Bennett David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First ReadingText is subject to correctionBennett David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First Reading[Sitting date: 10 March 2015. Volume:703;Page:2106. Text is subject to correction.]DAVID BENNETT (National—Hamilton East):It is a pleasure to take a call on the first reading of the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill.Hon David Cunliffe: More breaks for dairy farmers.DAVID BENNETT: Well it is not actually. If you actually read the bill and looked at the livestock—Hon David Cunliffe: Prove it.DAVID BENNETT: Well we will go to the livestock section then. This is coming from the former leader of the Labour Party. There is what is called a capital gains tax in dairying and that is on stock. And that is the only capital gains tax you have apart from where you sell property within 10 years. So go and see that one Mr Cunliffe and see what it actually means. Mr Cunliffe would love to be able to extend that. But there is something in this bill around the herd scheme livestock and that is around the valuations—that taxable status that you get under the herd scheme for increases in value. So I think Mr Cunliffe should read the bill rather than make accusations in the House.We look forward to this bill progressing through the select committee. I think members of the Finance and Expenditure Committee would like to get their teeth into it. I look forward to working with our officials from the Inland Revenue Department who no doubt will be able to give us some good advice and with the submitters who come to the committee and who will no doubt have their own opinions on how this bill would be presented in the best way possible.The previous speaker the Hon Clayton Cosgrove did not really focus on the bill but there was one thing at the end of his speech that he did talk about and that was the need for some kind of simplicity in tax law. That is a very difficult thing to achieve especially when you are looking at things like deductions and especially in areas like black hole expenditure or foreign investment funds or in research and development. They are not easy areas to deal with in our tax law. They are not things where you can set the simplest of rules and expect to actually have compliance or to actually achieve their purpose. But this bill does look into those three areas along with other areas and intends to provide solutions in that area.One of the first areas that was talked about by the Minister—and it was mentioned just before—was the research and development cash-out tax credits. Basically under the changes that have been looked at in this bill there will be some changes around that to enable research and development - intensive start-up companies to have early access to all or part of their tax losses in the form of a cash receipt rather than carrying those losses forward. So that would be a big advantage to many small or medium sized businesses in New Zealand that feel as the Minister said that they cannot carry those losses forward and have other revenue that would take account of them. So this is something that would be to their benefit.Another area that has been mentioned is in regard to black hole expenditure. The proposed amendments would enable capitalised development expenditure either to be deducted as depreciation or to be deducted upon the intangible asset being written off for accounting purposes. Those amendments would provide relief for black hole expenditure on both successful and unsuccessful research and development. So that is another thing that would assist small and medium sized businesses—and actually larger businesses as well—in terms of that business expenditure that previously was not immediately deductible and was part of the cost of the depreciable asset for income tax purposes and therefore could not have been deducted as depreciation.There are also the GST and body corporate changes. These are to give some clarity to organisations in that area. There are some concerns and some impacts on GST registration for bodies corporate from a tax accounting point of view. This bill seeks to give clarity in those areas so that the bodies corporate have better tax positions in the sense that whether they are GST-registered or not the approach to GST is primarily neutral from a Government perspective. The amendments also include rules on the tax base for any adverse consequences from those changes. This is something that should assist bodies corporate and should assist the Inland Revenue Department in the management of those bodies corporate as well.Those things are significant. They are delicate and detailed tax treatment areas that in many cases will inevitably require professional advice for many firms. But that is the nature of much tax advice and we should not say that we cannot make these changes or make legislation in this area just because it is going to need professional advice because it is a very complex area. That is something that often happens in this area. Also some changes—Hon David Cunliffe: This is the member’s worst speech of the year.DAVID BENNETT: Well Mr Cunliffe are you up next? I would like to hear your speech.Grant Robertson: Somebody’s trying to avoid talking about something.DAVID BENNETT: Oh that is from the arts graduate who could understand the poem given to us but that was about it.So there are also child support reforms and—Grant Robertson: Oh here he goes.DAVID BENNETT: Yes and—Grant Robertson: Tell us about those.DAVID BENNETT: Well those reforms are going to be great. Basically they should ensure greater compliance and a reduction of child support debt and that is something that all political parties in this House would be looking for. That will be done by clarifying the penalty and write-off rules to ensure that they operate as intended and by bringing forward the commencement of some of the write-off provisions. There have been some changes around child support legislation in this bill which assists in the tax planning.Also there are some other changes in regard to international-type tax treatments. For foreign superannuation there are some changes in regard to the tax treatment around foreign investment funds and also controlled foreign companies. Controlled foreign companies and foreign investment funds are complex areas that often do involve changing legislation as the Inland Revenue Department gets to grip with the changing nature of how business operates in those areas. So this is part of that process of trying to make sure that those rules are as fair and as accurate as possible. There will be some changes around the areas regarding the controlled foreign company test grouping rules and one of the changes is in regard to the acquisition and disposal of a group of controlled foreign companies part-way through an accounting period. So there are a number of changes in that area that would be important in the context of tax.The Working for Families tax credits—there are also changes made here in regard to deposits made by persons in their associated companies and trusts in the main income equalisation scheme. So that is part of the change in this bill as well. Then there are a lot of other minor changes including some issues around the herd scheme tax pooling provisional tax disputes and other parts of the tax system.So overall this is a bill that will cover a lot of tax areas. The main areas are research and development black hole expenditure and child support. Those are the fundamental areas that are being addressed in this bill. But it also covers off a number of other issues that you find in the tax system and this is normal for a tax bill at this stage. There are always some tax planning bills that have to be passed that will encourage a better system and a more accurate ability for us to collect tax also for taxpayers so that they have greater certainty and also so that we get the right payment of tax by the right people. Thank you.