Clark David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
Text is incorporated into the Bound Volume 
Clark David: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
[Sitting date: 18 September 2012. Volume:684;Page:5342. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to continue this debate on the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill because it is shaping into quite an interesting debate. I personally find it to be quite shocking that the Minister in the chair the Minister of Commerce has not taken a call yet on this matter. It is consistent again with the issue of the paper boy tax. I want to draw a parallel here because there is a pattern emerging in this legislation. I have said many favourable things about this legislation. I have said that there is little to disagree with. I have been appalled at the level of tinkering as opposed to real change but I have said on many occasions through this debate that it is hard to oppose the Government on much of this because a lot of it is common sense. 
Well here we have another example as my colleagues have pointed out of additional compliance costs on business. It seems that this Government truly does not like small business. This Government increases red tape on small business. The report we had in respect of the paper boy tax—the legislation that was more comprehensively dealt with earlier—made the point that there was expected to be increased compliance costs for many businesses. We are talking here about people who have cleaning jobs in schools for a few hours a week and do not earn much money. Businesses are now expected to keep their tax affairs close at hand and monitor them and likewise in this we are talking about the registration requirement for GST and penalty payment in respect of late payments. 
 Here there is a clear parallel. There is increased compliance costs on business. The interesting point is not just the increased compliance costs that National seems to be putting on business. National is also at the same time reducing compliance costs in some other parallel areas. So it is actually increasing the grey economy. It looks like National is trying to increase compliance on some businesses—it is not clear which or why—and there is a cost in that but it is also encouraging people to avoid paying tax. 
In the case of the paper boy tax we saw that those who had home lawnmowing jobs babysitting or other similar jobs where there was not a record of their payment on an electronic system were exempt from the same tax that those who were on a system were expected to pay. So we have a growing grey economy and an encouragement for people not to be registered with the tax system. Likewise here what the accountants said at the Finance and Expenditure Committee—and I recall that Mr Parker raised the issue of what happens with an early payment discount—in their advice as I recall it was that in fact GST will not be charged in respect of an early payment discount. 
So here you have an early payment discount not being charged for GST but then you have late-payment penalties being charged for GST. What do you think businesses are going to do? They are going to shift their model to avoid this unnecessary—as they will see it—additional burden of compliance that the Government is putting on through this legislation that we are passing through the Committee right now. Some will get trapped by it and some will have additional compliance costs. This is just a higgledy-piggledy mess in terms of this particular clause in the bill. It has not been well-thought-through. We have got early payment discounts on the one hand for businesses that change their paperwork so basically the Government is encouraging businesses to shuffle their paper. Then we have late payments attracting a GST penalty and extra compliance costs. 
We can see the parallel with the paper boy tax where there was a stingy tax grab from those who are on systems where the tax is carefully measured out and encouragement for people to have businesses where they are private contractors working in the grey economy and are therefore rewarded for that behaviour in future. It all adds to a pattern obviously of a Government that does not like business. 
The other point that I mentioned earlier on in respect of clause 151B “Keeping of records” was the kind of tinkering approach. There is a similar one in clause 150. This is the level of interest in this legislation. We see that it is a broadening provision so it is hard to oppose in this respect. I move on from the appalling encouragement of the grey economy in the previous clause but clause 150(1) says: “In section 55(1)(a)(iii) ‘multi-rate PIE’ is replaced by ‘multi-rate PIE or a look-through company’.” Again that is a worthy change probably and I would suspect that we are broadening the tax base a little bit. We are blocking the odd loophole here and there but that is effectively unpicked by the changes in clause 137 where we have actually got a new loophole being created at the time. We are creating a loophole clause and why would you do that? 
Hon Clayton Cosgrove 
: It’s a “John Banks clause” 
Dr DAVID CLARK 
: My colleague calls out that it is a “John Banks clause” and he may have a point. We actually see illustrations very clearly before us of why the law needs to be tightened. Indeed in respect of local campaigning and local elections the donations law definitely needs to be tightened up. I do not think there is much doubt about that. If we needed an illustration of that we have had one today that is playing out slowly and painfully as the Prime Minister tries to excuse one of his Ministers from his so-called high ethical standards by way—I will come back to the point—of excusing that Minister for having not read a report. You can see that what has been happening there is an encouragement of loophole behaviour an encouragement to look at a particular piece of law and look for the ways out. That is not a healthy way to have a democracy running. 
What we need if we want our economy really to get back on track is big proper change that will actually be a gear change for our economy. We have had this tinkering approach from the Government for the 4 years that it has been here. We have seen recently that the median wage has dropped 3 percent. The median wage has dropped 3 percent. This is ridiculous. We have seen the minimum wage dropping in real terms we see costs going up and we see people falling between the cracks. This is not a Government that is making big change; it is tinkering around with GST in this part. It is blocking a few loopholes but at the same time it is creating new loopholes. 
We could be spending our time here better by looking at things like pro-growth tax policy which would really encourage our economy to get ahead and encourage money to flow towards businesses—rather than towards the activities of compliance as we see in Part 4 of the legislation—and towards actually getting on with smart investment decisions that would gear up our economy and help it to succeed in conditions that up until now have been better than for most people. The Labour Government left many years of surpluses. Our trading partners— 
Hon Clayton Cosgrove 
: Nine years. 
Dr DAVID CLARK 
: Nine years of surpluses Mr Cosgrove reminds me—9 years of surpluses under the Labour Government. The economies of our trading partners China and Australia our main trading partners have been going well yet in New Zealand our economy is going backwards. It is because the big changes are not being contemplated in legislation like this. 
I have talked before in respect of a previous part of this bill about the excuses that might be made for change not happening in respect of the Inland Revenue Department computer system which is struggling and limping along. It is able to deal with small changes that close the odd loophole here and there and as we are seeing now open the odd loophole. It closes one with one hand and opens one with the other. But we are not seeing the really big changes and that is because the Inland Revenue Department computer system we are told is not up to it. Those big changes that are needed in the New Zealand economy cannot actually be made because we do not have a computer system capable of dealing with really big changes. 
That is why the Prime Minister on Valentine’s Day this year made his Valentine’s Day promise to address the Inland Revenue Department computer problems. He said that we should not be held hostage in terms of Government policy by an outdated computer system. But we have not yet seen the evidence that anything has been done about that. We have not seen a policy announcement or a timetable as to when that computer system will be upgraded or when it will be able to make the really big changes that we need as a country to have a modern economy that can get ahead. 
We know that Australia and our other trading partners have for example a capital gains tax which would push money towards the productive sector to support our export industries. We need export-led growth as a country. But we have in National opposite a party of “cannot” a party that says “no that’s too hard.” a party that refuses to make the big changes necessary and a party that is merely closing one loophole with one hand and opening another with the other hand.