their processes. That is very important. The proposed scheme would deliver pay-day tax relief on payroll donations by way of a tax credit which is most important. Employees will receive a tax credit on the amount of their donation made each pay day. Employers would offset the credit against the PAYE calculated on an employee’s gross salary. The tax credit would then be calculated to set a rate of 33.3 percent. Employees who make payroll donations would not have to keep receipts or wait until the end of the year to claim the tax benefits of their donations. 
We all know how this works. We have all given money to registered charities and they have given us a receipt. We have thought that in order to claim it back we must put in a tax return but that is too onerous so we do not bother doing it. This legislation removes that and makes it a lot easier. The scheme would also operate in addition to the current end-of-year tax credits claim system. Therefore employees who do not or are not able to give through payroll giving can still claim tax relief on their donations through the end-of-year process as a consequence of this clause in Part 2. 
I support Part 2 and I thank Mr Foss who worked this through. I also thank Inland Revenue Department officials who provided much-needed advice on Part 2. To our consultants and our drafting experts I say thank you very much. 
CRAIG FOSS (National—Tukituki) 
: 
 I also want to speak on the payroll giving provisions of Part 2 of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill particularly in respect of clauses 448 to 484. I want to speak about this matter because some good changes were made in this particular area at the Finance and Expenditure Committee although it could be said that all the changes made to the bill by the committee were good. We made quite a few suggestions and had wide discussions about improvements to the original bill that arrived at the committee some time in late 2008. I will touch on some of those issues. 
As we went through this particular part as originally drafted—and the previous speaker did pick this up—we learnt that only those people who file their PAYE returns electronically would be able to participate in the payroll giving provisions of this bill. We had a wide-ranging discussion about that. We erred on the side of keeping it simple because we noted that a growing number of employers were submitting returns electronically. Although only 19 percent of them did file returns electronically that figure constituted mostly the larger employers. Therefore a large proportion of the working population of PAYE taxpayers was actually being picked up by that. We had some issues in and around that matter and as I said the trade-off we made at the end of the day was to keep the electronic filing as in the original draft of the bill but with some caveats added to it which I will get to in a moment. 
One of the things that concerned members about this particular measure in the original bill—and I acknowledge that the suggestions from various advisers have been picked up by officials and this issue is addressed in the amended bill—was that in good faith an employee may want to set payroll giving up with an employer who files returns electronically. But we were very concerned that if something untoward was to happen—if the business was to go under if the charity itself turned out not to be a charity or if all sorts of other mischief happened—the employee in that instance should not miss out. So we tried to work that issue through and quite a few recommendations came from that to the point where we recommended that donations be held in trust for an employee until such time as they were remitted to the donee organisation. Even though it is an electronic process there are quite a few checks and balances to go through in the process before the monies get to the intended organisation. In the good faith that is payroll giving in the context where it comes from we wanted to make sure that employees had faith in the system and the ability to know that it would be working on their behalf. 
There was a problem however arising from the fact that the charities concerned must have charitable status. But we learnt as one submitter pointed out that when we check with the Inland Revenue Department we find if members can believe this there are actually 1330 donee organisations with names beginning with the letter ‘A’. So of course quite complex issues could arise there. The question was where the burden should lie in terms of checking the status of organisations. We did a bit of a test on the Inland Revenue Department’s website and it was found to be wanting. We did gain a commitment from Inland Revenue Department officials and this is in the commentary on the bill also that they would upgrade the ability for employers—in this instance—to go to the appropriate place on the Inland Revenue Department website and quickly look up an organisation without their systems going down and to have transparent timely and robust information available at all times. That was an example of good committee action good committee discussion and the committee as a whole making the recommendation there—a fair balance and I think a well-intentioned one. I think the previous speaker alluded to that. 
Most members in this House I am sure would agree with the intent at least of payroll giving. I will be speaking to other parts of this bill later on. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is a pleasure to join the discussion in Committee of Part 2 of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill and in doing so I will first reflect on the Minister’s closing comments in respect of Part 1 on the theme of the timetable for this bill which apply equally to this part. It is absolutely true as the Minister has described that a number of substantive provisions of this bill including issues such as payroll giving and tax pooling rules which are the subject of this part have been—transcending the change of Government—debated in the public domain over some considerable period of time. There have been discussion documents and the generic tax policy process has been in evidence. That is all a good thing. I would not want our earlier comments about the rushed nature of the bill to be misunderstood in that regard. 
