Cosgrove Clayton: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeCosgrove Clayton: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In Committee[Sitting date: 03 November 2015. Volume:709;Page:7652. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): I have got to say I do not share the total enthusiasm that my New Zealand First colleague Fletcher Tabuteau has for commending the Government on this one. I want to deal with the child support matters and place on record that the Opposition will support the bill. There is an issue in Part 4 which we will come to but in terms of the child support issue I think what the New Zealand First colleague neglected to mention of course is that it is true that Mr McClay who is the Inland Revenue Department Minister and presumably will be vociferously answering all the questions that we put to him today did pick up a steamy political issue shall we say—if I can put it delicately Mr Chairman for your sensibilities—from his previous Minister Peter Dunne. To put it bluntly he inherited a major cost blowout.As my colleague Grant Robertson has said this was costed originally at $30 million—that was in 2011—then in 2014 the estimate blew out to $210 million. Then to give credit to Mr McClay I think he must have hauled in the officials and got down on bended knee and begged them to do something creative to phase it to do something to smooth the books so that the mountain of budget blowout would go down to around $163 million. But of course the balance is in suspended animation—it is yet to come as it is phased in. The point being that if we are asking liable parents to be accountable for the expenditures and to be accountable and ensure that they pay their way for their family members and to be accountable for us to chase them up then I would have thought it would be on principle pretty realistic to expect the Government in the form of the Minister in the chair—who is not the portfolio Minister with respect but the Inland Revenue Department Minister either former or present—to provide us with some sort of explanation as to why particularly Mr Dunne was asleep at the wheel.When a department comes to you and it has not factored in capital expenditure then anybody I would have thought with half a brain awake behind the ministerial desk would say: “Now hang on are we sure there is not a capital expenditure component in this?”. Well Mr Dunne just sort of floated along and when he relinquished—I think he is the longest-serving revenue Minister in any parliament within the Commonwealth; that is some sort of record dubious though it may be. But you would have thought with that wealth of experience—[Interruption] Well I stand to be corrected. But I would have thought that Mr Dunne when presented with a project like this on the back of of course the Business Transformation project where the money is just flowing like the Nile River just flowing out the door—you know raking in the sheaves as it were to use the biblical expression—would say: “Now hang on have we got the figures right?”. Because we know with these sorts of processes that there are always movements and costs but to sit there blindly and not even ask the question in respect of capital expenditure and then the department has got to paper over the cracks is astounding.Mr McClay of course then inherits it and tries to sort of fix it up but for those liable parents and others sitting at home who are expected to—and they should—pay their bills pay their way and look after their family I would have thought that those parents would be sitting back saying: “Well if it is good enough for us it is good enough for the Government that expends this money on our behalf to be at least half awake and to ensure that these blowouts do not occur.” But to date we have had zero explanation—zero explanation—in any stage through this bill. I see the Minister in the chair has changed again not to—with respect—the portfolio Minister. We have had no explanation and no accountability. The previous Minister just wrung his hands and said “Well I’m not there now. Game over.” and passed the baton to Mr McClay and he has been relatively silent if not totally silent on the matter.But I am interested as Grant Robertson said in clause 44 where the commissioner is given discretion to look at other appropriate mechanisms and payment methods in respect of liable parent contributions. It harks back to a previous tax bill that Michael Cullen I recall introduced. It had a similar principle where if a small business had a difficulty—there was a mistake in GST or income tax or whatever—in the old days the penalties in interest would flow as I say like the Nile. A mountain of debt and a mountain of penalties would be put upon those small-business people. OK some may have cooked the books; most—90 percent I would argue—were cases where an innocent mistake had been made. We changed the law to allow that once an intervention was called for everything froze. Then you could examine it in a logical way and deal with it.So I do support this measure because—as Grant Robertson has said and all of us who have dealt with folks on both sides of the equation in respect of child support—it is an extremely difficult position. To be fair the Inland Revenue Department is only the referee and it intervenes in theory only when there is a dislocation or where agreement cannot be reached. It has to deal with this in a formulaic way and that in itself is inflexible. But there are no better ways. That itself is inflexible and does not allow for a whole lot of the subtleties and nuances that we see within the liable caring parent relationship. I think this clause to be fair goes some way to looking at those issues.Where you have got—is it $3 billion worth of outstanding payments—and as Mr Robertson said 75 percent being penalties the system obviously is not working. Obviously what the State wants is for the parents to ensure that those children are looked after. They are irrespective of the relationship breakdown the responsibility of the biological parents. They should be catered for. In good grace I would argue that most Kiwi parents would do that regardless of whether we had an Inland Revenue Department mechanism such as this but there are difficulties in relationships as we know. There are disagreements. There is all sorts of leverage occasionally that certain partners try to put upon others. It is called life. There is a whole representative set of issues and at that point the State in its own inimitable way has to intervene.If one can build in some flexibility like this clause where mechanisms—you could look at other methods to ensure that that money gets to where it is supposed to be going and ensure that those liable parents are accountable without burying them as we have under a mountain of debt but ensuring that they meet their responsibilities. That has to be the No. 1 priority—but basically ensuring the system works. I think this is something that common sense would say one should support.But I do go back to the costs around this. It appears and it worries me that since the retirement of some very very venerable Inland Revenue Department officials—I went to the awards of the trust that has been launched in Rob Oliver’s name last week. He was a very venerable official. He is not the only one of the very experienced officials in the Inland Revenue Department who have now retired. It does worry me that we are getting these sorts of mistakes flowing through. Go back a year or two and we had the computer issue the car parks issue—again Mr Dunne was in charge of that.There are two things that concern me. One is that a Minister should be on top of their game especially if they are in the Guinness Book of Records for being the longest-serving revenue Minister in our history. But secondly Ministers have to be on top of their game and read the papers. When stuff comes through and up on a Minister’s desk that does not add up they need the presence of mind to shoot it down. Secondly it does concern me that some of that long-term policy advice and experience that we have had for many many years is no longer there now. It worries me that the quality and high level of advice may be depleted. There are things that one would have expected would not make a Minister’s desk ideas that would not make a Minister’s desk because as we have shown in the past they have not added up.Finally the concern about the cost blowout flows across the Business Transformation project. Again—and I did say this to the Inland Revenue Department commissioner at a function the other night—we want the Inland Revenue Department to work. We want the system to be the best in the world but we also because we have been through INCIS and other IT blowouts throughout our history want to know that those collecting the money especially are also accountable for its expenditure and are treating the expenditures of public moneys as if they were their own and being as accurate and detailed and focused on ensuring that those expenditures are executed correctly—because it seems to me that we have not had the explanations to justify this blowout. That would suggest that we are not likely to get the explanations to reassure us that the expenditure around the Business Transformation programme is warranted. That leads to questioning the whole set-up.We want to have confidence in this. A good tax system must be simple. It must be clear for people and people must be confident in it. It is the confidence in it and the confidence especially in terms of those who are collecting money being accountable for its expenditure within their own department and Ministers being on top of that regime that we will be focusing on and monitoring very closely even outside the parameters of this bill as it proceeds. So we support the bill.