Shaw JamesHon JAMES SHAW (Minister for Climate Change): Thank you Madam Speaker. Can I just start by saying what a pleasure it is to rise and be able to have the opportunity to refer to you as Madam Speaker. I think it is a well-deserved role and I'm looking very much forward to working with you in the Chair over the coming 18 months.I also just wanted to rise in support of the Taxation (KiwiSaver Student Loans and Remedial Matters) Bill. I'm glad that this bill has bipartisan support of the House and I note that whilst the Opposition has some concerns it does look like we're going to be able to move this one through. As I understand from the previous speaker the Hon Michael Woodhouse there are actually fairly minor changes that would need to be made to satisfy his concerns about it. They don't sound all that substantive.But for the sake of the select committee and for submitters on the bill I think it's worthwhile just kind of getting out of some of the detail for a moment and referring to what the aim of the overall bill is because obviously one of the jobs of the select committee will be to ensure that the detail of the bill meets the purposes of the bill. So I do want to take a moment just to refer to that and get that on the record.The first purpose really is to ensure that we are simplifying and modernising the tax system. Now obviously this is an ongoing programme of work. We've had recent tax bills and some that came in the last few years all of which were moving towards that. But I think that it's worthwhile for us as we pass this bill through the House and through its stages through the House to keep that in mind because my own sense especially when I was on the Finance and Expenditure Committee is that you can get so lost in the detail that actually you end up creating more detail and pulling away from the purpose which is to simplify and modify the tax system. So I want to make sure that that is part of what we're doing because I think that serves New Zealanders best when we maintain that. The second purpose of course is we are very proud in this country of our broad based - low rate framework and this bill is again designed to reinforce that and to improve on the application of that.The third purpose—or the third aim of the bill—is to further encourage research and development expenditure. That is actually an area where there has been a lot of debate in the last few years about what the best form and structure essentially is to use the public purse and the tax system or grants to try and encourage New Zealand businesses to invest more in R & D because we are lower down the OECD league table of investment in R & D and that is really important. I'm very supportive of the measures that are outlined in this bill but again just for the sake of the select committee I want to make sure that we are keeping an eye on that to say: actually are we making sure that at every stage of this we are ensuring that R & D expenditure is increasing? Because we do have a goal of getting it up to about 2 percent of GDP and we're kind of starting from a reasonably low base there. Having said that that's what we're trying to do and I know that the new select committee chair will keep her eye very firmly on that.I want to refer to some of the specific items. One of the first ones is around KiwiSaver. This has been referred to by members on all sides around people who are investing in portfolio investment entities—or PIEs. This is one of those areas where the design of the system as it is at the moment tends to work against people who are less sophisticated users. So if you're kind of starting from a bit further behind the current set-up tends to leave you a bit further behind. That is because people need to notify providers of their appropriate tax rate and people who are generally less sophisticated users of KiwiSaver are not getting around to that. So what that is ending up in is that there are many many people—perhaps as many as one in five New Zealanders which is a staggering amount—who actually end up paying more tax than they would otherwise have to if they had notified inland revenue of their appropriate rate.Like I said what that means is that people who are more sophisticated users are more aware of what it is that their obligations are for informing their provider of their appropriate rate—not inland revenue but their provider. That means that they're doing better out of it than people who are kind of starting from a lower base. So the current system actually tends to add to inequality rather than help to close that gap. The proposed law—the changes that we're going to debate tonight and over the course of the next few months as this bill passes through the House—allow inland revenue to actually notify the provider themselves. They can say Actually we know what this person's appropriate tax rate should be. So here it is." That means that people should be only paying what they are supposed to be paying.That is one of those ways if we're to return to the purpose of making the system simpler and easier to use where actually we can I guess use the resource that we've got at our disposal to make life easier for ordinary New Zealanders—you know people who generally don't engage so much with the detail but who can then get left behind by not engaging with it. So I'm really supportive of that. I think it makes the tax system fairer—and just by changing the way that we administer the bill.The second area is around student loans. On this one I have to say—as someone who lived overseas for most of my adult life and the early stages of my career—when I went over with a student loan which at that time attracted a commercial rate of interest on it all the people who I knew from New Zealand who were over there as well all of whom had student loans often found it quite difficult to interact with inland revenue despite the fact that we actually have a really good system. Actually people's personal circumstances would often get in the way of them being able to pay their loans back—or they might miss payments and so on and so forth. Of course then you end up in a great deal of trouble and that would attract penalties which would also attract interest and then people would kind of opt out of paying into the system at all and try and hide away and then the real trouble started.So one of the things that I particularly like about this bill is that for student loan borrowers who are based overseas and whose health problems make them unable to make repayments the amendments in this bill will treat those people the same as if they were based here in New Zealand and they won't be subject to interest on their loan for that period of time. I think that is a very small change that could make a significant material difference to a significant number of people because when you're travelling you are at risk and you can find yourself in a position of being unable to pay. We don't want to penalise those people because they just happen to run into those circumstances. The third area of course has been covered a fair amount today and that's about research and development. This is also an area that's quite close to my heart because for a long time I was involved with a number of small businesses and it does take a while to get to a point of profitability to get up and running. That has meant that it has been effectively impossible for the very businesses that we want to encourage the most the start-ups the entrepreneurs and the innovators to actually get the support. So the whole scheme for encouraging R & D has tended to be skewed towards larger pre-existing businesses who could actually afford the investment more in the first place.So the change here in order to make it possible for smaller start-ups who are not yet at that profitable stage to start being able to recoup some of their investment in R & D I think is actually focusing the R & D tax credit system on exactly the part of the economy that you most need to pay attention to because that is the part of the economy where you are going to see the most innovation and the most growth and development in terms of new businesses and research and development. So I think that that is a fantastic innovation. I commend the Ministers involved for having developed that and I think that will make a huge difference.The mild concerns of the Opposition aside I think that this is a fantastic bill. It advantages a number of groups in New Zealand society and I commend it to the House."