Cunliffe David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeCunliffe David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second Reading[Sitting date: 20 October 2015. Volume:709;Page:7393. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn): It is a pleasure to take a brief call to re-register Labour’s support for this bill. I think the appropriate place to start given that it is an annual rates bill is to reflect upon the rate structure which is unchanged from last year but does however reflect the tax switch that this Government brought in soon after assuming office.That was one of the most major contributors to inequality in this country over many years. It resulted in the top 10 percent of income earners getting 40 percent of the net tax remission—that is 10 percent of income earners got 40 percent of the tax back—and that went to the top end. That tax switch which results in the rates that are reconfirmed in this bill was a major step backwards for an egalitarian society that believes that every New Zealander ought to have the opportunity to prosper not just those at the top who get extra help to prosper even more.You will remember that the tax switch was not as had been heralded fiscally neutral. There was a net fiscal cost of a billion dollars. Does it matter? Yes because that is more than twice the amount of the paper-thin surplus that is currently being touted by the Government which is more than offset by the change to the Earthquake Commission balance sheet. That is if you took away the Earthquake Commission change the Government would not be running a surplus at all and the surplus would be swamped more than twice by the earlier tax loss when that inequitable tax switch happened.So what is in this bill? Others have mentioned the child support reforms. I will not spend a lot of time on that other than to say it is acknowledged on both sides of the House that the system is capable of further improvement.The issue here is that the cost of implementing the change to the Inland Revenue Department computer system is $163 million and apparently that has been brought down from $200 million. How much is that? That is one quarter of all of the child support paid in this country for a whole year—for a computer change. One quarter of all of the child support payments is going to the computer programmers and none of it is going to children. That has got to be out of kilter. That is an implementation issue that goes to the Government’s ability to be savvy with taxpayers’ funds. It is not a legislative issue other than that it is provided for in this bill.The heart of this bill the stuff that is new is the treatment of research and development tax losses a subject that is dear to my heart and to the Labour Opposition’s recalling that we went into the last election and the one before it promising an across-the-board tax reduction of 112 percent for qualifying research and development expenditure and a change to depreciation rates so that short-life assets like high-tech assets could be written down over a period that was commensurate with their actual life typically 2 to 3 years not their on-paper life typically 5 years. That would have been a tremendous help to the ICT sector.Instead of that we have a hodgepodge of non-discretionary grants through Callaghan Innovation on the one hand and this sort of retrofitted research and development tax change which has got KPMG complaining that it does not suit medium or large businesses in its report to the Finance and Expenditure Committee but in fact does not really help small businesses either. The threshold starts at half a million dollars of research and development expenditure and you have got to be a reasonable sized business to make full use of that.What is interesting is that in the select committee report there are pages and pages and pages of fine-print consequential changes because this is a dabbling form of research and tax remission rather than a clean across-the-board research and development tax credit like Labour had proposed. The Government is creating a rod for its own back and in fact for every taxpayer’s back who seeks to qualify because the fine print is onerous—onerous.None the less based on the law that it is a step in the right direction and it is going in the direction of trying to support the high-tech economy we will support the bill but we are underlining today our reservations that it is clumsy that it is partial that it does not do the job properly and that is exactly what KPMG said about the black-hole expenditure tax changes as well.It would have been much better to do it properly and across the board. Tinkering sector by sector does not work. Thank you.