Copeland Gordon: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading 
Copeland Gordon: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading 
[Volume:626;Page:21442] 
GORDON COPELAND (United Future) 
: 
 That was an amazing speech particularly the latter part from a member of the House whose party has decided to vote for the bill. I just found the logic quite astonishing. 
United Future will vote in favour of this bill. It does three major things. It sets in place new rules for the taxation of banks as has been mentioned; it brings in a variety of tax-rule changes that have the effect of either reducing the quantum of tax paid by a business or reducing the cost of tax compliance and those are two things that United Future strongly supports; and lastly it establishes tax adviser privilege to protect tax advice given by professional tax advisers along similar lines to the privilege that has traditionally been extended to lawyers. 
I am one of two members in this House who is a chartered accountant—the other one being Pansy Wong who spoke earlier—and I am pleased indeed to see that these changes are being made. It is really if one likes a kind of injustice that lawyers on the one hand and chartered accountants on the other hand are probably giving equivalent tax advice to their clients and the lawyers are being protected by privilege but the chartered accountants have not been and it is good to see a level playing field established in that regard. 
I shall make a couple of comments on those matters and the first one is to talk about the taxation of the banks. I agree entirely with the Hon Richard Prebble that profit is the lifeblood of businesses and banks are no exception. Therefore it is good and healthy that they make profits. That is how they become successful and provide good services to their customers. 
I also agree with him that there is nothing immoral or illegal about any taxpayer taking action within the law to minimise his or her tax bill. Where I guess I probably differ from Mr Prebble though is in his conclusion in saying that the banks had not used illegal means to avoid tax because as is well known through the media there is a big dispute involving hundreds of millions of dollars between the Inland Revenue Department and the banks that is yet to be determined by the courts. It will be the courts and they alone when they have heard all the evidence that will make a decision at the right time as to whether retrospective tax is owed. But these rules clearly set out the position for the future. 
In my days as a chief financial officer for a large corporation I was also expected to minimise the tax paid by the company and I did that—within the law I might add. But in my role as a parliamentarian—now a gamekeeper rather than a poacher—I do like to remind myself when I am looking at these sorts of issues that for example a nurse working long hours in the intensive care ward in Wellington Hospital or any other hospital in New Zealand pays his or her fair whack of tax. They do that as Richard Prebble has pointed out because it is taken off them before they get it through PAYE. Therefore it is a matter of fundamental fairness that all New Zealand taxpayers should obey the law and pay their fair share of tax and I do not think that that is asking too much of the banks. 
That is essentially all this bill is doing. It is saying: “Look guys sorry you had a go at this but we’re closing it off; we’re changing the law so that in future you will just pay your fair share.” We are not asking them to pay more than their fair share or less than their fair share—but just the right amount. I think that that is a completely worthy goal. 
The other thing I would like to touch on briefly is the part of the bill that deals with losses on buildings. This law change is designed to allow companies to deduct the residual book value of buildings on their books for tax purposes when buildings are destroyed through natural causes. But the committee received submissions particularly from port companies saying that that should also be extended to situations where buildings have come to the end of their useful economic life. In that situation also the building owner should be able to write off the residual amount and claim it for tax purposes. That is an entirely reasonable proposition. Therefore the committee has recommended that the officials consider that issue as part of their ongoing depreciation review. 
A similar matter came up in respect of dredging costs also from the port companies. Under the current rules the initial costs of dredging are not permitted to be deducted for tax purposes. I believe that that is quite fundamentally wrong. As I mentioned I am a chartered accountant and I happen to know that the idea of depreciation is to allocate the cost of an asset across the commercial life of that asset. When one thinks about a big hole being dredged to enable ships to go into the port one is doing that to earn additional taxable income. Therefore it seems to be fully consistent with general depreciation philosophy if one likes that those costs should be able to be capitalised and then depreciated in the usual way against the commercial if one likes stream of income that is arising from the asset that has been created: namely the result of the dredging. I see no philosophical or tax principle why that should not be the case. 
 Therefore I led the committee to the recommendation which Pansy Wong also supported that we should also ask the Inland Revenue Department officials to re-examine that practice to allow for the initial dredging cost to be capitalised and depreciated but for subsequent dredging costs as distinct from the first lot—and putting aside the question of betterment—to be allowed to be expensed. After all when people dredge the hole that they have made to get the ships in and to get greater depth and so on gets filled in with sand and other stuff and they have to clean it out again and that to me is no more than maintaining an existing asset and therefore should be expensed for tax purposes. I want to mention that we have asked officials to continue work on that issue as well. 
Those are the only remarks I wish to offer at the second reading stage and as I mentioned United Future will vote in favour of the bill.