Dunne Peter: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
Dunne Peter: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
[Volume:644;Page:13706] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I will respond to some of the points that have been made. I go first to the comments made by Katrina Shanks about research and development. 
I think it is worth rehearsing where the research and development changes arose. When the  
Business Tax Review 
 discussion paper was released in 2006 and put out for consultation a range of options were identified other than changing the tax rates in terms of providing assistance to business. Changes to the research and development regime or a more aggressively attractive research and development regime came in as the top priority from that consultation process and that was introduced in this year’s Budget. We have made the point that we are acting cautiously. We are deliberately following some of the lessons learnt from Australia. We are not going to have the pitfalls that they have in some areas but we are going to be guided by their experience. I take this opportunity of commending to Ms Shanks a speech made by her deputy leader during the second reading of this bill on the issue of research and development that I thought was a remarkably constructive contribution. 
As far as the issue of finance leases is concerned let me go back to what I said in response to the original questions. The exposure potentially at the moment is around $92 million. That will be reduced by some $16 million as a result of the measure contained on the Supplementary Order Paper. I indicated earlier that we get into difficult territory here because there are two individual cases we know of—I underline “that we know of” and I do not want to start being too taxpayer-specific because I cannot be. However it is fair to say that since the original Supplementary Order Paper was tabled officials have consulted all of the affected parties. Consultation does not mean an agreed solution necessarily but it does mean that the sentiments that are expressed on the Supplementary Order Paper are seen as a reasonable solution to the difficulty we face. Obviously others will make a judgment in reaction to those but it is our responsibility to secure the New Zealand tax base and also to ensure that we have a robust regime moving forward. I think the changes that are contained on the Supplementary Order Paper which I can assure Dr Smith have been the subject of wide discussion provide that pragmatic balance. 
I cannot remember whether it was that member or Pansy Wong—I think it may have been Dr Smith—who raised the issue of accident compensation in the context of the redundancy changes. We can make an argument that accident compensation payments deserve a similar form of treatment but we could make the same argument in respect of a number of other areas of social policy assistance. The redundancy changes arose as a result of a particular problem. The member’s analysis of the difficulties we face at the moment in terms of redundancy payments earned in a particular year even though they might be compensation for many years’ work is entirely accurate. What this bill seeks to do is correct that anomaly. I indicated before that the amendment that his colleague had moved had some technical difficulties; it amended legislation that actually no longer exists. At this stage we are focusing only on the redundancy change. I think that other issues will have to be considered at another time. 
Finally I will make a comment about the changes the member commented on in respect of the fair dividend regime. This is an area of huge technicality and I will not profess to be sufficiently expert to give him a comprehensive ruling on it. But I will make this point which I think goes to the heart of the point that he was raising. These changes are intended to be applied prospectively rather than retrospectively. So the issue he was expressing concern about—a square-up being applied by the Commissioner of Inland Revenue in an instance where the taxpayer may have made a wrong call—should not apply. This is a prospective consideration rather than a retrospective one. 
I also observe with regard to the fair dividend regime that only just over a year ago we had a very intense debate in this Chamber about the entire approach to the taxation of offshore investments. All sorts of dire predictions were made as to what would happen on 1 April. I can recall—and I am sure that my colleague the Minister of Finance can recall—the representations we received from a range of investors and investment institutions that the end of the world was nigh. It is interesting that a lot of the prospectuses and correspondence now laud the portfolio investment entity regime that we introduced as being very positive. We are seeing adaptations of those regimes being introduced all the time by various savings entities that are good and positive and that are benefited by some of the changes that were announced in this year’s Budget.