Tabuteau Fletcher: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeTabuteau Fletcher: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second Reading[Sitting date: 20 October 2015. Volume:709;Page:7389. Text is incorporated into the Bound Volume.]FLETCHER TABUTEAU (NZ First): I would just like to take this opportunity to start off by pointing out the irony of Mr Ross’ statement in his contribution earlier. He talked about the necessity of enabling businesses through tax breaks despite the very fact that only several weeks ago it was this National Government that cut funding to one of our biggest research institutions in New Zealand and was told by those very people that it will compromise the outcomes for research in this country for the next couple of decades. So the irony is not lost on most New Zealanders. The Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill is a large and unwieldy piece of legislation that needs much consideration and certainly more discussion than we have the time available for today. So I would like to note that New Zealand First stands in support of this bill but would take this earnest opportunity to highlight some of the concerns we have around it.New Zealand First has said repeatedly that these types of bills used to be uncontroversial. They were remedial. They were fixing up small mistakes and we acknowledge on this side of the House that that happens and you do need to take the opportunity to fix them up. But what we are seeing here now—and case in point evidenced in the very House tonight and I acknowledge the Hon Mr Cosgrove and his contribution earlier—is that there are mistakes being made. There are mistakes in this legislation and more to our point there are a whole lot of unintended consequences of getting the wording slightly wrong or putting it in the wrong place or referencing the wrong paragraph or even other pieces of legislation. So this is not what it used to be in that we used to say it was uncontroversial. Actually this is quite a big issue and this House needs to get it right. More important the National Government needs to come much better prepared.Just speaking to that one of the submissions to the Finance and Expenditure Committee was the suggestion that this Government provide drafting of these changes to the public prior to this stage of the process. What submitters were saying—and we are talking about the likes of KPMG and Ernst and Young—was that actually this is so complex and so broad in nature that to ask our accounting experts and tax experts to consult in the time frame provided was an arduous and perhaps even unrealistic expectation. They want to contribute. They want to be able to highlight the issues to the Government so that as we move forward—and this is essential for tax legislation—it is not complex and it is transparent and it is fair and it is not contradictory. That is what they were asking for and New Zealand First says: “What a great idea. Let us focus on opportunities like this.” I encourage the Minister of Revenue to take this advice from submitters on board.With regard to Supplementary Order Paper 77 which was attached to this bill with regard to child support payment New Zealand First supports the intent of extending the powers of the Commissioner to write off certain penalties. There is a lot of debate that I believe still needs to go into that and that New Zealand First believes needs to go into that but at this stage we also support allowing the Commissioner to write off certain penalties if it is fair and reasonable to do so. That came through in the submissions also: what is it that is fair and what is it that is reasonable? Providing a purview—even “Here is a list; here is what is not in it.”—that kind of thing is a practical solution moving forward.Of concern is what the Minister of Revenue mentioned in his opening address to the House. He said this legislation allows for those who have not been paying their child support payments to come forward and work out a solution and try to make it work. To a great extent we agree with the Minister but it does not actually address the issue. It is an ambulance at the bottom of the cliff as it were but having dealt with several cases and being able to talk to the Minister about those cases I acknowledge that he and this Government are genuine in trying to find solutions for child support payment problems. It is big; 7 percent of the total debt owed for example is in penalties alone so a strategy needs to come about but this bill is certainly not the solution to that.Deloitte highlighted that the policy intent around research and development is a positive one when it comes to the intent of the bill but as noted during select committee hearings it restricts high-growth companies it restricts start-ups and it restricts those companies doing business offshore. The eligibility criteria with regard to these exemptions have been questioned by several submitters so New Zealand First would say and impress upon the National Government that what we would like to see from these research and development tax exemptions is the actual encouragement of research and development for good Kiwi business. So we say around the issues at the moment especially around small start-ups that there are solutions presented in this legislation but it needs to go further and we need some clarity because the more we can do to encourage research and development with our small businesses the better it is for the New Zealand economy. The more they can do that—come up with the great ideas that Kiwis are renowned for around the world—and take them around the world the better it is for our New Zealand economy.The other issue that we would raise alongside submitters is the level of guidance and I mentioned that briefly just a moment ago or the commentary necessary for businesses to use in order to report and claim that tax break on research and development. I picked on the wage intensity percentage issue. The process for the percentage to be apportioned is confused and New Zealand First would add that the calculations for start-ups should be made at the market value. Research and development tax credits are supposed to be incentivising research and development. I got from the Minister of Revenue’s address earlier today that his approach was one about administration but this is a real opportunity and the whole key point I would like to think of this part of the legislation is around actually incentivising research and development to ensure it becomes part of New Zealand business culture.I just want to conclude by saying that tax should not be complex; rather it should be as simple as possible and transparent so that New Zealand businesses can comply as easily as possible. This would ideally include specific compliance and non-compliance examples. Again businesses are more likely to comply if they know what the rules are. That part of the issue is not addressed in the legislation. So it is just a suggestion to this Government that if it wants compliance and it wants people taking advantage of this then there are some practical solutions that could be included in the implementation. I will have to conclude my contribution for this evening. Thank you.