Dunne Peter: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
Text is incorporated into the Bound Volume 
Dunne Peter: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
[Sitting date: 28 August 2012. Volume:683;Page:4842. Text is incorporated into the Bound Volume.] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 May I begin by responding to perhaps the last point that the member David Clark made relating to the Inland Revenue Department’s FIRST computer system. It is a 1991 system. Since it was introduced in 1991 we have bolted on to it under successive Governments in no particular order child support Working for Families KiwiSaver and one or two others as well that will come to my mind as I go through. So we have a very complicated system. But I want to assure the House in Committee that there is no danger of imminent collapse. The system continues to do today what it always has done. Its capacity to absorb new change is what is at issue. I think the Committee needs to be very clear that we are not talking about the imminent collapse of our technology. We are talking about the need to upgrade modernise and bring it forward to enable us to do the things we do now and will go on doing and also any new initiatives that come along. There will be as I said earlier announcements later this year about the plan and I am sure that the member will be supportive of it when we do announce the whole raft of plans that will need to be taken to upgrade this system. 
I want to pick up on a couple of other points that the member made because they are the critical parts of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill although they are by no means the totality of Part 2 of it. The first one I want to talk about is the profit distribution plans—the bonus share issue. The member attempted to draw a little bit of an analogy between what he saw as restrictions in this area and opportunities created for KiwiSaver investment. In fact the changes that have been made regarding profit distribution plans are simply to prevent what was a potential element of double taxation had those schemes been applied as they were being developed. As the member may recall we consulted fairly broadly with those who were affected before developing the plans that came through in the legislation that the Finance and Expenditure Committee considered. So I do not accept the proposition that this is in some way a restriction on savings opportunities. It is actually preventing a potential element of double taxation and it is also ensuring that we have a common standard if you like for profit distribution plans with similar schemes within the tax system in terms of saving and investment and the tax treatment thereof. 
The member also spoke about the amendments relating to the writing off of unsuccessful software development. This is a very important issue actually because it is one that occurred in retrospect. There had been for some time an assumption that these deductions could be made. Then we discovered that that was not in fact the case. So what we are effectively doing in the amendment in the bill is making clear in statute what had been a common understanding until such time as there was doubt cast upon its validity. There will be a number of occasions when we make changes like this. They are broadly taxpayer-friendly and it is appropriate that we do so. 
I want to come back to the comments about KiwiSaver. I want to say to the member that he can argue as much as he likes about the relative incentives that this Government and the previous Government have offered to KiwiSaver savers but the reality is that KiwiSaver membership has more than doubled since this Government came to office. KiwiSaver membership is now three times what the previous Government estimated it would be by 2015. KiwiSaver membership is now not far short of 50 percent of New Zealanders and it will continue to grow. What the Government embarked upon in 2008 was a programme to ensure the financial viability of KiwiSaver in terms of the Government’s investment long term. What the changes being proposed from April 2013 in terms of the increase in the contribution rate recognise are two things: firstly a recommendation from the Savings Working Group; and secondly the fact that because of the nature of the changes made a little earlier we feel more comfortable about the long-term viability of KiwiSaver. Members need to be reminded—and I think it was a correct decision that the previous Government made—that KiwiSaver individual investments are not Government guaranteed because they are held in private funds. Therefore the Government’s responsibility here is to make sure the regulatory regime the administration of the KiwiSaver scheme is as sound as it can be to protect to the best extent possible the interest of the KiwiSaver members. I am very proud of the fact as I say that we are not too far away from having the 2-millionth KiwiSaver identified. I think that is a terrific achievement and I actually think both sides of the House can take some credit for that. 
I want to just draw attention to some of the provisions that are contained in the Supplementary Order Paper that I have moved because Supplementary Order Paper 98 applies to a number of the provisions of this particular part. These are a number of amendments that are related to the outcomes arising from the Canterbury earthquake. What we have embarked upon quite deliberately since February 2011 has been a series of remedial pieces of legislation as and when needed to give effect to situations that arise as a result of the earthquake and the rebuild. These changes in this particular Supplementary Order Paper are all taxpayer-friendly but they all deal with situations that we could not have anticipated pre-earthquake. 
I say to the Committee that although I am very pleased to be bringing this range of measures before the House in Committee today I do not expect that these will be the last. This is an ongoing work in progress if you like as the rebuild gets under way and issues become identified about the nature of some of the arrangements particularly those between insurers and builders issues relating to the nature of business activity and the disruptions that it has suffered pool depreciation rules treatment of damaged assets that are uneconomic to repair etc. etc. This is very much new territory. I want to commend the Inland Revenue Department officials who have worked on this because they have been diligent in identifying the problems that have arisen. We have consulted with the local community in Christchurch with the business community and with tax professionals to make sure that we are addressing the particular problems that are emerging and we will continue to do so as and when necessary until such time as Christchurch is back on its feet. They may not appear to be significant—and taken individually and collectively they are probably not—but they are beneficial to those people seeking to re-establish particularly business and other activities in Christchurch. 
They are the main aspects of Part 2 of the bill. It is essentially remedial it is all very positive and I think in general terms it will be regarded as taxpayer-friendly.