Nash Stuart: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
Nash Stuart: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
[Volume:675;Page:20774] 
STUART NASH (Labour) 
: 
 As someone who sat on the Finance and Expenditure Committee that reviewed this Taxation (Tax Administration and Remedial Matters) Bill I say that there is a lot of good stuff in here. Of that there is no doubt; there is a lot of good stuff in here. As I think I said in my first reading speech on this bill it is a real shame that the abolition of gift duty provision sort of snuck into the end of the bill. As my colleague Mr Hipkins has said a remedial matters bill is really not the place to insert this sort of legislation. 
What we have in front of us is a bill that runs to about 128 pages so it is quite a substantial bill. As mentioned there is a lot of good legislation in there but about one-fifth of a page is filled by clause 110 “Estate and Gift Duties Act 1968” on the abolition of gift duty. The clause is about 10 lines long and begins “(1) No gift duty is payable under the Estate and Gift Duties Act 1968 in relation to a gift made on or after 1 October 2011.” With those two lines a tax is removed that has been in place for a very very long time. 
I am not saying—and Labour made this clear at the Finance and Expenditure Committee—that we are necessarily against the abolition of gift duty. But we have said that the analysis has not been undertaken to prove that this is the right thing to do. I acknowledge that gift duty is collecting only about $2 million a year. I also acknowledge that it is costing the Inland Revenue Department over $70 million a year. So on the surface there appears to be a little bit of discrepancy around that. But a lot of submitters came to the Finance and Expenditure Committee to say “Hold on a second. This has not undertaken a rigorous analysis to check that the unintended consequences of removing gift duty will not be dire for the country.” 
There are a whole lot of unintended consequences of removing gift duty. Let me list just a couple. The first one is the hiding of matrimonial property. When we quizzed the Inland Revenue Department about that in the select committee its officials said: “Well it’s been looked at by another agency and we think it should be fine. But what we will do is take a look at it a couple of years down the track just to make sure that it is working.” Well that is simply not good enough. It is simply not good enough. 
There is the ability to avoid creditors but I suggest that when this bill goes through tonight when it is signed off there will be an absolute rush to lawyers and accountants by everyone who has a trust and who has not gifted all their assets across to that trust. That is what they will do. I know there are legal precedents that allow creditor courts to look back into gifting and into those trusts to see whether there is any sort of ill purpose there. But I suspect that every single person in business at the moment who has not completed their gifting programme will do so in the knowledge that if everything is working well at the moment but turns to custard in 2 years’ time they will be fine. 
The thing that concerns me about the removal of gift duty in Part 3 is that a hell of a lot of legislation and precedents will be set which will be decided through the courts. They will be decided through the courts because the law is not strong enough and there are too many holes. We have already talked about that. In my first reading speech I talked about the ability to avoid paying tax through continual gifting and through gifting from one entity to another. One person I had an email from outlined how easy it would be to launder money. 
I suspect that the vast majority of people who are going to take advantage of this legislation are good law-abiding New Zealand citizens. I suspect that the vast majority of them are going to undertake a gifting programme because they can. But there will be elements—and the Minister of Revenue knows this—of the business society who will take advantage of this legislation and who are just waiting for it to come through to say: “Now is my opportunity.” They will grab that opportunity with both hands and there will be tax avoidance as part of that. Even the Trustees Association said that it believed that a significant number of trusts had not met legal requirements.