Huo Raymond: Taxation (Business Tax Measures) Bill — In Committee 
Huo Raymond: Taxation (Business Tax Measures) Bill — In Committee 
[Volume:653;Page:2001] 
RAYMOND HUO (Labour) 
: 
 I rise to support the Taxation (Business Tax Measures) Bill and I wish to reiterate the following three points. First the Labour Party supports small businesses as we support all New Zealand businesses in a positive and proactive way. This bill is targeted at the 96 percent of New Zealand businesses that are classed as a small to medium sized business. As a matter of fact Labour wrote this bill. This bill as it is today was largely written by the previous Labour Government. Secondly we wrote this bill in about August 2008 before the global recession was felt in a tangible way and before we had the opportunity to draft the bill further. Therefore we believe that further measures need to be taken either by amendment or in some other form to improve the bill. Thirdly as I said this bill is targeted at the 96 percent of Kiwi businesses that employ approximately 60 percent of the country’s workforce. Without any doubt those small to medium sized enterprises are the backbone of our economy. 
The Finance and Expenditure Committee of which I am a member had opportunities in the past weeks to listen to and digest submissions from relevant parties and advice from officials. Members of that committee all agreed on taking a bipartisan approach towards helping smaller Kiwi businesses deal with the current economic pressures. We have worked together to identify measures where the bill could be extended and they are written in the committee’s report. 
The Finance and Expenditure Committee recommended that the bill be passed with amendments. The report acknowledged that a number of initiatives in the bill reflect proposed changes in previous legislation or in the Inland Revenue Department’s work streams and discussion documents including the Taxation (International Taxation Life Insurance and Remedial Matters) Bill use-of-money interest rates the uplift of thresholds and instalment regimes. The report makes a number of technical amendments to the bill and it also addresses major issues that were considered by the select committee but did not result in any recommended amendments. However in many respects this is a good bill as far as it goes and it largely implements ideas that Labour had worked on earlier. It contains measures aimed at easing the impact of taxes on the cash flows of small to medium sized businesses and at reducing business tax compliance costs. 
Sadly as I said at the beginning this bill was written sometime in August 2008 before the current recession deepened and worsened. The outlook for our economy has changed significantly and has worsened significantly. The official cash rate for instance has dropped since the measure was first drafted in response to recessionary conditions. It has been dropped to 3 percent actually; one of its lowest levels for many years. 
The currently proposed reduction in the use-of-money interest rate of 9.73 percent is based on December 2008 Reserve Bank 90-day bill rates. Updating this to January 2009 gives a rate of 8.88 percent. Proposing a January annual adjustment allows this to be updated for further changes. As to uplift basis the bill currently proposes 100 percent of the previous year’s income or 105 percent of the income in the year before that as a basis for uplift. However in times of recession the 5 percent penalty on 2-year-old income is unnecessary and potentially punitive. 
Questions must be asked about what the National Government has done in the 6 months since the bill was written in light of the deepening and worsening recession which will hit small businesses hard. Where is the National Government’s robust approach to tax legislation? Where is the National Government’s insight in pursuit of the nation’s economic health? Thank you.