But having conceded that point I hope that the Minister would also concede that in hindsight the deadline for the report back of the bill in this Parliament once the change of implementation dates had been agreed could have been extended. The pressure on officials on the independent tax advisers and on the committee itself was extreme. That is not to ask for sympathy for poor old politicians. We know how far we would get with that— 
Amy Adams 
: Not very far! 
Hon DAVID CUNLIFFE 
: Not very far no because as the public knows we all get rather larger allowances than the chief executive of Telecom New Zealand and work only 3 hours a day! That is a long 3 hours; there is nothing longer than tax legislation to measure time. 
Hon Peter Dunne 
: Are you doing overtime? 
Hon DAVID CUNLIFFE 
: We are doing overtime today for which we are not paid time and a half. 
Amy Adams 
: We’re not paid at all! 
Hon DAVID CUNLIFFE 
: No. Members opposite have no doubt done the maths and worked out what their hourly rate is but I digress. 
The fact remains that there is—even in this part that amounts to about 30 percent of the text of this doorstop—an incredible amount of detail that politicians because they live such exciting lives find it within their responsibilities to have to scrutinise. As the public may know select committees are the places where we join together in a relatively non-partisan kind of a way and work through the detail on the basis of advice. So the long and the short of it is that I stand by the earlier comments that that process could have been better. We were under such time pressure that Part 2 could have benefited from further discussion. 
Let us turn to some of the substantive provisions. There is general agreement—and Labour will be supporting the part—that the payroll giving provisions are meritorious in general and should be supported. Payroll giving is the idea that employees can nominate a set of charities for whom direct deductions can be made through their payroll process on an ongoing basis—that is only to be commended. New Zealanders are generous people. We care about our neighbours broadly defined we give a reasonable percentage of our incomes towards overseas aid and New Zealanders come forward for everything from the Daffodil Day appeal to telethon and to a whole range of other charities. Payroll giving is a way of making it easy. New Zealanders can fit it once forget it and support the charity of their choice. This legislation is permissive it is not compulsory and we hope that the detail will stand the test of time. 
Similarly we support the concept of the tax pooling rules. Tax pooling is a system as the public may know that allows taxpayers to benefit from the aggregation of the unders and overs between different taxpayers who through a tax pooling agent can collect those flows into one pool and pay an aggregate on their behalf. The impact of that is that the unders and overs to a certain extent balance themselves out thereby lowering the cost of the holding capital and perhaps through timeliness also reducing any penalties that might accrue for late payment. A professional manages the tax pool there is general good notice of deadlines and the system works well both in the interests of the taxpayer and of the department that benefits from the aggregation and timely provision of those flows. 
Contained in this section of Part 2 are a bunch of rules that in detail facilitate and indeed extend the ability of taxpayers to pool their tax payments. The Finance and Expenditure Committee made a number of amendments—for example new section RP 17B(1) inserted by clause 405 and the amendments in clause 406 and so forth. The committee gave reasonable attention to those matters. We turn then to the subset of those intermediary rules that affect PAYE and I will pick that up in a further call. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I want to make a few comments about payroll giving and I am grateful for the support for this that members from across the Chamber have indicated in their remarks this afternoon. 
Payroll giving is an important step forward. It was first foreshadowed in the discussion document that was issued in 2006 which arose from the confidence and supply agreement that United Future had with the previous Government over a charitable tax regime. 
Hon David Cunliffe 
: You’ve had one with every Government. 
Hon PETER DUNNE 
: With every Government so far yes. I am not sure whether the current agreement is the second leg of the double or the third leg of the quinella but I remind members that the first part of the process was— 
Amy Adams 
: A trifecta! 
Hon PETER DUNNE 
: Never mind. I am not a racing person as the members can see. 
Hon David Cunliffe 
: Not a racist. 
Hon PETER DUNNE 
: That neither. 
The first part of the changes to the tax law was the changes to the rebates for charitable donations that came on 1 April last year. The change to bring in payroll giving was something we were very keen to see for all of the reasons that members have enunciated. This scheme draws very heavily on the scheme that was implemented in Australia. 
