Cunliffe David: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading Instruction to Committee In Committee 
Cunliffe David: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading Instruction to Committee In Committee 
[Volume:626;Page:21455] 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I would like to take the opportunity to respond to a couple of the questions that members opposite have raised. 
The first came from Pansy Wong in relation to Supplementary Order Paper 378. Her question was whether the changes to the definitions there would change the underlying policy around equity and debt. The answer is no. The amendments were made at the request of the banks themselves. They provide some certainty and clarity but the underlying policy will not change. The regulation-making power cannot be used for anything beyond clarifying those definitions. 
Mr Prebble raised the issue of clause 110 which gives the Commissioner of Inland Revenue discretion to deregister non-residents who do not carry on a taxable activity in New Zealand. Mr Prebble described that rule as akin to those in Nazi Germany. It seemed a long stretch of the imagination because what that provision in fact does is clarify that someone who is not carrying on a business in New Zealand and essentially is not incurring any input costs to defray GST on should not be able to take the GST margin as a final profit because he or she does not operate in New Zealand. In other words we are treating such people in the same way that we would treat any other business in New Zealand. It is entirely fair and of course we must reject the suggestion of Mr Prebble. 
Mr Nick Smith argued that this so-called greedy Government has seen its tax take go up but he forgot to tell the Committee that in fact tax as a share of GDP has gone down. According to the OECD in the year 2000 tax as a share of GDP was 37.2 percent and in 2002 it was down to 36.3 percent. [ 
Interruption 
] The member has asked about the growth in GDP. It is true that under this Government GDP growth is nearly double that achieved by National when it was in Government throughout the 1990s. So part of the reason why tax as a proportion of GDP has fallen is that the economy has grown so quickly under this Labour-Progressive coalition Government. 
Mr Nick Smith argued that the Government was sitting on a $7.5 billion surplus. That simply does not wash. Kiwis know that whether they are in surplus or in deficit is determined by whether after they collect their pay packets and pay the bills they have got any cash left in their pockets. [ 
Interruption 
] On a cash measure that is right. In 3 of the next 4 years according to the Budget we will be in a cash deficit situation. In 2008 we will face nearly $3 billion of cash deficit. There simply is no pot of gold. For the ladies and gentlemen out there in radioland National is spinning them a line. If National were ever lucky enough to be elected which is looking increasingly unlikely it would spend New Zealand into the kind of oblivion that Rob Muldoon left the country in last time Labour had to rescue it in 1984. 
Nick Smith argued that 80 percent of people prefer National’s tax policy—even though it has not got one. That is the highest number that National members will ever see because when they finally unveil their policy and try to make the numbers add up it will be very very clear that they do not. New Zealanders know a swindle when they see it and they will vote for the Government that has delivered solid growth and fiscal credibility for the last 5 years. 
Gordon Copeland said that Labour does not believe in tax cuts. Well that does not square with the evidence in this year’s Budget because we brought in a nearly $2 billion business tax cut package. I will recall it for members. Fringe benefit tax thresholds were raised provisional tax was eased tax on actively managed funds was erased tax on international migrants and venture capital funds was lowered there was a small-business tax discount in the first year of operation and there were tax cuts in the $3 billion Working for Families package. This Government has already cut taxes. [ 
Interruption 
] 
He asked the key question—and Mr Shane Arden is asking it again—“Why didn’t you just cut rates?” and that is a good question. The answer comes back to the central point of this bill which is that if you just cut rates the benefit would flow— 
Dr Richard Worth 
: I raise a point of order Mr Chairperson. Prior to your assuming your position as Chairperson of the Committee we had a most unpleasant exchange with your predecessor which was all about members bringing the Chair into the argument. In the last minute we have had three instances of gross breach by this very young Minister. If he could just be brought to order we would be grateful. 
The CHAIRPERSON (Hon Clem Simich) 
: Thank you for raising that point. The member is quite right but I did not intend to interrupt the Minister. 
Hon DAVID CUNLIFFE 
: I shall endeavour to speak in the third person. The central question is why we did not just lower the tax rates. There are two key reasons for that. This bill makes clear that certain large banks are foreign-owned and they have kind of forgotten to pay tax—or enough tax—for the last 5 years. If we lowered the tax rates much of the benefit of that would flow straight to the foreign owners. It would not go to the hard-working Kiwi battlers to the panel beater shops to the farmers in Taranaki to my constituents in New Lynn; it would go to the Sydney financial markets like the $360 million of tax that three Aussie banks have forgotten to pay per annum—and this bill is required to fix that. Do I care? You bet I care because that adds up to the loss of an Auckland hospital every year built from scratch because those banks have hired smart accountants and lawyers to cheat the honest people of New Zealand of their hard-earned tax money. 
I say ladies and gentlemen that this bill is sadly necessary. It is moderate. It has even been agreed by the New Zealand Bankers’ Association as a good basis for moving forward. Of course I make no comment about individual taxpayers but I regard it as sad but true—and it goes back to New Zealand First’s point—that although making a profit is an entirely laudable and legitimate thing to do being a good corporate citizen in paying one’s fair share of tax is also a good thing to do. We regret that we have had to clamp down on this kind of corporate behaviour but we make no apology for it. We do it for the sake of children and mums and dads in New Zealand who elect the Government to defend the interests of the little people from the Queen Street lawyers who are paid to enrich big foreign-owned business interests.