Key John: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Third Reading 
Key John: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Third Reading 
[Volume:630;Page:2098] 
JOHN KEY (National—Helensville) 
: 
 It appears that the time of the previous speaker Winston Peters has expired so I will take over in his footsteps. On behalf of the National Party I rise in this third reading debate to support the Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill. 
I start with the point that the bill contains certain measures that are supportive to business. The National Party clearly supports those measures and the attempts to make depreciation rates more realistic as they apply to the modern economy. This measure was trumpeted by the Labour Party in the last Budget as heralding a great success for businesses around New Zealand and it was said that New Zealand should be rejoicing because somehow Budget 2005 was business-friendly. When one looks at Budget 2005 one probably reflects on the fact that it was a Budget in the proportions of about $4 billion a year. It was a massive spend-up that was followed by a Labour give-away programme as we moved towards the election campaign. No doubt the Government will argue that that is the reason it has very little money available this year. 
It was interesting that the business tax cuts that were delivered—we will talk about those in a minute—were paid for by the introduction of yet another tax. It is the Michael Cullen philosophy of taxation for all New Zealanders: when he gives with the left hand he takes with the right hand. Theoretically on the one hand he was giving businesses something but on the other hand he was taking and that was the $360 million tax grab in relation to a carbon tax that was frankly a “New Zealand experiment” as the  
Guardian 
 newspaper described it. Lo and behold Michael Cullen had to come before the Finance and Expenditure Committee a few weeks ago with his tail between his legs and forlornly tell the committee that he did not have the numbers to get that bill through the House. So he was forced to make a rapid retreat from his carbon tax—and that was a wonderful idea. The National Party as members may remember had already launched its “Axe the carbon tax” campaign and we were delighted when the carbon tax was removed. 
The point I make is that as soon as he got the words out of his mouth—that he was axing the carbon tax—he went on the hunt as Minister of Finance for another $360 million to make up the shortfall. Lo and behold we learnt that tax threshold adjustments would not be introduced. That was the threat at least from Michael Cullen—that the tax threshold adjustments that were going to take place—the infamous chewing gum in the “chewing gum Budget”—would not occur in 2008 because despite the fact that the Government was predicting that it would run somewhere between a $3 billion and $5 billion surplus around that time there was not enough money. I think New Zealanders find that quite remarkable and it really does not bode well for the infamous business tax review that is taking place at the moment. 
The infamous business tax review was pitched in the same way as the supposed infamous deep dark secret in Budget 2005. The infamous business tax review was sold and pitched in such a way that businesses were led to believe that it would be good for them and that like at Christmas there would be a present neatly tucked under the bottom of the tree. What they did not know was that Michael Cullen was back to his old tricks of fiscal neutrality and that if he was going to give with one hand he would need to take with the other—and the other would come in the form of a payroll tax. That is what is coming down the line for businesses in New Zealand under a Michael Cullen – Labour-led Government. That is the bad news. 
But should businesses be rejoicing because of the passing of the Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill tonight? Well they should probably be grateful for small mercies because goodness knows that under Labour they do not get a lot of small mercies. But really businesses should be far from rejoicing because the bill effectively says: “We are going to increase the write-off rate—the depreciation rate—for things like laptops.” A laptop can be written off at something like 40 percent in year one. I ask in all seriousness whether any New Zealand business thinks it can buy a laptop and sell it 6 months later for anything more than about 60 percent of what it paid for it. I would be amazed if a business got 50 percent of what it paid for it. In fact quite frankly in the modern technological age I would be surprised if a business got anything for it. So for Michael Cullen to be trumpeting this as business-friendly was quite unbelievable. 
Members may remember around Budget time—I certainly do—that we had a remarkable scenario whereby Michael Cullen was trumpeting this measure as a $1.5 billion return to business. What a business-friendly Government Labour was proclaiming itself to be! The only small problem came in this regard. During the Budget lock-up that occurred an hour before Budget 2005 we asked Treasury officials whether they could tell us what this missing $800 million was that was theoretically some reduction for business. 
Chris Auchinvole 
: What did they say? 
JOHN KEY 
: Their answer was that they did not know. Fifty-five minutes later 2 minutes before we came back to the House a Treasury official came scurrying in. He told me that he had discovered as apparently Michael Cullen discovered literally weeks before the Budget—and we all know Michael Cullen can blow a foo-foo valve at the least sort of aggravation so one can only imagine that the walls were pretty blue when that discussion was finished—that there was not an accrual process for the recognition of GST and because the Government was changing the GST rate and aligning it with I think the fringe benefit tax (FBT) payment rate that meant a movement from one income period to another. So as businesses moved over to that income period they were in effect paying eleven-twelfths of their GST payable at that particular date. But because they were not paying that other one-twelfth for another 42 days I think it was Michael Cullen was claiming that that was a $800 million benefit to them when in fact they were getting the use of money for 42 days. It was more trickery from the Minister of Finance—similar to the trickery we saw on the student loan policy. 
We saw Michael Cullen in the general debate today—and I do not like to digress Mr Deputy Speaker because I know you like to keep these third reading debates tightly and narrowly constructed but let me digress for a second. We saw Dr Cullen in the general debate today telling the House that somehow student loans would be even less expensive than the 18th calculation he has now received from Treasury. But he forgot to mention the $1.5 billion write-down to the New Zealand books—the $1.5 billion write-off in assets that has occurred from that student loan policy. 
So let me just say to business that National is supporting this bill. It is a breadcrumb though in a breadbasket. The actual loaf is gone; it has been long since toasted by the Labour Party—as have so many of its Ministers in recent months. This bill is a crumb that has come off the bit of the crust that is left and businesses should be grateful because under Labour that is all they will see. But I do not think businesses should be doing cartwheels over it in any shape or form. 
There are some other interesting changes in relation to for instance the elimination of “nine to five” leases. As a member of the Finance and Expenditure Committee I know we received a lot of submissions in relation to “nine to five” leases. I quote a comment that came from KPMG in relation to the cancellation of those “one plus one plus one” leases or “nine to five” leases as they are sometimes known. The comment was: “Officials see these as FBT avoidance. Taxpayers see them as a means of reducing their overtaxation.” That was a heated area of discussion for the committee but it was an interesting point. Some of those taxpayers make the fair point that they are being charged FBT on a car park they are not using for any private expenditure at all—only for working time—and that sounds a little bit crazy. 
 I want also to refer readers of this bill—it is quite a long bill so for insomniacs it will be a wonderful piece of information—to the provisions around the subsidy for payroll agents. That is actually a very interesting and typical Labour Party response to taxation. It is a case of: “Don’t go out there and simplify the tax system because that is a far too simple thing to do. Don’t make tax simpler and easier to understand with fewer compliance costs but do pay for yet another bean counter so that that bean counter can work out the mess that is going on behind the scenes.” That is no way to be treating business in New Zealand particularly small businesses and particularly the small to medium enterprise sector which dominates New Zealand’s business face. They really should not be having to pay or get a subsidy for another accountant. They really should be getting a much more simplified broad-based low rate of taxation. I think that is really important. 
Lastly I want to mention the racing industry if I may for a moment. National’s policy on racing was the right policy. New Zealand First is getting this legislation through only because that Government desperately needed New Zealand First. It was National’s policy and when I go on racetracks around the country people say to me: “Thank you National for what you have done.” so we say: “Best wishes and good luck with this legislation—we are off to the races.” National will be voting for this bill.