Foss Craig: Taxation (Business Tax Measures) Bill — In Committee 
Foss Craig: Taxation (Business Tax Measures) Bill — In Committee 
[Volume:653;Page:1996] 
CRAIG FOSS (National—Tukituki) 
: 
 I acknowledge the tenets of the previous speaker and the bipartisan nature with which the Taxation (Business Tax Measures) Bill has been progressing through the House and the Finance and Expenditure Committee so far and hopefully as it progresses through the Committee stage and the third reading in the not too distant future. As chair of the Finance and Expenditure Committee I would like to acknowledge and thank the previous—and current—Minister of Revenue for getting the bill to this stage other parties for the cross-party support around Parliament in this House and at the select committee and the officials who have worked very very hard to put the bill into this form at very short notice when it became apparent that it was very urgent that it be put into place. Of course my fellow members and colleagues on the select committee need to be acknowledged because to get this bill to this point a lot of cooperation and goodwill has been shown by all parties to enable the processes to be moved through quickly. All parties recognised the urgency of the bill; I would like that to go on record. Thank you very much Mr Chair. 
As I noted—and the previous speaker talked about this a wee bit—it is urgent that this bill is passed as soon as possible. It is not under urgency but it is urgent that it goes through the House as soon as possible. It has been reported back generally without any substantive amendments or changes and I acknowledge again the previous speaker who said that his party had ideas thoughts and policy that it may wish to progress. As a committee we discussed that and I am sure there will be further discussion around that. Again as that member noted the commentary on the bill also addresses issues around the use-of-money interest spread the tax deductibility of patent costs and so on. But there was one point that I need to check my records on. Although New Zealand has a 20-year amortised write-off period I think other options are available in New Zealand to write something off over the life of whatever a product or invention might be—but I stand to be corrected on that one. 
This bill is actually quite short. Its origins are in the Taxation (International Taxation Life Insurance and Remedial Matters) Bill which is still before the select committee. As the commentary notes many of the measures have been taken from that bill and brought forward or enhanced in some way. There are some new measures in this particular bill but again I acknowledge its origins in previous work policy and discussion papers. I think it was in a small-business discussion paper in 2007 that a lot of these points started to be at least talked about. 
The focus in this bill—and this is why for example the patent measures are not here—is on cash flow. It is about assisting businesses through the troubled times in front of us right now. Since this bill was introduced and since the parent bill of this one was introduced the global economy has deteriorated markedly—and again the previous speaker alluded to some of the facts and figures on that. The bill is urgent. 
We had six submitters on the bill all in favour of it but they raised interesting points most of which will be pursued further. I would like to acknowledge the Institute of Chartered Accountants of New Zealand not only for the very progressive and positive way it submitted on the bill but also for the good policy work it does in general around all things regarding tax in New Zealand. The New Zealand Retailers Association submitted particularly on the compliance issue and how those measures would improve life for many of its members not necessarily just in respect of cash but also in respect of compliance—for example with regard to GST and PAYE thresholds. The New Zealand Manufacturers and Exporters Association was actually the group that raised the issue around patents and deductibility and encouraged the committee to do further work on it. I appreciate that and acknowledge the association for that. 
The New Zealand Chambers of Commerce and Industry made as was to be expected a very robust submission. Although it was generally very much in favour of the bill the organisation suggested areas where things could be bigger wider or higher—where thresholds could be made more tax friendly and so on. Of course in these challenging budgetary times we have to balance all of that against the fiscal cost. The aim is admirable but we have to try to balance the budget or at least not let our debt blow out too much as we get through this current trough. I also acknowledge the New Zealand Council of Social Services. It was recommended and suggested as a submitter and its submission was very useful for members of the committee. The council made a big effort. I will be brief but I want to go on record as thanking the council. Its submission was very very beneficial to our committee. 
 The bill is in two parts. The guts if you like—excuse my French—are all in Part 1; Part 2 is about remedial matters and some other issues. All of the issues—the use of money and the provisional tax uplift changes—are in Part 1. As we go through the clauses members will note that all the major points are in Part 1 from clause 3 to clause 27. Virtually all of those provisions are changes to the Income Tax Act such as changing thresholds changing application dates and some minor wording changes to facilitate the main parts of the bill which I am sure other members will speak on. 
I will point to my favourite part of Part 1: the changes to the provisional tax uplift level. That may sound boring but quite simply I say it is a very good and very quick recognition of the state of play for New Zealand businesses. It was common knowledge from about December last year that to at least meet last year’s profits will be very very challenging for businesses. So a quick reaction by the Crown the Government and the officials at the Inland Revenue Department in terms of actually thinking about these measures—which is actually eminently sensible when one looks at it in hindsight—I think is very very good and acknowledges the key problem for businesses which is a simple cash-flow issue. Yes there is a fiscal cost to this measure but over a few years it does start to level out. The cost of carrying it is the cost. I will make the point that the 2-year horizon of those provisional tax measures for this financial year and the next financial year actually lines up with a recognition of what the Reserve Bank said last week. It sees New Zealand as hopefully starting to come out of its recession in the middle of 2010. That is exactly when these measures start to change and come into play. 
We will discuss later the use-of-money interest issue. The previous member talked about the spread of the two rates—debit and credit—but he made the point which I am very much in favour of that they now relate much more to the 90-day bank bill rate rather than to the official cash rate changes which we have seen a large deduction in recently. The change reflects the working capital borrowing period of many small businesses. They do not borrow overnight; it is borrowing for some 30 or 90-day rolling cash. 
I look forward to speaking on this bill a bit further. I once again acknowledge the cooperation of all members and I look forward to this legislation being in place before 1 April 2009.