Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16161] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to take a call or two on clauses 102 and 103 in Part 6 of the Taxation (GST and Remedial Matters) Bill. 
Hon Trevor Mallard 
: What about 101? 
Hon DAVID CUNLIFFE 
: Well I am not sure it is in Part 6 but I am particularly focused on clauses 102 and 103 if it is all right with my colleague. I say it is my right to be focused on whatever clauses I jolly well want. I think Mr Mallard is angling for a job as a whip. But he is doing his job pretty well. 
Chris Hipkins 
: He wants Gerry’s job! 
Hon DAVID CUNLIFFE 
: Well that brings to mind the question that has fascinated philosophers for many many years. If Gerry Brownlee is the third-smartest guy in the National Party—I need not finish the sentence. In fact the reason we are all here enjoying our time together in the Chamber is twofold: firstly the abhorrent Supplementary Order Paper amending the bill and secondly the organisational genius of said Gerry Brownlee who has completely mishandled the Order Paper by dumping a huge huge collection of bills on it and this is only No 2. This is only the second bill up. Members opposite will be here all weekend I fear.  
But anyway back to clauses 102 and 103. What is interesting about these clauses which amend sections 86I and 86L of the Stamp and Cheques Duties Act 1971 is that they are amended to introduce references to an exemption under a double tax agreement. Those relate to the non-resident withholding tax rules of the Income Tax Act 2007. The context is that we have recently concluded double tax treaties with Australia and the United States which include a new exemption from source company tax for interest derived by banks. Together with clause 79 those clauses clarify the circumstances in which a person is eligible to pay the approved issuer levy as my colleague Mr Nash has just said. They make it clear that the borrower can pay approved issuer levies in order to qualify for an exemption under a double tax agreement even if paying the levy makes no difference to the way the transaction is dealt with under domestic law. That clarifies an uncertainty that existed when the double tax agreement was written and that brings us right to a very very important point. The process by which the underlying double tax agreements have been negotiated and brought through the House is itself deeply flawed and I will explain why in a minute.  
There is a huge irony in having to introduce by stealth a massive amendment part of which by Supplementary Order Paper that has not gone to the Finance and Expenditure Committee is to correct mistakes or ambiguities in double tax agreements that supposedly had them. Our Labour team argued consistently in the Finance and Expenditure Committee that the process of examination of double tax agreements is fundamentally flawed. It is flawed because there is an oxymoron called a national interest analysis. Why do I say it is an oxymoron? It is neither national nor a good definition of interests nor is there much analytical content. These tend to be once-over-lightly narrative descriptions of the treaty that has been under negotiation. They are brought to the committee late in the process after the negotiation has concluded and before the agreement is ratified by the House. But when members of Parliament in a select committee ask difficult and searching questions about the balance of interest in the double tax agreement we receive a stock of standard responses. The first one is not to bother our pretty little heads about it because it has already been done and dusted and it would be improper to intervene. Well I am sorry but that is not what the Standing Orders prescribe. The Standing Orders very explicitly prescribe for a detailed and rigorous select committee examination under about a dozen different subclauses— 
Chris Tremain 
: What has this got to do with 102 and 103? 
Hon DAVID CUNLIFFE 
: These clauses are amending ambiguities that arose in the Australian and United States double tax treaties which went through the same committee this should have gone through but which did not receive thorough enough examination for exactly the reasons I am about to go on and describe. Now what were those reasons? What are the flaws? The member opposite has asked for more detail and he is a senior member he is the senior Government whip and I try my best to obey whips. We are just getting to the interesting part now that Chris Tremain has requested more detail.  
The first of I think four key structural defects in the process of consideration of double tax agreements is that there are supposedly network effects. That is we are told by our officials that it makes no sense to consider one double tax agreement in isolation from a whole spectrum of double tax agreements of neighbouring or related countries. Yet they are brought to the committee often one at a time. How could the committee and how could Parliament possibly offer proper scrutiny of one double tax agreement when it supposedly makes sense only as part of a network? There is supposedly some separate headline negotiation or analysis that covers the whole system. It is just that it is not visible to Parliament and it does not come to the select committee. 
The second point is that there is a lack of data. Let me give a very good example not in relation to the double tax agreement covered by this clause but by one very similar—the New Zealand - Singapore closer economic partnership agreement. That agreement was described by officials as being likely to reduce New Zealand’s trade in goods but to expand its trade in services and its investment opportunities. Well that is a perfectly reasonable trade-off to make but guess what? The New Zealand department of statistics does not record data for trade in services or investment flows in sufficient detail to answer the question in the rear-view mirror of whether we have come out ahead. So 3 or 4 years after this Parliament passed the New Zealand - Singapore closer economic partnership agreement it cannot even now undertake the analysis to find out whether the New Zealand taxpayer the New Zealand economy is better off or worse off because the New Zealand Government does not collect the statistics that would enable that analysis to occur. I find that absolutely amazing.  
However it gets better—or worse. Even if we had the data we should not expect anybody in officialdom to have crunched it because the national interest analyses are an analysis-free zone—an analysis-free zone. They are narrative descriptions of “We trade this bit for that bit. We think we might be better off.” OK “Tell us why you think that.” You know there are no numbers typically in a national interest analysis on a double tax agreement such as those covered by clauses 102 and 103. Well that is ridiculous. How can it be an analysis if it is qualitative on a tax treaty? Or in one that I recall it was an upfront loss of tax of $20 million. That was the cost side. On the benefit side there was supposedly a qualitative compliance cost reduction. “Well how big is it?” we asked. “Can’t tell you.” said the officials. “Well is it bigger than or less than $20 million?” we asked. “Can’t tell you.” said the officials. “Why can’t you tell us?” asked the members of Parliament “Is it a secret?”. “Well” they said “there are two problems with that”—and that brings us to the fourth of the four reasons why these clauses are an embarrassment for the Government. Not only is there a network effect a lack of data and a lack of analysis but also hey presto there is a lack of process too.  
The lack of process is that there is no point in the chain of the negotiation where the essence of the negotiation is able to be subject to sufficient public scrutiny because the Government negotiators go in secret to negotiate with the negotiators of the other party. They do not bring the bill to Parliament until after it is negotiated which is fair enough but no tracking analysis is brought to the select committee. It is brought to the select committee for analysis only after the negotiations are completed. When on one occasion we found a clear example where the negotiation had come out badly for New Zealand we were told: “You can’t say that.” “Why couldn’t we say it?” we asked. “Because we don’t want the other side to know they won.” In another example where it came out very well for New Zealand and the public would have wanted to know we were told: “You can’t say that.” “Why not?” we asked. “Because we don’t want the other side to know they lost.” “Then why are we doing this?” we asked. We were told: “Because you have to.” and we said: “Well shouldn’t it be meaningful?”. And here we are today in Parliament under urgency on Christmas Eve now re-correcting clauses 102 and 103 because they were not done properly the first time.