By nature of being a voluntary scheme people will have a choice about going into it. We have resisted and I think the committee was wise to resist some of the submissions that tried to prescribe too narrowly the organisations that might be considered for this scheme. I think that is a choice for the taxpayer and it is a matter of the employer having the systems to be able to deal with it. 
Mr Foss made the point about the original limitation to electronic filing companies. The figures that I had originally—I think they have moved a little bit since—were that around 16 percent of businesses in New Zealand were filing electronically but that covered about 70 percent of the workforce. I think those figures have moved upwards a little in the last couple of years. So this policy initiative will be available to most New Zealand taxpayers should they choose to take advantage of it. For those of a certain age it will be very similar to the old days when we made our National Provident Fund or Government Superannuation Fund contributions. The net figure was the one taken after those contributions had been deducted. That is when we got our rebate. 
One thing that will be important and I say this by way of observation is that once this scheme takes effect—and with the Taxation (International Taxation Life Insurance and Remedial Matters) Bill passing at around this time 1 December will be the effective date for the start of payroll giving—employers and those who have been associated with similar schemes elsewhere will need to be part of an advisory group of people drawing to both employees’ attention and employers’ attention how this scheme works how simple it can be and how it is a win-win for both. We will be working separately with appropriate people to make that information available. 
I hope that in time there is another raft of issues that we can deal with with regard to charitable giving. We have work under way at the moment on the question of access to imputation credits for charities. That work is on hold to some extent pending the outcome of the Australian Government’s tax review and any issues there that might be determined regarding the mutual recognition of imputation credits across both countries. 
This scheme is part of a concerted suite of measures designed to promote a culture of giving in New Zealand designed to make it easier for people who wish to give to charities to do so designed to boost that support and designed to recognise the large number of charitable organisations that there are in New Zealand—Mr Foss referred to 1100-plus alone beginning with the letter “A.” There are many many charities in this country and the charitable registration process is part of that. I am currently reviewing the number of donee organisations that are eligible for tax deductibility and that review will be completed a little later in the year. 
I simply wanted to thank members for their support for this provision. It is an important one it is a welcome one and it is an extremely positive step forward. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I am very pleased to speak on Part 2. I particularly want to focus on the move through this bill to make clear some of the issues around relocation and overtime meal allowances. This is quite a vexed issue and it has been a concern to many people in the trade union movement for quite some considerable time. As I understand it about 15 years ago changes were made to the tax treatment of allowances. In the past the commissioner had been required to determine whether an allowance was taxable or exempt. That requirement was taken away and instead the onus was put back on the taxpayer to determine whether the allowance was taxable or exempt. Also the test changed from whether the expenditure was incurred as a necessary part of the employee earning his or her income to one based on whether the expenditure would have been deductible by the employee were it not for the prohibition in the Income Tax Act whereby employees cannot claim expenses in relation to their employment. I think the way these things have been tackled is somewhat Kafkaesque in its logic. 
In essence I was pleased that the committee was able to clarify at least two areas. In respect of relocation expenses where an employee is required due to the nature of the change of his or her employment to move town or even move across a city the employee is able to claim and able to deduct some expenses in relation to the extra costs that are incurred and also in relation to overtime meal allowances. For an employee who is in the situation where overtime is either a regular pattern or is an occasional imposition or request by his or her employer obviously the employee is incurring expenses that he or she may not have been able to anticipate in the case of sudden overtime if you like. In the case of what is built into overtime clearly the employee is not able to return to his or her home and have meals with the family and do this at the same price that an employee may pay on a worksite or near a worksite if he or she needs to pop out from work to get some food. 
I am very pleased that the committee was able to agree at least in part with the submission from the Council of Trade Unions. The council has been put in a most unlikely collegial relationship by the Institute of Chartered Accountants which acted on its behalf. It was a seminal moment to see representatives of the accountancy profession aligning and agreeing with members of the trade union movement that there was an area that needed to be clarified in favour of employees in this respect. I am very pleased that the committee has been able to deal with that issue. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I certainly look forward to my colleague Mr Nash’s contribution forthwith because he has been a tremendous and very studious supporter of the process of the select committee as has Mr Burns reflecting very clearly the interests of the broadcasting industry and of course the Council of Trade Unions. 
