Huo Raymond: Taxation (GST and Remedial Matters) Bill — Second Reading 
Huo Raymond: Taxation (GST and Remedial Matters) Bill — Second Reading 
[Volume:669;Page:15783] 
RAYMOND HUO (Labour) 
: 
 It is a pleasure to take a call on the second reading of the Taxation (GST and Remedial Matters) Bill. The bill seeks in particular to simplify and clarify GST issues in relation to commercial land. It will bring real advantages for the GST treatment of suppliers of commercial land. No longer will the parties have to determine whether the sale of land was the sale of a going concern. An overriding purpose of the bill is to stop fraudulent schemes known as phoenix schemes as mentioned by my colleague Stuart Nash where the Inland Revenue Department refunds GST to a registered purchaser but no corresponding GST payment is made by the vendor to the department as the vendor is deliberately wound up before such payment is made. 
The bill makes a number of tax-related amendments and introduces changes to the KiwiSaver legislation emissions trading scheme units portfolio investment entities and the tax treatment of superannuation funds. Labour supports this bill as it introduces some sensible changes and a number of remedial amendments but we do have concerns as well. 
With regard to the new rules for the change-in-use adjustments option for certain financial service providers a key concern was the potentially significant compliance costs for financial service organisations such as banks and life insurers. An adjustment would be required for each asset used for both taxable and non-taxable suppliers. In response to submissions the Finance and Expenditure Committee has recommended a new provision to allow a person who is principally a supplier of financial services to use a different method from the new rules if the method meets certain criteria including for example if the method is fair and reasonable. Some commentators and submitters however still remained concerned because it is not clear whether the proposed amendment will achieve reduced compliance costs. 
With regard to the definition of land the Finance and Expenditure Committee has recommended a carve-out for most commercial leases from that definition following submissions by KPMG and others. This means that most commercial leases will not be subject to the zero rating provisions for land. It is sensible because the inclusion of commercial rentals would have caused an increase in compliance costs for landlords. As KPMG submitted this was not warranted given the very low risk of phoenix fraud in those circumstances. 
In respect of the zero-rating of land sales the select committee has recommended amendments to clarify that the test for zero-rating land transactions should be at the time of settlement. This is a departure from the previous principle of testing for zero-rating at the time of supply. However according to some experts this approach does not appear to be particularly practicable. I look forward to more deliberation on this particular part. 
This bill makes a number of amendments to the KiwiSaver scheme. It is regrettable that the Government did not use this bill to undo the damage it did to the scheme in cutting KiwiSaver. After 2 years and two Budgets the only offer of a National Government savings plan if any has so far consisted of gutting the KiwiSaver scheme and cutting contributions to the New Zealand Superannuation Fund. Gutting and cutting in combination is representative of the National Government’s savings plan. 
New Zealand’s savings history time line is straightforward. In 1974 the Kirk Labour Government introduced a compulsory contributory superannuation scheme. In 1975 the Muldoon Government closed the scheme. In 2001 the Clark Labour Government established the New Zealand Superannuation Fund. In 2007 Labour’s KiwiSaver came into force and it was expanded in Budget 2007. But in 2008 National halved the effect of KiwiSaver in order to pay for the tax cuts. In 2009 National suspended contributions into the New Zealand Superannuation Fund until 2020 or until the Crown accounts are back in surplus. In 2010 National extended the suspension of contributions to the New Zealand Superannuation Fund until 2018 despite a forecast surplus in 2016. Brian Gaynor in an article published in the  
New Zealand Herald  
on 21 August this year stated very strongly that National Prime Minister Robert Muldoon’s termination of the superannuation scheme in 1975 was the worst economic decision by any New Zealand Government in the past 50 years. 
Let us have a look at the Australian and New Zealand figures on a per capita basis. Australians have A$56000 of superannuation funds whereas Kiwis have just NZ$5500. 
Brendon Burns 
: How much? 
RAYMOND HUO 
: It is NZ$5500 versus A$56000. Australians have A$29200 of net overseas debt whereas Kiwis have NZ$35900. Since mid-2000 Australia’s total superannuation assets have risen nearly threefold from A$484 billion to A$1257 billion. Mr Gaynor said in his article that a substantial majority agreed that Muldoon’s decision was a disaster for the country particularly as the compulsory scheme was replaced by New Zealand superannuation which costs $8 billion a year and is funded from taxes. If Labour’s scheme had not been abolished it would have been worth an estimated $240 billion - plus in 2007 and it would be worth around $255 billion today using the same conservative investment refunds projections. This $255 billion or $58300 a head compares with our current superannuation assets of just $24 billion although the latter does not include the $16 billion held by the New Zealand Superannuation Fund. 
How disastrous was it? Prime Minister Muldoon’s decision turned our country from being a potential Switzerland in the southern hemisphere to a low-ranking OECD country that is falling further and further behind its next-door neighbour. I thank Mr Brian Gaynor for his analysis which is a wake-up call for anyone and everyone who is concerned about our country’s future. If the Minister of Finance the Hon Bill English is so worried about the warnings from the ratings agency Standard and Poor’s he should be worried about our very poor performance in savings because compounded by our mountain of household debt it leaves our economy very very vulnerable to further international shocks. 
It is very unfortunate that the National - ACT Government terminated the annual contribution to the New Zealand Superannuation Fund and changed the KiwiSaver contribution formula from 4 percent each from employee and employer to 2 percent respectively. Halting contributions to the Cullen fund has cost the taxpayer millions and millions of dollars and has undermined the certainty and future of the fund. It was a short-term decision taken for purely ideological reasons because National has never been committed to the superannuation fund. The core issue is the sustainability problems of New Zealand superannuation as the baby boomers move into retirement. 
Muldoon will be judged and has been judged by history. I say to the current National Government in the context of this tax bill that instead of adjusting its policies based on the latest opinion polls it should be focused on reducing external debt and increasing internal savings. Thank you very much.