Nash StuartSTUART NASH (Labour—Napier): As a number of my colleagues and members have alluded to this is quite a large bill—the Taxation (Annual Rates for 2016–17 Closely Held Companies and Remedial Matters) Bill—for a good reason. There is some very complex tax legislation in this and by its very nature tax law is complex. But what we seem to have seen in this House—and I must make this point before I talk about the substance of the bill—is a note that has been passed on to the Financial and Expenditure Committee (FEC) members as well as through the IRD that the number of tax bills coming through the FEC is such that there is a belief that those who are submitting actually have not got the time to give these bills the respect that they need.These are complex pieces of legislation. The people who are actually often submitting on these bills are the big law accountancy and other companies. They take these very seriously. They go through these with a fine-tooth comb. We know that there is a high level of consultation both prior to the bills' drafting as well as through every stage of drafting in order to get them right. My view is that if the IRD actually wants to create good legislation—and we all want that—then it just has to pull back a little bit.A member last night talked about the fact that we should not be complaining about the amount of tax legislation coming through the House because what it shows is that there is a very busy Government working on a whole lot of complex areas. Well that is true but the correct way to do this is if it had started 6 months into Government as opposed to waiting for 6 years into Government. This FEC has I think seen more tax legislation in the last 2½ years than it saw in the first 6 years.There are four pieces of tax law that this bill deals with. The first one is about closely held companies. What are now closely held companies started out life as loss attributing qualifying companies—this would have been about 25 30 years ago I think. The reason for loss attributing qualifying companies is that they provide the tax advantages of a partnership while providing the limited liability advantages of a company. The main difference between both of those is that they can have only five core shareholders. There are supplementary shareholders—like if I were a shareholder and five of my colleagues were then my wife could also be one because she is from the same family as me and closely held.Closely held companies morphed from loss attributing qualifying companies—and my understanding is that they actually started life as a way for property developers to get into houses. Then they were abused a little bit—for example forestry companies ended up with partnerships of 25 loss attributing qualifying companies under one partnership so that they got around the 25-partner rule by having 125. What happened is that the IRD realised that these companies were being abused to a certain extent. They went from loss attributing qualifying companies to qualifying companies and now they have gone from qualifying companies to being called closely held companies.What this legislation seeks to do is to simplify this even further. There has been a lot of consultation around this—I acknowledge that—because it is a complex area of tax law and in fact there are now a lot of closely held companies out there. There are still a number of qualifying companies out there but this legislation means that they have all got to morph through to closely held companies. One of the good things about that I must admit is that a look-through company can transition to a closely held company without triggering immediate tax consequences. That is quite important. If someone holds a qualifying company and is required to move through to a closely held company this just simplifies it and we are all for business simplification.The second area increases and tightens the rules around tax treatment of interests earned changes to non-resident withholding tax and approved issuer levies. Again this is a reasonably complex area of law but what happened was that those with significantly bigger brains than me and certainly with much more knowledge of the tax system were finding loopholes. The last thing we want in our tax system is loopholes because the integrity of the tax system cuts to the very heart of the economy. Actually what is really the last thing we want is foreigners ripping us off—there is enough of that that goes on as it is—so this legislation tightens those rules around non-resident withholding tax and approved issuer levies.The third area is GST. Basically we have got a pretty simple GST regime in this country but it could be better—there is no doubt about that. One of the things in this bill and one of reasons why we will support it—well we support all tax legislation but one of the things that is good is that it actually means that GST can be deducted off costs associated with capital fund-raising. That just makes sense. Again that makes it easier for businesses to go out and raise capital when they are looking to grow.My comment on this is that there are a number of things that we can do to make it easier for businesses to grow and to really encourage businesses to innovate to seek capital to raise capital and to drive sustainable growth. The concern I have is that this is possibly one of the more minor things we could use the tax system for in terms of business growth. There are things like research and development tax credits which the last Labour Government put in place; however this Government withdrew them against the advice of Treasury. In fact I am a huge believer in using the tax system to drive certain behaviours.I think that if this Government was really bold and if this Government really wanted to support businesses—and certainly small to medium businesses—in the sort of growth that creates sustainable jobs for New Zealanders then it would use the tax system in a much more positive way to drive the sort of growth that Mr Robertson talked about. Mr Robertson today highlighted the fact that New Zealand has the fourth-lowest labour productivity in the OECD. What that actually highlights is that businesses are not investing in capital assets that drive productivity growth. We love to think that we live in this land of milk and honey—and it is the best country in the world we know that—but this bill could have been used to drive growth in a way that really increases productivity. It is a major problem with this legislation. The Productivity Commission came out and outlined a whole lot of different areas where we could do so much better.The fourth area that this bill deals with involves a whole lot of technical amendments and in any bill the size of this one—well it is actually a remedial matters bill and in any remedial matters bill involving the tax system there are a number of pieces of tax legislation and similar legislation that will be changed. The challenge with this is that it creates a whole lot of work for those who as I mentioned submitted on it. It is also a whole lot of work for the tax experts but more so for those who are charged with implementing it—and often it is those small to medium businesses that are required to do that.One of the things that is interesting about this bill is that 14 charities have been added to the list of donee organisations with overseas purposes. These are held in schedule 32 of the Income Tax Act. What this means is that New Zealanders who donate to these organisations are actually eligible for tax benefits on their donations from 1 April 2016. We all know that the charitable status of certain organisations is actually quite contentious at the moment. For example in Napier there is a scaffolding company that has just been undercut by a charitable organisation that does not pay tax—because it does not pay tax it has actually undercut that organisation by 25 percent on every single contract. This is an organisation that is set up as a charity but undertakes commercial operations. I think we probably all know who we are talking about here.Just to reiterate Labour does support this bill. We support the majority of tax legislation that goes through this House because most of it is good. We just believe that the legislation put forward by this Government could have been a whole lot bolder. I would love to be standing up here talking about the 5-year brightline test as recommended by the IRD. Mr Robertson agrees with that do you not Mr Robertson?Alastair Scott: It's in the bill is it?STUART NASH: There is so much we could do for businesses. Mr Alastair Scott knows this—he is a businessman. Mr Alastair Scott may look at this and he—[Interruption] Mr Craig Foss who was the Minister for Small Business—I hate to think how much dialogue he has had with the Minister of Revenue that says: Please can we do something to help small businesses?". In the meantime until 23 September we have got to put up with this. It is hardly inspirational and it certainly is not aspirational. On that note thank you very much."