Cunliffe David: Taxation (Annual Rates Trans-Tasman Savings Portability KiwiSaver and Remedial Matters) Bill — Second Reading 
Cunliffe David: Taxation (Annual Rates Trans-Tasman Savings Portability KiwiSaver and Remedial Matters) Bill — Second Reading 
[Volume:664;Page:12180] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to take a call on behalf of the Labour Opposition in response to the second reading speech of the Minister of Revenue the Hon Peter Dunne on the Taxation (Annual Rates Trans-Tasman Savings Portability KiwiSaver and Remedial Matters) Bill. Labour supports this bill. When members of the public are watching Parliament on television or listening to it on the radio particularly if the main time they listen to it is around question time or the Wednesday general debate they sometimes go away thinking that the entire business of this House consists of members calling each other names or attacking each other across the floor. Of course that is not true. It is on occasions such as this when we have a largely technical bill one that makes needed improvements to our tax legislation and is not particularly partisan a bill which was started under the previous Labour administration and continued—by the same Minister it might be observed—in the current one that we see Parliament at its work in a select committee and in the House making sure that the detail is up to snuff and that the bill will have the effect that it is intended to have. There has been good cooperation in the Finance and Expenditure Committee. I commend its chairman Craig Foss and members on all sides for a constructive approach that was taken to this bill. 
On process matters however I observe one word of slight disappointment and that is that I heard today that the Minister has a substantive Supplementary Order Paper about banks covered bond programmes and other matters to be introduced in the Committee of the whole House stage. I think it is a matter of some regret that that material was not introduced and subjected to the very useful and open select committee process that had previously ensued. Were the justification for that step simply that taxpayers wanted it there might be all manner of changes to the tax law that the Minister might propose. He might drop rates to zero! The Budget went part of the way there in some regards. He might get it into his head to go all the way. There must be another reason for that. We will not prejudge it but I will record now that it is not good practice for this House to face substantive Supplementary Order Papers on the floor when that could have been avoided in a bipartisan process. 
I will briefly touch on the summary of the bill’s provisions. I will raise a couple of specific matters and then talk about the context for a minute or two. The bill introduces the following: the trans-Tasman portability of retirement savings. That is the most important measure in the bill in my view. It applies to New Zealanders who have not opted out of KiwiSaver hitherto and who move across the Tasman for family or employment reasons. It might be observed that they will not be going for lower tax rates because tax rates in Australia are significantly higher than tax rates in New Zealand. But if they move across the Tasman they can take their KiwiSaver savings with them rather than as previously having to wait until they are 65 to collect them. That will be important to them if they are setting up a new home. 
However I think this needs to be monitored. It is bipartisan but we need to monitor it because if there is a perverse effect such that the early release of substantial KiwiSaver funds acts as an incentive for people to move across the Tasman we might find that it runs contrary to other objectives of the Government such as closing the gap with Australia or stopping the brain drain—although we are hearing less and less about those measures as the gap widens and more Kiwis leave. 
The next point is that there are new rules for under-18-year-olds seeking to enrol in KiwiSaver where the parents’ or guardians’ permission is required. That is absolutely sensible although we would note that we strongly believe—and I will expand on this later—that KiwiSaver remains a very very important step towards closing the country’s yawning savings deficit and thereby assisting to reduce the current account deficit. 
The bill introduces flexibility in a provision applying to resident cooperative companies that require a member to hold shares in proportion to their trading stock transactions with the company. As cooperatives become a broader and more important part of our economy that flexibility is to be welcomed. 
There is the effective cancellation of branch equivalent tax account debits and there is a 5-year tax exemption on profits for non-residents operating offshore rigs or seismic vessels in New Zealand. I would not be surprised if some member moves an amendment that states “provided that they do not spew oil all over our beaches”. Let us hope that they do not. We will of course hold the accountability instruments of the Government to account in that regard. 
There are a number of new rules relating to binding rulings. Binding rulings are important but sometimes it is to be observed that the private sector might we say it uses a ruling for purposes beyond that for which it was originally intended. One can think of certain large-scale banking transactions that have been reversed by the courts and by negotiation with the Inland Revenue Department where there was allegedly an unfit purpose for which binding rulings were quoted. However the changes in the bill are useful. 
There is an exemption from gift duty for gifts made to local or central government donee organisations and distributions of property made in accordance with certain court orders—and we are pleased to admit Cure Kids to the list of charitable donee organisations. 
I will touch on three broader themes that attach themselves to the bill. The first is concerning retirement savings the second is about KiwiSaver and the third is about anti-avoidance measures which relate to the provisions for loss attributing qualifying companies in clauses 20G and 20H of the bill. Firstly on retirement savings portability Labour as I have said before believes that it is a sensible arrangement. That is the Minister’s favourite word and it is embodied in the bill. It allows more flexibility for New Zealanders. The chief policy risk is that there is a perverse effect whereby the flexibility around KiwiSaver deductions becomes somewhat greater or it is easier for New Zealanders to get their money out of the scheme if they go across the Ditch to live in Aussie. They can take their KiwiSaver savings with them earlier than they might be able to access them in New Zealand. We will just need to monitor that. I believe that people will make their decisions about where they live for other and different reasons but it is not beyond the realm of possibility that we may need to come back and look at that in the future. 
It is a positive step for current and future New Zealand superannuitants and this Government has however ultimately undermined their future security by other measures. It would be remiss of me notwithstanding the bipartisan nature of this legislation not to note again for this House that there has been a grievous broken promise in regard to superannuation repeated once again in Budget 2010. The single biggest decision if we can call it that that was made in regard to Budget 2009 was the decade of deferrals of the pre-funding of New Zealand superannuation. As members and listeners will recall that pre-funding—the paying into the New Zealand Superannuation Fund of $2 billion or $3 billion a year to build up a fund about the size of the New Zealand economy of $160 billion—was there to support the baby boom as they moved through to superannuation. Otherwise there would not be enough tax revenue to pay their pension. By not pre-funding the Government has put at risk the future of superannuation. There are no two ways about that. 
In Budget 2010 not only has National broken its promise to recommence pre-funding when the Government’s books are in surplus—that is now 2016 and the pre-funding does not supposedly resume until 2019 3 years later—but even then I note that in the fiscal risks section of the Budget documents that funding stream has been removed as “no longer required”. I am sure Grey Power members will be extremely concerned to hear that. We are extremely concerned. We think it is irresponsible and I have made my point on that I believe. 
On KiwiSaver likewise at a time when the National Government the Labour Opposition and members on the cross benches are all remarkably agreed on the need to rebalance this economy in the wake of the global financial crisis in the wake of the then exposed housing and property bubble and at a time when we all agree that the key ingredient to narrowing the financial deficit on our current account which drives the whole kit and caboodle is to improve our domestic savings rate how silly it now seems that one of the first moves the incoming Government made was to halve the incentives for ordinary Kiwis to participate in KiwiSaver taking it from 4 percent to 2 percent. That is a matter of great regret and I think it is a measure that everybody in this House will come to regret. Labour is pledging again today that we will not only restore KiwiSaver but also take it forward. We believe it is a very very important measure. 
My final point in conclusion is just a small point on loss attributing qualifying companies. There are a couple of technical measures in the bill clauses 20G and 20H which make them easier to use. We expect further substantive reform from this Government to tighten the provisions on loss attributing qualifying companies because they are a black hole.