Nash Stuart; Ross Jami-LeeSTUART NASH (Labour—Napier): There are two areas of this bill that I would like to talk about. The first one is actually to back up Ron Mark of New Zealand First. Supplementary Order Paper (SOP) 260 set down by Ron Mark—thank you to the Minister in the chair Judith Collins for outlining the IRD's response to this. But if you could indulge me the right to reply to that the Minister did mention that in 2010 there was a change in rules around depreciation of buildings and what the IRD has said is that buildings do not normally depreciate and therefore it really does not make much sense. The thing is that that seems a very Auckland- or Wellington-centric view. There are a whole lot of small places in provincial New Zealand like Eltham—The CHAIRPERSON (Hon Trevor Mallard): I am going to interrupt now and I am going to apologise to the member for interrupting him and not interrupting the Minister. But a discussion about depreciation changes that happened 5 or 7 years ago is actually not relevant to the bill. I mean a vague passing reference would be fine but we cannot—the member can debate either the part or Mr Mark's SOP. Again I want to reiterate my apology for not interrupting the Minister but we just cannot let this debate go on because we could have another hour on things that are not relevant now.Iain Lees-Galloway: I raise a point of order Mr Chairperson. I just noticed that while you were ruling the clock was running. I just want to ensure that Mr Nash gets his full time.The CHAIRPERSON (Hon Trevor Mallard): That is my instruction. When I interrupt a member because they are not being relevant then the clock will run. If there is another point of order generally the clock will stop but I will still make a judgment. A couple of members might have noticed that they were stopped early. Their speeches were not terminated; they just did not get credit for good behaviour.STUART NASH: The reason I did mention this is that the heart of Mr Marks' SOP is: to redress significant tax disadvantages faced by commercial industrial retail and heritage property owners when looking to bring buildings above the earthquake-prone building threshold required by the Building Act." What the Minister actually said is that the IRD believed that it was actually creating almost another building. I think those were the Minister's words and I think she meant to say that. I get that on one perspective. What we have done without changing the legislation and it might have been an unintended purpose is that we have taken a building that was within code—it was legal; there was nothing wrong with that building and it was valued as such—and we have actually changed the law to move that building from being legal to now being illegal. I could mount a counterargument that in fact what the IRD has done by actually changing the law is take a building and again move it into another category. That is counter to what the Minister was saying.What we actually may see here is something that Mr Mark alluded to but it could be slightly worse than that. Mr Mark has said in his Supplementary Order Paper: "Without this amendment many buildings may be demolished without replacement especially in provincial New Zealand." The reason that may happen is that the cost of actually rehabilitating that building or getting it up to code is more than the value of that building but I see a scenario where it could actually be worse than that. Let me give you an example. A building in Waipawa has got a value—this is not a real-world example just a hypothetical one and I do know Waipawa because it is a quaint little town with nice heritage buildings. It might have a commercial value of $200000. The cost to remediate that building is $300000. That building is held in a separate company as these things tend to be these days. Instead of the building owner saying "I'm going to pull down that building." what that building owner may actually say is: "I'm going to walk away from this company. So not only am I not going to demolish this I'm going to leave this."So at some point in time the territorial authority will have a statutory requirement to either make that building safe or pull it down. The onus moves from the owner of that building to the ratepayers and the council. I can see a potential scenario where in fact that building is not pulled down by the owner but it is a cost incurred by the council as it has to pull the building down itself. If I am right in saying this—the Minister may correct me on this—I think the Government has given councils in provincial areas 10 years to remediate any building that does not come under the code. If I come to my home town of Napier which of course was rebuilt after the 1931 earthquake if a building was built before 1935 it automatically is discounted by 20 percent I think on what constitutes being in code.There are two things I would say to the Minister's response to this SOP. First has the IRD a mandate to actually look at the social cost of not implementing a piece of legislation; if so how does it quantify that? I think what Mr Mark—I do not want to put words in Mr Mark's mouth obviously—is talking about here is not only the fiscal cost but the social cost that a council or a town might incur if in fact this is not allowed to be expensed. This is a problem all over New Zealand. I visited a gentleman in Eltham and he owned half a block. It is just not worth him spending the money getting that up to code.The other thing I would like to say on this is that $12 million over 4 years put forward by the heritage fund is very generous and I commend it for that but I think $12 million—let us say it is roughly $3 million a year. [Interruption] Sure but just answering the Minister's—The CHAIRPERSON (Hon Trevor Mallard): You cannot answer an irrelevancy with an irrelevancy.STUART NASH: Sure but that is possibly about three or four buildings a year. It really does not address the problem in any way shape or form.The other thing I would like to briefly allude to is clause 42 in this bill which actually covers inserting new section DW5 and all the subsections on that through to new section DW6. It is about aircraft operators aircraft engines and aircraft engine overhauls. We had a really interesting debate in the select committee. This was brought forward by David Seymour. I do not know whether Alan Gibbs said I had a problem with my airport maintenance but I would not like to say that at all.It is a sensible amendment; there is no doubt about that. But I suspect there are some unintended consequences. The reason I say it is a sensible amendment is that the engine of an aircraft needs a much higher level of maintenance than say the body of an aircraft or the wheels or any other part of an aircraft and rightly so—rightly so. I do not want to disagree with that. But what this actually requires now is the purchaser of an aircraft to actually separate the value of the engine from the value of the aircraft itself. I am assuming there is a simple model that will allow the sellers of aircraft to do this or insurance assessors who look at aircraft and say: "OK what we can do is let's have a model"—it is not in here Mr Chairman but I am making a hypothetical assumption—"that the engine of the aircraft is worth let's say 50 percent of the whole aircraft itself. Therefore if you are purchasing an aircraft for $10 million the value of the engine is $5 million."I do not know whether it is as simple as that and the Minister may well know. If it is as simple as that then it makes this a little easier to implement. If it is not as simple as that then I am really interested to know how the Commissioner of Inland Revenue is going to deal with this when someone comes and says: "I bought an aircraft for $10 million. It consists of a little bit of aluminium some rivets a little bit of leather and a really big engine because without that engine this thing doesn't get off the ground. Therefore I reckon it's worth about 90 percent of the value of the aircraft." If that occurs then I believe the Commissioner of Inland Revenue is going to be forced to rule on some standardised model that will allow aircraft owners and aircraft engine maintainers to comply with because it could be all over the place.When we look at this there are certain things you are not allowed to do. For example if you buy an aircraft like one of those old Harvards that I think the air force uses for its trip planes and you just maintain the engine for standard use that is fine but if you want to modify the engine then you cannot claim anything back which sort of makes sense in a way but it is sort of interesting as well. It does not include gliders which is good to know; Richie will not be under any more tax obligations.But the other thing also—it is interesting here and I will read this. This is new section DW5(3) "Deduction for aircraft engine when acquired for price". The wording is very interesting here. It says that if the person acquires—other than as an unpriced aircraft engine with the aircraft—an aircraft engine for use with the aircraft the person has a deduction. The wording that is interesting is "other than as an unpriced aircraft engine with the aircraft". I suspect what was happening is a whole lot of people were buying an aircraft and saying: "The engine's just part of it; it's not unpriced." That is why I am saying that a new model is going to have to come into existence.JAMI-LEE ROSS (Junior Whip—National): I move That the question be now put.The CHAIRPERSON (Hon Trevor Mallard): Ah no. I think we have had a bit of original stuff—Ron Mark."