Wong Pansy: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Second Reading 
Wong Pansy: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Second Reading 
[Volume:629;Page:1894] 
PANSY WONG (National) 
: 
 Dr Cullen our Minister of Finance has apparently quietly delivered one of the business community’s biggest expectations of tax cuts. I hope that during the Committee of the whole House stage or whenever else Dr Cullen brings the spark back into his speeches. The lack of spark is much lamented by the  
New Zealand Herald 
 which pointed out that possibly the single biggest thing that has upset Dr Cullen’s good humour was the expectation last year that he would relax fiscal policy with substantial tax cuts. He did not work hard enough to dispel that expectation of a substantial tax saving yet he wants to tell the business community and small to medium sized business that this is one of the biggest tax cuts he has delivered. 
National supports this legislation but none the less I think there is a lot more that the Hon Peter Dunne and Dr Michael Cullen can do to improve it. For a start I find it astounding that in this bill of 346 pages there is no compliance cost statement. I thought it was standard practice that all legislation was to be accompanied by a compliance cost statement because that is the time when the Minister should hold the officials to account as to the impact of taxation legislation on business. 
I welcome the Hon Peter Dunne’s announcement that there will be an amendment to the unacceptable tax position shortfall penalty because that is one of the problems we are talking about regarding the defect of not having a compliance cost statement. If there had been one the officials might have picked up the difficulty of imposing the unacceptable tax position shortfall penalty. It is worthwhile to draw on that a bit. Apparently in the original version of the bill the officials came up with a 20 percent penalty to be imposed on a taxpayer if viewed objectively—I am not sure from whose point of view—the taxpayer’s tax position failed to meet the standard of being “about as likely as not to be correct.” Therefore if from the Internal Revenue Department’s point of view a businessperson’s tax position is not likely to be correct it may impose a 20 percent penalty tax. 
Recently there is a group of young and some senior businesspeople who were involved in TradeMe which sold for over $700 million and we were all very proud of that. Suddenly those entrepreneurs had an influx of money paid into their bank account. Members can imagine their altered tax position derived from just the interest income alone or alternatively depending on the business structure and how much of the proceeds may be subject to taxation. That would substantially alter their tax position and I am not sure that it is a situation that can be foreseen. I know that for a number of years those businesspeople were discussing a possible sale with various buyers but that deal came through pretty quickly. So for the Inland Revenue Department to say that from its point of view if somebody’s tax position is not likely to be correct then a 20 percent penalty tax will be imposed on them that is pretty severe. 
It is always very easy for Government departments to impose those standards on taxpayers but sometimes the way they are enforced is from only the Inland Revenue Department’s point of view. It is the Inland Revenue Department’s job to be fair—that is what it says. But I will discuss a particular case: that of a taxpayer who has run a company relating to safety products since 1999 and who wrote to us. We all know that businesses get into trouble with cash-flow problems every now and then. This particular company faced those problems during 2004 entered into some repayment arrangements with the Inland Revenue Department and got into trouble with complying with them. One Friday the company found that the Inland Revenue Department using its statutory power had withdrawn money from the company’s bank account and left a balance of 45c. That particular company was due to have a discussion or negotiation with the department on the following Tuesday. So I call upon both the Hon Peter Dunne and the Hon Dr Michael Cullen to be very careful about how the department sometimes administers the law. If the department is going to be fair its staff need to understand that people who operate in a pretty uncertain business environment at times need to have rules that enable both parties to negotiate in good faith. 
I also disagree with Dr Michael Cullen’s statement that a reduction in company tax and personal tax would not have removed the desire for people to play games or arrange taxation plans. Since I am a qualified accountant I can say that it is well known in the tax planning sector that ever since personal tax has gone up in effect a lot more energy has gone into and a lot more of tax planners’ work has involved the minimisation of taxation. Certainly the 340-odd pages of this bill would have been reduced if New Zealand’s individuals companies or other types of business arrangements had faced a lower taxation regime. When people face a lower taxation regime they actually channel their energy into managing their businesses rather than into engaging with their tax planners on how to minimise their taxes or play around with taxation law. 
In order to see how complicated taxation law has become we have only to look at one of the provisions in this bill. It is to further stipulate a date of commencement for the subsidy for payroll agents. That particular provision demonstrates Labour’s approach: instead of using a simple logical way to tackle the issue its instinct is to turn businesses or middle-income families on to the welfare State. The Labour Government offered a subsidy to small businesses that voluntarily make use of a PAYE intermediary. So instead of simplifying PAYE or taxation law or not requiring the company to adhere to a whole raft of taxation measures used to deliver social policy the Government preferred to put those small businesses on to welfare and pay them a subsidy. In order to do that we then had to consider and deliver legislation last year that defined who could be payroll agents and what the criteria had to be for businesses to get that subsidy. I find that rather ironic. 
Although I welcome the provision of tax exemptions for new migrants coming to New Zealand or for New Zealanders returning to this country I cannot help thinking once again that maybe the Immigration Service and the Inland Revenue Department are heading in different directions. On the one hand the Inland Revenue Department is taking the right step towards attracting migrants but on the other hand our immigration law has continued to change dramatically in a short time and is hardly an incentive to entice new migrants or encourage Kiwis to return to New Zealand. 
Finally I say the reason that most people want to live in a country is to have the opportunity to earn high incomes.