The relationship between the New Zealand Council of Trade Unions and the Institute of Chartered Accountants was so close during part of this bill that we conjectured we might witness the formation of a new body—the “CTUCA”; the “Council of Trade Unions and Chartered Accountants.” But no despite agreement on the substance of the bill the merger did not quite occur and we look forward to hearing more in that regard. Certainly they had their eye on both the principle and the detail and who in this House would not wish that to occur—because of course it would simplify our job. I am sure members opposite would be only too willing to support anything that the “CTUCA” could agree on. 
Hon Trevor Mallard 
: I can think of a few things. 
Hon DAVID CUNLIFFE 
: Our Labour spokesperson wishes to demur from some of that and probably with good reason. 
I would like to take us back to an issue that covers Part 2 and several other parts which are the depth and breadth of the bill. I would like to read briefly from the commentary on the bill: “The size of the bill and the depth and breadth of the material it covers have made our consideration more difficult than it might have been otherwise.” That statement is by the way a unanimous statement of the committee. It is part of the covering language that applies to all of the parts of the bill so it is not the view of only the Labour members of the committee; it includes the view of the Government members. 
The commentary on the bill continues: “In trying to meet the report due date for the bill we and our committee consideration processes have been put under considerable pressure. We do not consider it desirable to put a number of very distinct and significant proposals into one bill simply because they relate to one area of law. In future we would prefer to see such proposals introduced to the House as separate more manageable bills. If such proposals are not divided sensibly the House might wish to accord significantly more than the usual consideration time to committees charged with considering such bills.” Mr Chairman I hope that you will deem the Committee of the whole House such a committee and that we will be able to take more than the usual time to consider the important matters around payroll giving around charitable donations and around the tax treatment of meal breaks which are important to employees nationwide. 
The commentary on the bill goes on to state: “Ministers should remain mindful that if departmental advisers are appointed to advise committees on such bills they will need to meet committee deadlines and information needs under pressure.” That I think is both a compliment to the hard work of our officials and a polite warning to the powers that be that the pressure was at times excessive. 
This part includes new section CW 62B inserted by clause 39 which deals with the tax treatments of reimbursements and honoraria paid to volunteers. It is an opportunity for this Committee to once more recognise the importance of the work of volunteers. In that regard it is pretty important that we accept the principle that in many of our non-governmental organisations there is a very strong volunteer component to the work that they do. Many of those organisations do not fully cost their overheads in terms of the volunteer time and in what sector is that more apparent than the adult and community education sector? 
These clauses give us further reason to remind ourselves that recent changes that saved only around $10 million in expenditure from that sector have the impact of undermining or de-leveraging from that sector the virtually unpaid contribution of the many thousands of volunteers nationwide who are supporting the night classes and community courses by providing expertise and by assisting on a voluntary or near-voluntary basis in running those courses. 
We all know the phrase “penny wise and pound foolish” and I wonder whether it is possible to be “pound wise and penny foolish” because really those services cost only pennies but they have been the target of some of the first cuts the Budget. That is one of the things that worries Labour—the new funds allocated for Budget 2010 are only about half of the new funds in Budget 2009 and Part 2 really draws those issues high in our consideration. 
AMY ADAMS (National—Selwyn) 
: 
 I move  
That the question be now put 
. 
STUART NASH (Labour) 
: 
 I must admit I am very thankful for Peter Dunne’s speech earlier about payroll giving. I have always had difficulty in reconciling that someone could jump from Labour to National or change political philosophies over the space of a fortnight. For me the principles of social democracy run through my veins and I could never ever compromise such principles. I am pleased that Mr Dunne had unfinished work from when he was Minister of Revenue for Labour and became Minister of Revenue for National for the sole reason of getting this important legislation through. That is fantastic. As I mentioned the principles of social democracy run through my veins and I could never compromise such principles and that is why I certainly back the payroll giving scheme as outlined by Minister Dunne and spoken about by my colleague David Cunliffe and my Opposition colleagues. 
