Clark David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeClark David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — Second Reading[Sitting date: 27 May 2014. Volume:699;Page:18320. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North): The member who has just resumed his seat Todd McClay needs to table the agreement that will come into effect in July this year. It is an agreement that has been negotiated behind closed doors. That is proper in the negotiation process. The Government has been very slow to finalise the agreement. That is why we are being asked as a Parliament to ratify an intergovernmental agreement we have yet to see. I have reason to believe that the Minister of Revenue has seen the agreement and that the agreement has now passed a stage where it is in its final text and is ready for Cabinet to sign it off.Hon Todd McClay: Haven’t seen it.Dr DAVID CLARK: The Minister claims he has not seen it. He may be the only person in Cabinet who is being kept in the dark but I doubt it very much. I challenge the Minister to table that document before this legislation the Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill is passed. Transparency is a very important principle and unfortunately this Government has a bad track record on transparency. We know that with the Skycity deal we know that with the conversations around extra payments to Chorus we know that with the matter ofOravida and there are plenty more. But here where the agreement has been negotiated and is awaiting Cabinet approval it is incumbent upon the Minister to table it in the House so that we can have a look at the agreement and we can see whether the text has been well negotiated because it is very unusual.Officials noted this. Officials noted this when we interviewed them at the Finance and Expenditure Committee. They said that it was very unusual for a select committee to be passing enabling legislation before the negotiated document had been tabled.Hon Todd McClay: Ask me tomorrow.Dr DAVID CLARK: This is very very unusual behaviour. I think that member opposite said that it was going to be tabled tomorrow.Hon Todd McClay: I said you can ask me at the committee tomorrow.Dr DAVID CLARK: He says I can ask him in the committee tomorrow. Well that is promising. I wish the member would do it sooner. The member has never seen it before but having been challenged he is confident that tomorrow it may be available to be released. I think that indicates a certain defensiveness and it is a great shame that the member could not come clean first off and table the document in the House because this is not the way this process should be done. It should not be the case that the cart comes before the horse that Parliament is asked not to scrutinise the negotiated legislation and that Parliament is asked simply to swish it through and wait and see what happens. That is not why Parliament is here. Parliament is here to properly examine such agreements.This agreement the Foreign Account Tax Compliance Act affects 20000 New Zealanders who were born in the US who have as we understand no further relationship with the USA. It affects those New Zealanders who have lived and worked in the USA. More broadly it will affect their families whose bank account details will be released along with those US citizens back to the United States. These people are giving up on their privacy by virtue of this legislation that is passing through the House. That is one thing that we can be pretty confident of having not yet even seen the text. But this Government does not seem to take seriously those matters of privacy and the matter of an international negotiation being properly ratified through this Parliament through the normal processes. Instead we have a very unusual process through the House right now.The Labour Party stands for reciprocity in tax agreements. We do want to crack down on tax avoidance and tax evasion. That Government across the Chamber has a very poor record in that regard. We know for example that Google declares less than 5 percent of its revenues out of New Zealand for tax purposes and yet the Government does nothing about it. We know that Facebook pays less tax than many members in this House despite having 2.2 million users in New Zealand which it values according to its initial public offering much more highly and says that if it was a New Zealand - based company based on its initial public offering of 2012 it would be paying roughly 100 times as much tax in New Zealand if it was a responsible tax-paying organisation based here.These questions are of little concern to that Government across the Chamber. It seems much more interested in swathes of rhetoric around beneficiaries than in actually chasing the huge tax-avoidance problem that we have. The Government says that we will get into the multinational process—the base erosion and profit shifting process. You wait. Mr Goldsmith will pop up in a minute and defend the OECD process whilst the US unilaterally goes out and makes New Zealanders pay for banks to collect data on their own people and to send the data across to the USA. That is what this Government will get up and defend in a minute.The reason that we might enter into such an agreement is that the US has unilaterally said that it will charge 30 percent extra on wholesale lending if New Zealand does not comply. We may end up in that space but it is incumbent upon us in a negotiation to put our side of the case which is reciprocity. It is actually about making sure that tax avoidance is tackled wherever it falls in the world not just where it is in the US’s advantage to tackle tax avoidance but also where it is in New Zealand’s advantage to tackle it.But this Government will not do that. In the select committee it blocked putting the principle of reciprocity in the legislation. Mr Goldsmith I am sure will tell you when he gets up that there was good reason for not wanting reciprocity written into the agreement. We have yet to hear a plausible explanation as to why the Government doesnot want us to go after tax avoiders in New Zealand in the way that it is asking us to go after US tax avoiders at our own cost. There must be a reason there. Perhaps it is just the embarrassment of the Government that it has left this negotiation too late and it has happened too slowly. The officials clearly have not had the guidance or the leadership that they should have had from this Government because they are very competent officials. I know that from having dealt with them previously. The fault rests with the leadership of this Government and its failure to set down a set of expectations around reducing tax avoidance and tax evasion. Many New Zealanders will be feeling uncomfortable with this change and with the fact that we are here putting the cart before the horse and not scrutinising properly the legislation that is being passed through this House.This Government does have a record of being slap-happy in respect of agreements. I have already mentioned the Skycity Casino deal. We know about theOravida one and about the Government’s support partners—we can think of a matter before the courts currently where there seems to have been a slap-happy arrangement in respect of the way in which financial issues are treated. This cuts to the core of these members opposite who are concerned about the corporate interest and not concerned about putting people first.We on this side of the House the Labour members have a view that New Zealand ought to have a fairer tax system. Everybody ought to pay their fair share and that is so that we can have the schools the hospitals the roads the safe society and the courts that give us a good society—the New Zealand that we all know and love from previous generations where there is high trust where we have a social safety net and so forth. But across the way members are content to see things slip content to see things go in the interests of the big players and content to buckle under pressure and have Parliament do some very unusual things—Paul Goldsmith: This is a very rambling speech—a rambling speech.Dr DAVID CLARK: —Mr Goldsmith some very unusual things—in passing legislation that is not properly scrutinised by Parliament.I should also note that there is around $8 billion in outstanding debt that this Government is unable to chase. It was reluctant to write it off probably because it came down to part of its Budget-balancing exercise. It is tinkering here in this legislation with some other things that are positive. We will actually in the end support this legislation because we know there are some positive measures in it but we are deeply concerned about the process and the way it has been done. We would not want to see the banks put in a difficult position where they would have to pay 30 percent withholding tax because this Government had not got around to doing its homework and had not got around to sorting this matter out long ago.We would also like to draw attention to the challenges around community housing entities. The Minister will have wide-ranging discretionary powers to approve or disapprove of charitable exemptions as a result of this legislation. This delegation to the Minister of the effective right to confer lower taxes on some but not all taxpayers is just simply bad law. It is quite simply put terrible law where the Minister has such wide-ranging discretionary powers to say “You’ll pay a lower tax rate than this person over here.”It has been a rushed process. That is why we have ended up with this sloppy law. The Government put these changes out for consultation around Christmas-time and expected people to get back in early February. It was a rushed process. It tried to bury this. It shows where we end up when we have bad processes: we end up with bad law. The useful stuff in this law is forcing us to support it but overall we are very disappointed with the process because the law could be so much better. The problems also could beironed out around exemptions which KPMG drew to the attention of the committee—the taxable nature of an employer-provided allowance or benefit such as accommodation. We heard countless examples of exemptions in that area. Again it is sloppy law being made that will require tidying up later.