Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16167] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Thank you— 
Hon Trevor Mallard 
: This is one of the biggest parts of the bill. 
Hon DAVID CUNLIFFE 
: It is. Part 7 is a particularly important part of the bill. It is particularly important because it reflects the process that has gone on so far. This is a grab bag. It is entitled “Amendments to other legislation”. How non-specific can we possibly get as to the title of a part—“Amendments to other legislation”? That reflects the shambles of a process that is embodied in this bill. The Government could have done the normal generic tax policy process but it chose not to. It could have given the bill the benefit of a standard select committee consideration but it chose not to. It could have allowed practitioners in the industry such as the lawyers and the accountants to make formal public submissions along with affected businesses and members of the public but it chose not to. Government members could have subjected themselves to the cross-examination of members on this side of the Chamber but they chose not to. Instead they have chosen to bring to the Chamber a Supplementary Order Paper that dwarfs the original bill.  
Part 7 is contained in the original bill not in the Supplementary Order Paper but it is a grab bag of miscellaneous clauses that reflect the general state of disarray of this legislative process. The first one is clause 105 which covers deductions from joint bank accounts under the amendment to the Gaming Duties Act. This clause together with clauses 16 and 86 allows deductions of tax from payments due to a defaulting taxpayer. They are amended to allow the Commissioner of Inland Revenue to make deductions of tax from joint bank accounts. The amendments will allow deductions from a joint bank account if the defaulting taxpayer can make withdrawals from that account without the signature of the other person. What that means in plain language is that if someone has a joint account and one member has defaulted then the commissioner can allow deductions to occur without the consent of the other party. That is certainly improving the reach of the tax department. It does raise the odd issue about whether the privacy of another person is involved but I guess that is the price of having a joint account.  
Clause 106 which covers provisional tax relief for the super-city transition is a matter of some considerable importance because this is the tax implication of the new structure of the super-city. It is specifically designed to accommodate the fact that most of the business of the super-city is not going on at council level; it is going on at the council-controlled organisation level. That has required entirely new tax provisions between the council-controlled organisation and the parent council. This clause amends section 83 of the Local Government (Auckland Transitional Provisions) Act 2010 which provides transitional tax relief on the amalgamation of the local authorities into one council. It provides for the purposes of the financial arrangement rules in the Income Tax Act 2007 that where the new Auckland Council enters into an acknowledgment of debt with a council-controlled organisation without paying the principal to the council-controlled organisation the council is deemed to have advanced the amount of the principal to the council-controlled organisation. That is it is deemed to have advanced the amount even if it does not actually make a new loan because it is inheriting a debit from a previous structure. It is probably one of the more sensible provisions in the bill.  
As part of the super-city restructuring certain assets owned by existing local authorities will vest in council-controlled organisations owned by the Auckland Council. There is no problem with that. It is sensible enough. The issue at stake is the balance—of course this is old territory—of authority and oversight between the parent council and the plethora of council-controlled organisations into which most of the activities of the new council have been devolved. It is of great cheer to this side of the Chamber to see that the new mayor “Auck-Len” has ensured good transparency at the council-controlled organisation board level by insisting on the publication of board papers. The  
New Zealand Herald  
yesterday of course revealed a very good summary of the first round of board meetings the notable exception being the transport council-controlled organisation which saw fit to have its first meeting entirely in secret and not publish any of its papers. So we have the paradox that the largest most important council-controlled organisation has been hitherto conducting its arrangements in secret. That is not acceptable and I am very very pleased that the new Mayor of Auckland Len Brown has been able to gently persuade the transport council-controlled organisation board that the expectations of the public of Auckland are for a maximum degree of transparency. So that is excellent.  
There are some debt implications that are tidied up in these clauses. In clause 106 the debt relating to the assets owned by local authorities vested in council-controlled organisations will not be transferred to the council-controlled organisations but will be assumed by the Auckland Council. In turn the council-controlled organisations will then enter into an acknowledgment of debt to the council for the amount of debt attributable to the assets. That is interesting. In fact despite the locus of control being vested in the board of the council-controlled organisation the debt is vested in the council. To members on this side of the Chamber this just smells slightly familiar—the old right-wing tendency to socialise the losses and the risks and to privatise the profits. That is exactly what has happened in the global financial crisis. 
Hon Darren Hughes 
: Seen that before. 
Hon DAVID CUNLIFFE 
: That is right. The taxpayer around the world has had to underwrite the huge bonuses made by the crocodile shoe brigade on Wall Street. It is an outrage. 
Hon Darren Hughes 
: Don’t call the Prime Minister that. 
Hon DAVID CUNLIFFE 
: That is right. 
Dr Paul Hutchison 
: What would have happened otherwise? 
Hon DAVID CUNLIFFE 
: Well if there had been a decent regulatory framework we would never have had the level of bonuses paid. 
Dr Paul Hutchison 
: No what would Governments have done otherwise? 
Hon DAVID CUNLIFFE 
: I think it is bipartisan that we have had retail—[ 
Interruption 
] If the member has asked a question he should have the courtesy to listen to the response. There was bipartisan support for having a retail and wholesale deposit guarantee scheme before the current Government blew it and extended the retail scheme without sufficient clarity of oversight as—I have a good bottle of wine resting on this one—it is now going to blow the budget for the underwrite. It is going to blow the budget for the underwrite because not only has it turned down a really good recapitalisation proposal on South Canterbury Finance—and it is going to end up paying a whole lot more by the time it has brought the asset sales to book—but it has had Equitable Mortgages another $180 million - odd which has been deliberately put into receivership by the owners before it is anywhere near insolvent. When asked why they did it they said: “We don’t want to take the risk.” It was the closest thing I have ever seen to an admission by a private board that it suited their shareholders for the taxpayer to bear the risk. It was extraordinary. Yet the Government did not bat an eyelid. It did not even ask the question of whether that was ultra vires to the purposes of the retail deposit guarantee scheme. If Dr Hutchison would like me to go on I could probably spend two or three calls examining the details of the scheme a little more fully but I think he probably wants to get home some time tomorrow.  
Hon Darren Hughes 
: No on Monday! 
Hon DAVID CUNLIFFE 
: It could be Monday. Let me move on to section EW 3(2). In this provision— 
Hon Trevor Mallard 
: Bring on the detail! 
Hon DAVID CUNLIFFE 
: Well is it not interesting that Mr Brownlee the Leader of the House has not taken a call? We could argue about whether he is in the Chamber; I could not possibly comment. 
The CHAIRPERSON (Lindsay Tisch) 
: Members cannot refer to the absence of a member. The member should know that. 
Hon DAVID CUNLIFFE 
: In which case I will not refer to it Mr Chairman; you are quite right. The general definition of financial arrangements in section EW 3(2) does not apply to the acknowledgment of debt because no consideration is paid by the council to the council-controlled organisation and therefore there is no consideration violating standard practice contract law that a contract is not a contract until consideration has been exchanged and that an agreement to agree is not an agreement in law until such consideration has vested. So here we are in the dead of the afternoon the week before Christmas under urgency doing what? We are overriding a bill making perfectly sensible but necessary tidy-up amendments that was agreed by consensus in the Finance and Expenditure Committee by every party in the House. We had consensus on those points until the Minister brought into the House an 80-page Supplementary Order Paper which is far more important than the main bill. The main bill was just a tractor put on the trailer. All the hay is in the trailer; it is in the Supplementary Order Paper. The committee did not have the opportunity to investigate.