I will elaborate on the tax pooling which David Cunliffe talked about. It relates to section 15O to section 15T in clause 435 and is quite an important part of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. Provisional taxpayers do not always know how much their tax liability will be for the year and therefore how much provisional tax they need to pay. If they get the calculation wrong then they are subject to two-way use-of-money interest on the underpayment or overpayment of their tax liability. Provisional tax pooling was introduced in April 2003. It was great legislation and was implemented by the previous Labour Government—of course. It allows compliant taxpayers to reduce their exposure to use-of-money interest on underpayments as a result of uncertainty about their provisional tax payments by purchasing funds from or depositing funds with a tax pooling intermediary. This is a very important facet in today’s economy because there is a lot of uncertainty around the recession into which the National Government’s policies are driving us. 
Tax pooling generally involves a taxpayer depositing money with a tax pooling intermediary. The deposit earns interest which is good. The intermediary deposits that money in its pooling account with the Inland Revenue Department. The taxpayer may use his or her funds—the deposit—in the future to pay outstanding tax liabilities or sell the funds to the tax pooling intermediary. If the taxpayer sells the funds to the intermediary the intermediary can then sell the funds to another taxpayer for a fee. It may sound quite complicated but in fact it is quite a simple process and quite an important process. It optimises the tax system. It is a very good process—of course it is; it was put into law in 2003 by the Labour Government. 
Hon David Cunliffe 
: It was an excellent year for tax policy. 
STUART NASH 
: It was a very good year. Was that the year we dropped the corporate tax rate? 
Hon David Cunliffe 
: One of the years. 
STUART NASH 
: As I have mentioned several times Labour was the only Government in a generation to drop the corporate tax rate. We are the party of business and we are the party for farmers. But anyway let us talk about tax pooling. Many small to medium sized enterprises would say that tax pooling has made paying their provisional tax a lot easier. Labour is the party of the small to medium sized enterprise and Phil Goff will be the next Prime Minister of this country—bring it on! 
On the payment of a fee the intermediary transfers the funds to the other taxpayer’s income tax account as at the date the money was deposited with the intermediary. Usually that will coincide with the provisional tax due date. 
This is such a good bill because it was introduced by the Labour Government. Minister Dunne was a Minister in that Government. It is great that we have such a sense of conviviality around this bill. We all support it and we all love it because it was Labour tax legislation. 
Hon David Cunliffe 
: We trained him and gave him to the National Party. 
STUART NASH 
: We did indeed. Tax pooling enables provisional taxpayers to access money at lower interest rates than if they failed to pay provisional tax on the due date and were subject to use-of-money interest. It also enables taxpayers who have overpaid their tax to get a higher return from selling their funds than they would receive from the Inland Revenue Department. Of course we are not suggesting that the Inland Revenue Department would charge a hell of a lot more than a bank would on an overdraft facility or that it would charge a lot less on a deposit than a bank would but this legislation smoothes things out. I say to Mr Cunliffe that it is interesting because I often hear that in 9 long years Labour did nothing but we do not hear that from the Finance and Expenditure Committee. 
CHRIS TREMAIN (Senior Whip—National) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand National 58; ACT New Zealand 5; Maori Party 3; United Future 1. 
Noes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Motion agreed to. 
The CHAIRPERSON (Eric Roy) 
: The Minister has agreed to split his amendments so the amendments will be put as two questions. 
The question was put that the amendments set out on Supplementary Order Paper 34 in the name of the Hon Peter Dunne to Part 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand National 58; ACT New Zealand 5; Maori Party 3; United Future 1. 
Noes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Amendments agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 35 in the name of the Hon Peter Dunne to Part 2 be agreed to. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 2 as amended be agreed to. 
Ayes 111 
New Zealand National 58; New Zealand Labour 43; ACT New Zealand 5; Maori Party 3; Progressive 1; United Future 1. 
Noes 7 
Green Party 7. 
Part 2 as amended agreed to. 
Part 3 Amendments to Goods and Services Tax Act 1985 
AMY ADAMS (National—Selwyn) 
: 
 It is my great pleasure to take a call on Part 3 of this mammoth legislation. Part 3 deals with consequential amendments to the Goods and Services Tax Act made as a result of the policy changes brought about in the bill. It includes clause 518 to clause 528. 
