Mallard Trevor: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee Speaker Recalled In Committee 
Mallard Trevor: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee Speaker Recalled In Committee 
[Volume:673;Page:19486] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 Although there are some detailed matters that have to be dealt with I think Part 1A is probably the best part on which to make a pretty clear statement with regard to the details in these arrangements. When there is a change of Government and I expect there to be one in November each of these details will be reviewed and all comforts that this Minister has given to Telecom and any of the other providers will also be reviewed and they will not be guaranteed. 
I want to make it clear and put it on the record that if this Minister enters into contractual arrangements that a subsequent Government finds are inappropriate and too expensive then they will be reversed following a review and they will not be compensated for. I just want to make it very clear that anyone entering into an arrangement based on this legislation has to know that it may not last. Like all legislation these clauses if they are passed—and I expect they will be passed—will be subject to further parliamentary review and the possibility of amendment without compensation. 
I now want to say why I am so anxious about these provisions and I want to start from where I was so kindly interrupted earlier on. It goes to the taxation consequences of structural separation. I do not understand—and I do not think any reasonable person can understand—why a particular telecommunications company when it chooses to do something in the interests of its shareholders should be exempt from the normal taxation liabilities that would occur at that stage. 
A number of preferences by way of subsidy and by way of what I regard as a regulatory rort will be reviewed. It will be questionable whether it is appropriate to review and change past taxation arrangements. I think it is probably fair to say that retrospective taxation is a bit hard to do although I might say we will still be within the same financial year. That is an issue that is relatively important. I think it is important to place on the record that Labour feels that some of the things done within this legislation are wrong. I know this is not the time to have a principled debate about whether broadband is good—of course it is a good thing; it is an important thing—but what we are talking about here and what is in the very detail of the bill which we will get into is a method of getting there and the taxation pricing and penalty arrangements that will occur. 
I want to make it clear and say that the idea that the division is not a kind of assessable income is questionable. Either it is either the case or it is not. If it is assessable under the Income Tax Act then it should be assessed. It should not be exempt by this legislation or in a similar way by the Estate and Gift Duties Act. 
I now turn to the question of the finance leases and the arrangements for them which are outlined in section 69XW in clause 23H. What is the system of review that ensures that the revenue is not being adversely affected by these transfer arrangements? Or if the revenue is to be adversely affected by these transfer arrangements by how much? Is the Minister aware of the cost to the Crown of this treatment of the finance leases? If so can he tell the House? If not could he bring that information to the House on Tuesday. 
I turn to the question of penalties. I am relatively pleased that the Chairperson effectively struck out my earlier contribution on this question because I cannot now be pinged for repetition. On 19 separate occasions—that is the figure I have in my head but I am up for correction—Telecom has been found within civil courts to be in breach of its competitive requirements. Telecom made an art of hiring lawyers in order to keep its competition away. The bodies of its potential rivals are littered around New Zealand and around the world. Telecom used to do this regularly and to be fair it was an expert at it. Telecom had some of the best lawyers in the country. It paid them a lot. It employed some of the biggest legal firms in order to prevent proper competition from occurring. 
The cost to this country has been enormous. I want to be clear that I will take some responsibility for it as a backbencher in the previous Government at the time Telecom was sold. A significant proportion of the shares went to two American companies. Americans tend to sort out these issues through legal matters and through the involvement of lawyers rather than with engineers and from a competitive approach. Out of that there has been a development within Telecom of drawing on lawyers as soon as possible rather than moving towards a competitive situation. Therefore the point I am making is whether $10 million is a sufficient fine for a breach of section 69L in clause 23H which is a failure to comply with or amend sharing arrangements. That goes right to the basis of competitive behaviour. 
Clare Curran 
: It’s a drop in the bucket. 
Hon TREVOR MALLARD 
: Well it is a tiny amount considering the billions of dollars that can stand to be gained through those anti-competitive behaviours. Line of business restrictions are very very similar behaviours to have occurred. 
Failing to notify sharing arrangements incurs only a $1 million fine. A duopoly of two companies working together through a secret arrangement and failing to inform others of what they are doing goes to the core of anti-competitive behaviour. I think the Chairperson and I might say that of course companies in New Zealand would never do that sort of thing and that it is unethical wrong and illegal but unfortunately on 19 separate occasions Telecom has been found to act in this anti-competitive manner. Therefore I am saying that these penalties are woefully inadequate. They are woefully inadequate frankly for a continuing breach. The fine is only half a million dollars for a continuing breach of section 69L or section 69R in clause 23H—the failure to comply with the sharing arrangements or the line of business restrictions provisions. Those are very very small fines when we are aware that billions of dollars in revenue will be available in this area and that every encouragement to rort is sitting there for these companies that are favoured by the Minister’s arrangements.