Cunliffe David: Taxation (Business Tax Measures) Bill — In Committee 
Cunliffe David: Taxation (Business Tax Measures) Bill — In Committee 
[Volume:653;Page:1994] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I wish to commend the Taxation (Business Tax Measures) Bill to the Committee and to reiterate the statement that Labour members made in the first and second readings that we will be supporting the bill’s passage through the House. The bill comes to the Committee stage following a thorough and I think very helpful and bipartisan select committee process. The common ground that is reflected in the commentary on the bill is that many—indeed most—of the provisions of the bill that are taxpayer-friendly have been in process for some time and date back to the previous Government. The commentary sets out that they include matters in “the Taxation (International Taxation Life Insurance and Remedial Matters) Bill; use-of-money interest rates; uplift thresholds; and instalment regimes.” We appreciate Government members acknowledging that point in the commentary. 
There are a number of areas where we do not believe that the bill goes far enough. The bill incorporates measures that were under development or announced by the previous Government from around the middle of 2008. As we all know the world economy has gone into serious decline since then. What was an aggregate world growth forecast of about 1.5 percent of real GDP growth has now turned into the first negative growth since World War II. Indeed as recently as today we have seen predictions that world exports will fall by as much as 7 percent in the year to date. That is an unprecedented drop-off—the most alarming example of which is in Japan where I understand that export volumes and value are down to the tune of around 45 percent and in Taiwan the figure is nearly 50 percent. This is truly a crisis of a global magnitude. 
Against that background therefore many New Zealand businesses including small and medium sized enterprises will be suffering. Businesses that were and are in the exporting game will find it considerably more difficult to make sales and they will find it considerably more difficult therefore to meet their cash flow predictions. It is incumbent upon this House working in a bipartisan way to see whether more can be done to assist small business through measures such as these. 
The Opposition will be recommending certain matters for the further consideration of the Government pertaining to the policy review processes which as the commentary sets out are already in train. We had considered tabling certain amendments to the bill in the Committee stage today but we have decided not to do that in favour of a more bipartisan approach of working with the Government on matters that the Government can bring forward. At the end of the day this is not about who claims credit; this is about getting the job done for small and medium sized enterprises. 
Certain matters stand out as indicated in the select committee’s report. Use-of-money interest deductibility is a matter of crucial interest to business. It must be said that this has not been resolved for some time and we are gratified across the Committee that this has been noted for further work and we support that being on the work programme. Secondly use-of-money interest rates are still too high. The previous Government had indicated that it would drop use-of-money interest preceding the previous election and this bill takes into account only the measures that had been contemplated some 6 months ago. During that time the Reserve Bank has dropped the official cash rate by around 5 percent and those reductions are not incorporated in action contemplated by the Government at this time. 
It is important that at least some catch-up is made. Several options are available. One would be to have a reciprocal use-of-money interest rate that reflected the deposit interest rate—currently around 4.23 percent. There is some reasonable argument about whether that would provide the ideal incentives for prompt payment. Another and lesser suggestion that we commend to the Government would be to use the Reserve Bank’s 90-day bill rate as a mechanism for securing interest rate reductions. That could be done from the date of passage of this bill and we are already moving in that direction. That would be a current rate somewhere above 8 percent and less than the 9.7 percent currently proposed by the Government. We commend that suggestion for the consideration of Government and the officials. 
Submitters to the select committee raised the issue of the tax deductibility of patent costs and across the committee we had considerable sympathy with those submitters. As a committee we would see merit in moving to align the New Zealand regime which is currently a 20-year amortisation period for patent rights. It is clearly out of step with the OECD average which is probably below 10 years and certainly out of step with our drive to introduce more high technology into the New Zealand economy for which even 10 years is clearly too long and therefore puts an unfair tax burden on companies engaged in those kinds of activities. Those are the kinds of further measures that we see as needing to be considered. Furthermore we suggest that the Governments give further consideration to omitting the 105 percent uplift basis as provided in new section RZ3(3)(a) inserted by clause 20 and replacing it with a straight 100 percent which means that no penalty would be imposed on estimates calculations for preceding years. 
This bill good as it is and perhaps insufficient as it is in its current form subject to the ongoing work that we have drawn attention to begs a far bigger and more important question: where is the Government’s plan that is proportionate to the magnitude of the crisis facing New Zealand business? Surely it cannot be the 9-day fortnight for which a total of $20 million of Government subsidy has been earmarked? Surely it cannot be the Cape Reinga to Bluff cycle track which even since the Job Summit has somehow melted into something of a lesser cycle network? Surely it cannot be simply the fact that the Prime Minister is phoning the Council of Trade Unions more regularly? Surely it cannot be the fact that we have speeches coming out about philanthropy? 
No I do not believe that is the strategy the Government has in mind other than in the public relations sense of the word. As a number of commentators—most recently John Armstrong in this weekend’s  
New Zealand Herald— 
have pointed out the real agenda is becoming clearer. This Government in the last few weeks has increasingly demonstrated itself as a wolf in sheep’s clothing. The trumped-up—it must be said—overhaul of the Accident Compensation Corporation public service spending cuts the privatisation of prisons the unsympathetic treatment of Television New Zealand the Draconian review of the Overseas Investment Act which is not known internationally as one of the most hard line of investment protection measures the stop on contributions to the Cullen superannuation fund and the hard line on the financial performance of State-owned enterprises are just some of the measures. It seems that every day one reads in the newspaper or hears in the media about something else that although not being presented by the Prime Minister as front and centre while he is doing the happy clappy stuff is none the less hard line and part of the gathering right-wing momentum of this Government. Most recently it was back to the old Holidays Act with the supposition that by giving workers “the choice” to put their holidays up for sale somehow that will not become an obligation. 
To sum up this bill is good as far as it goes. It represents a thorough and bipartisan select committee process. It does not go far enough because it was designed 1 year ago before the recession deepened. The Opposition is willing to work in a bipartisan way with the Government to bring further relief to small and medium enterprise. But having said that let us be under no illusions that this represents the real agenda of this Government that by the day is becoming darker and harder edged.