Essentially three main parts of the Goods and Services Tax Act need to be amended as a consequence of this legislation. The first of those has already been discussed on a number of occasions during the course of this debate. As I mentioned in my contribution on Part 1 the parts of this bill are divided by the various Acts that are to be amended so the same items of work come up in repeat parts. 
The first item in Part 3 that I want to talk about is the tax consequences of the emissions units and how they would work in relation to the Climate Change Response Amendment Act. That earlier legislation set out quite clearly that the Kyoto emissions units were to be zero-rated but the issue that arose and that needed clarification in this legislation— 
Hon David Cunliffe 
: I raise a point of order Mr Chairperson. It is with some reserve that I rise to question whether the member is focusing on Part 3 rather than Part 2. It is my understanding that the Kyoto matters fall under Part 2. 
The CHAIRPERSON (Eric Roy) 
: That is hardly a point of order. 
AMY ADAMS 
: It is clear which members have read the bill and which have not. As I mentioned Part 3 relates to amendments to the Goods and Services Tax Act. The point I was discussing was the GST treatment of emissions units. Clearly the Goods and Services Tax Act needs to be amended which is why it is in clause— 
Chris Tremain 
: 519(2)! 
AMY ADAMS 
: That is why it is in clause 519(2) as my senior whip has just pointed out—if that is any use to the finance spokesperson from the other side of the Chamber who clearly has not read the bill. I do hope that is helpful; we are here to help. 
Craig Foss 
: Written apology. 
AMY ADAMS 
: I will accept a written apology at any time. That would be fine. 
As I was saying before I was interrupted Part 3 clarifies the issue around the zero rating of the Kyoto emissions unit. It needed to be made clear that the zero rating did not apply to the transfer of emissions units by the Crown under earlier agreements—primarily the Project to Reduce Emissions. 
Interestingly enough what started off as a reasonably small technical part of this clause was one that the Finance and Expenditure Committee latched on to in some degree of detail as a response to the submissions we had received. It led us into an interesting debate about whether the zero rating of the Kyoto unit should be extended to the non-Kyoto units—sometimes called the grey market or unofficial units. This was discussed over a number of meetings of the Finance and Expenditure Committee and as a result the committee recommended to the House that the zero rating should be extended to the non-Kyoto units as well as the Kyoto units thereby tidying up an area of some potential confusion. That is one of the amendments we deal with in Part 3. 
The second amendment that I will touch on is the GST treatment of exported second-hand goods. The changes here ensure that in appropriate circumstances exported second-hand goods that will not be brought back into New Zealand are treated the same way as exported new goods. That was just a matter of ensuring that appropriate parity was maintained. Once more the work of the committee ensured that a number of important changes were made. Unlike the first example in this instance the issue was about ensuring that any potential future confusion could be minimised such as ensuring that words like “supplier” were switched for words like “registered person” to make clear that those provisions applied only when the supplier was a registered person. I think that part of the bill ensures there are quite clear rules around the treatment of GST on these exported second-hand goods. 
The final amendment I will touch on is one—I have to confess—that before this bill had never crossed my mind. It is the whole issue of how GST applies to loyalty points—air miles the Fly Buys scheme and the like. I will confess to being an avid shopper. I do tend to rack up a few royalty points; my husband will certainly attest to that. I know that the loyalty point schemes have been something of a phenomenon in recent years amongst avid consumers such as me—I do my bit for the economy—and the GST treatment of those schemes is a matter of some confusion. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 The deputy chair of the Finance and Expenditure Committee is faster than a speeding bullet. It is wonderful to have her peroration on the subclauses about Kyoto emission units. But Part 3 is where the debate really starts to hot up. I felt in a bind because we really needed to debate Part 2 at greater length but Mr Chairperson exercised his discretion and brought us right to the political heart of the matter. 
The bill is Minister Dunne’s personal statement to the nation. It is part of his legacy. But he is not finished yet. He will no doubt be the Minister of Revenue for many more Governments and he will not rest until he has raised GST. That is what this part applies to—GST—and it is a timely and sobering reminder to the Committee that the Government is bent on raising the rate of GST. 
A little bit of a phenomenon is being observed around the country—that is the ability of the Government to get itself elected on a programme that is so bland— 
Chris Tremain 
: Very good question—who raised it from 0 to 10? 
