Cunliffe David: Taxation (Business Tax Measures) Bill — Third Reading 
Cunliffe David: Taxation (Business Tax Measures) Bill — Third Reading 
[Volume:653;Page:2153] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 The third reading of the Taxation (Business Tax Measures) Bill provides a welcome opportunity to sum up the various arguments that have been proposed and discussed around the Chamber. The first point that must be made is that this bill is a useful bill. It deserves and will receive the support of the whole House and it does so in recognition of the very real pain that exists in the small and medium sized business sector. Many workers formerly employed in larger businesses have as we know been outsourced and now contract back as small-business owners. That can offer them opportunities which they have taken but it also means that they personally are bearing much of the risk and the pain of this unprecedented recession. 
To that end it is worth recalling that a majority of the measures incorporated into this tax bill have been around for some time. Indeed they were the work of the previous Labour Government either embedded in the broader international tax bill currently under consideration by the Finance and Expenditure Committee in the Inland Revenue Department’s work plan or proposed through the Labour Party’s pre-election manifesto. 
The key issue is that time has moved on. Every week we hear further statistics as we have again today from the Minister of Finance that show that our current account deficit is widening. We also hear from the Minister for Social Development and Employment that unemployment is increasing and that the situation facing New Zealand’s small businesses is getting ever more serious. 
 Once again the question of what the Government has been doing since it took office in November last year must be reflected on and where the additional impetus is that should have been included in this bill. Where is the plan to drive further and faster to reduce the complexities of tax compliance for small businesses which my colleague the outgoing Minister of Commerce Lianne Dalziel was busily working on pre-election? Where is the plan to recognise that in times of recession providing for and estimating provisional tax is probably the No. 1 problem that many small businesses face? 
There are some moves to address those questions in this bill and we welcome them. But they do not go far enough. Let us take as one example the reduction in the use-of-money interest rate for underpayments. It has been reduced from 10.5 percent to 9.7 percent. That is done as a one-off measure rather than as a rolling change but at the same time the official cash rate has been reduced by a full 5 percent. The premium the Inland Revenue Department is taking has actually increased during the time since this policy was first mooted. 
That is why the Labour Opposition has taken it upon itself to propose that the Government consider further change. For a start it should adopt the 90-day bill rate from the Reserve Bank as an ongoing benchmark for the use-of-money debit rate. We further propose that the Minister consider reducing the 105 percent uplift basis for a 2-year previous income to a straight 100 percent. This would acknowledge that it is difficult to accurately forecast income and that if one is using historical income in these circumstances then no penalty should be attached. 
We further argue that the Minister should consider—and I understand that the Minister and his officials have agreed to this measure and we welcome that—the deductibility of patents from their 20-year life to a much shorter period reflecting the fact that New Zealand is an outlier in that regard. Above all we have asked that the Government continue to strengthen its drive to reduce the red tape on tax compliance for small businesses in areas where the results really are de minimis. 
This does bear upon a larger question that is now much on the minds of New Zealanders. Regrettably there is no apparent broad-based plan that gives the public of New Zealand confidence that this Government understands the gravity of the crisis facing New Zealand and indeed the whole world. Examples of this crisis are that Taiwanese exports have been cut by half Japanese exports have been cut by 45 percent and world growth estimates are down from 1.5 percent positive to something like 3 percent negative. This is an absolutely unprecedented cut in 6 months. And why does that matter to New Zealand small businesses? It matters for two reasons. Firstly when we cannot sell our products and services as easily overseas our exporters suffer and many of them are small and medium sized enterprises. Secondly those very same businesses will find it harder and harder to get the credit they need to carry them through this recession because lending from banks has tightened as a result of global economic conditions. 
 So there is a double whammy and this bill is unfortunately a little too late and a little too small to make the kind of difference that small businesses need. What has become apparent in recent weeks particularly is that not only does the Government not have a comprehensive plan for dealing with this situation but that it has described itself as a global outlier. I think the  
Wall Street Journal 
 thought it was doing Mr Key a favour when it praised him for being the only leader in the Western World who is trying to deregulate and cut his way out of this recession. But there is a real problem with that approach which is that this recession has occurred largely because of the problems of deregulation itself. 
An under-regulated American real estate market and a woefully under-regulated American financial system—under the Bush administration—have resulted in a terrific bubble that has now burst and we are all around the world paying the price for that lack of regulatory oversight. Against that background Mr Key thinks it is appropriate to take a deregulatory stance to solve the problem. One wonders why. 
Hon Tau Henare 
: You want more regulation just like America? 
Hon DAVID CUNLIFFE 
: The member should confine himself to areas where he has some expertise—a fairly short list. National in Government is in the unique position in the Western World of taking a conservative approach to recession management. As the debate on the Budget Policy Statement in the last couple of days has made clear the code that is being used by the Government—that it will take the sharpest edges off the recession—simply means that National is not ambitious as a Government about the degree to which it can protect New Zealand workers and small businesses from that pain. 
The second part of the code—that the Government will make New Zealand more lean and competitive for the rebound—simply disguises a classic neo-conservative agenda of deregulation and privatisation which is something that New Zealanders have considered and thrown out in successive Governments from Roger Douglas to Ruth Richardson and to the present day. 
This bill—as good as the measures are and as much as we and all parties will support it at the third reading vote—does not go far enough. It incorporates around two-thirds of its content that had its origins in Labour Party policy and work streams. It has not been significantly extended since the National Government took office and in that time the world has changed. 
In summary I emphasise to the House the contention that this Government clearly must have a different approach in mind. It either has no plan or a plan that New Zealanders have previous tried and once they got the taste of it decisively rejected.