Prebble Richard: Taxation (Base Maintenance and MiscellaneousProvisions) Bill — First Reading 
Prebble Richard: Taxation (Base Maintenance and MiscellaneousProvisions) Bill — First Reading 
[Volume:622;Page:18061] 
Hon RICHARD PREBBLE (ACT) 
: 
 I rise on behalf of the ACT party to speak to the Taxation (Base Maintenance and Miscellaneous Provisions) Bill. I do not think the Minister of Finance will mind my saying that he did suggest to me that the ACT party would find it difficult to criticise this bill. I suggested that we would have no difficulty in doing so and I will show members why that is the case. 
Hon Dr Michael Cullen 
: It wouldn’t be under 2 percent would it? 
Hon RICHARD PREBBLE 
: The truth of a proposition does not depend on a party’s poll rating and it never has. So let me make statements that may not be populist but that make a number of criticisms. Firstly let me explain what the bill is about. The bill has been introduced fundamentally because the trading banks have been quite legally able to reduce their income. The reason they can do that is that trading banks actually borrow large sums of money and they are able to put up for taxation purposes the interest they pay on it. Now we are going to do away with that which is interesting because it means that the tax on banks will be different from that on other organisations. Fundamentally from a taxation point of view that is a bad principle. 
I understand the problem the Minister has but there is actually a very very simple answer to that problem. Banks are no different from individuals. 
John Key 
 Lower the company rate. 
Hon RICHARD PREBBLE 
: I thank the member. If we lower the company rate— 
John Key 
: I didn’t mean to spoil the punch. 
Hon RICHARD PREBBLE 
: No no it is good to see that Mr Key is right on the job and I am sure he has make this point already to the Minister—[ 
Interruption 
] Well let me put this to the Minister of Finance. I have heard him get up in this House and say that New Zealand does not have a higher taxation rate than Australia’s. If that were so then all the Australian banks would be falling over themselves to pay tax in this country rather than in Australia. But they are not and that is another reason that this bill is wrong—it does not actually fix the problem. 
But let me go to another dilemma with regard to the bill. I will make a criticism of our taxation system generally and it is this. An extra 115 pages are to be added to the—what is it—thousands of pages now— 
Gordon Copeland 
: Over 2000. 
Hon RICHARD PREBBLE 
: I thank the member; Mr Copland is an accountant. There are over 2000 pages of taxation law. Why is that? The reason for that is— 
Hon Dr Michael Cullen 
: How much is there in Australia? Over 10000 pages. 
Hon RICHARD PREBBLE 
: The Minister interjects to say there are 10000 pages in Australia. If he had not anticipated what I was going to say he would have heard me explain to him what the problem is—and it does exist right around the Western World. There is an attempt to artificially define income so then one needs artificial laws. Then when countries take as much in tax as they are taking they need to have a huge tax code and people cannot find their way around it. If we had a simple flat rate of taxation I say to the Minister we would then have a simple tax code. That is true in New Zealand and it would be true in Australia as well. 
I want to make another criticism and it is this. We find that those who are interested in civil liberties have set out what good principles are for the law but when it comes to taxation law they completely ignore all civil liberties. One of the provisions of the bill which is actually put forward as though it were a more liberalising measure states that the amendments to the Tax Administration Act limit the right of the Commissioner of Inland Revenue to require taxpayers and their tax advisers to provide documents that give instructions to the tax adviser or give tax advice to the taxpayer. Well in a sense that is true because the Commissioner of Inland Revenue with his police State powers—and they are police State powers—has been able to force people to actually talk about private conversations they have had with New Zealanders who were trying to organise their affairs. If one is a civil libertarian and if one does believe that citizens are entitled to organise their affairs why is the State able to reach in with the sorts of powers that Nazi Germany would have been pleased to have? They are actually called Danzig laws and they run right through our tax code giving enormous power to the State. 
It is true that in this particular bill in some ways that power is further limited. But I just invite members to look at what the Government now claims it has the right to do. A person must disclose tax-contextual information from a tax advice document. So if people have documents—private documents—about their private affairs that no one has the right to look at the Government is now saying that they must give those documents to the Government even if they do not want to. Even if a document has nothing to do with tax a person still has to tell the Government why he or she wanted to obtain tax advice. A person may want to have tax advice because his wife is leaving him. He does not want to tell everybody that that is happening but he must tell the Government. A person may want to get tax advice for personal reasons to do with a partnership he or she is in. That person has to tell the Government and then has to trust it. Well the Inland Revenue Department has a pretty good record of holding confidential information but that still does not remove the personal embarrassment that people feel about having to disclose that sort of information. Why are we passing what we would regard in any other part of the law as an outrage and a violation of our rights as citizens? How can we call ourselves a free country when we have a code that states that people must hand over personal private documents that have nothing to do with tax just in order to convince the tax department—so that it can see the context in which a person was getting tax advice? 
I say to the House that that is the inevitable result of the Government having an escalating taxation rate. If there is an escalating taxation rate we have to have police State powers. If the Government takes 40 percent—[ 
Interruption 
] I say to the Minister that they are police State powers. 
Hon Dr Michael Cullen 
: The Russians had police State powers with a flat taxation rate. 
Hon RICHARD PREBBLE 
: Well that is true but it does not—[ 
Interruption 
] The Minister says that the Russians had police State powers with a flat taxation rate. I am not saying that the only reason— 
Hon Dr Michael Cullen 
: The Russian tax police. 
Hon RICHARD PREBBLE 
: The Minister is capable of better logic than that. I am not saying that if we had a flat rate of taxation it follows that we would not have police State powers. What I am saying is that in this country there are only two areas where we have— 
Hon Dr Michael Cullen 
: Sub-machine guns. 
Hon RICHARD PREBBLE 
: Police State powers have nothing to do with sub-machine guns. Police State powers exist when a citizen is deemed to be guilty and has to prove himself or herself to be innocent. That is the situation right through the tax code. The State has the right to take information from a person when that person has broken no law has been perfectly law-abiding and has been going about his or her own personal private affairs. Despite that the Government can say it requires a person to disclose information and if he or she does not do so there will be very very heavy penalties. That is a police State. 
If we look at our tax code as a whole we see it is a violation of all the proper principles of civil liberty. There are another 113 pages of that in this bill and the solution I say to the Minister is to have a low flat rate of taxation. We would then not need all these measures—we would not need to have special laws for banks. One of the advantages of a low flat rate of taxation independent of the economic advantages that I believe are there—the Minister does not believe that although he cannot dispute this—is that if we had a low flat rate of taxation New Zealand would be a freer country. We would have more civil liberties. We would have the sorts of things that I heard him and his colleagues talk about when they spoke so eloquently in favour of the Civil Union Bill. They talked about how people should be able to make their own choices but when we come to 40 percent of the economy which is the amount that the Government takes in tax then all their concern about civil liberties goes out the window and the Government assumes that everyone in New Zealand is a criminal. That is why the ACT party will oppose this bill.