Hon DAVID CUNLIFFE 
: Yes OK I know. Who brought in GST? Coming back to the bill it says right here in clause 518—the proof is here—“Goods and Services—”. [ 
Interruption 
] Members opposite asked the question; they would be very well advised to hear the answer: “Goods and Services Tax Act 1985.” 
When Peter Dunne was but middle-aged GST was first introduced. He was a member of the Government then and he is the Minister of Revenue now. He has come a long way but he has a lot further to go—2.5 percent further in fact if the newspapers are to be believed. 
 We need to observe two things. The first thing is that when stuck with a politically unpalatable decision the Prime Minister will identify a brave junior Minister normally the leader of a minority party—say Rodney Hide—and let that Minister off the leash. But when the Minister goes too far out comes the scrub-cutter and takes the Minister off at the knees which in Mr Hide’s case is particularly challenging. But there was no such problem with the venerable Mr Dunne who on this matter has many more miles yet to travel. 
The second phenomenon we observe is that the difficult decisions are not contained in the National Party manifesto. Oh no—Steven Joyce has seen to that. All policy was stripped out of the manifesto on Mr Joyce’s instructions. The Crosby/Textor - Joyce manual states: “If you can say it don’t write it down particularly in an email and if you can nod don’t say it particularly not in a manifesto.” That is the way with GST and the Tax Working Group. All the controversial ideas will be inured from politics. No way will they be part of the Government’s programme. They are the objective and conscientious product of the most learned doyennes of tax policy from out in the private sector. 
The proposal will emerge to raise GST to 15 percent and Minister Dunne will champion it as per the harbingers in Part 3 of the bill. Out will go Minister Dunne and Steven Joyce will blow the whistle. He will get above the trench head into the machine gun fire of public opinion take a few brave steps before collapsing in a hail of polls— 
Chris Tremain 
: I raise a point of order Mr Chairperson. This Shakespearean performance is very nice but I would like the member to focus on the part of the bill at hand which is about emissions units GST-exported second-hand goods in clauses 522 and 523 and GST loyalty points. I would appreciate your indulgence in this point of order. 
Hon DAVID CUNLIFFE 
: Speaking to the point of order I was particularly referring to GST on the loyalty points of the Minister who is earning loyalty points with Mr Joyce for his brave carriage of the GST issue emanating from the Tax Working Group. 
The CHAIRPERSON (Eric Roy) 
: There is a bit of tolerance around this area of debate but I think all members know that at the end of the day if I think the discussion is not pertinent then closure motions are accepted. I ask the member to continue. 
Hon DAVID CUNLIFFE 
: I shall take a more detailed view for the next few minutes. What is really important in fact occurs in clause 521 which relates to the time of supply of GST. We ask ourselves how long it will take for the ruminations of the Tax Working Group to come as far as the public domain in respect of GST which is the subject matter of this part I say to Mr Tremain. How long will it take the Committee to deliberate on it? Again we find ourselves inescapably drawn back to the main consensus provisions of the bill which are that the process was too constrained. 
If in tax bills to come Minister Dunne brings forward his brave attempt to raise GST we put down two markers right now. First the Labour Party does not support raising GST on New Zealand’s low-income earners unless they are more than fully indemnified from the regressive nature of any such change. Second if there is going to be any debate about GST at all we need to have a full and proper process unlike the discussion of GST contained in Part 3 of the bill. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I am very pleased to speak on Part 3 of this bill the Tax (International Taxation Life Insurance and Remedial Matters) Bill. I want to acknowledge a small victory for a small section of the community in this bill. 
Hon David Cunliffe 
: United Future. 
BRENDON BURNS 
: No it was not United Future; it was not as small as that. It was the scrap metal industry. Three men—and they were men—appeared in front of the select committee. They were blokes. 
Hon Trevor Mallard 
: They were real men! 
BRENDON BURNS 
: They had lambs on their shoulders; they were real men. Their suits did not quite fit right their ties looked a bit tight and they had calloused hands. But they were the sorts of blokes who go out there create jobs and create exports. They were being hammered by the fact that under the existing regime when they get a load of scrap—copper or whatever—and send it off in a container to China or somewhere else they have to pay GST on it. I thought it was great to see representatives of that industry. 
Progress reported. 
Report adopted. 
The House adjourned at 5.55 p.m.