Taxation (Transformation: First Phase Simplification and Other Measures) Bill — Third ReadingText is incorporated into the Bound VolumeTaxation (Transformation: First Phase Simplification and Other Measures) Bill — Third Reading[Sitting date: 31 May 2016. Volume:714;Page:11531. Text is incorporated into the Bound Volume.]Taxation (Transformation: First Phase Simplification and Other Measures) BillThird ReadingHon MICHAEL WOODHOUSE (Minister of Revenue): I move That the Taxation (Transformation: First Phase Simplification and Other Measures) Bill be now read a third time. As the name suggests this bill focuses on removing some of the more immediate legislative obstacles to the Inland Revenue Department’s (IRD) reform of our tax system. Over the next few years the department’s Business Transformation programme will be implementing more customer-focused business practice and new technologies to make it simpler for people to complete their tax affairs and get them right.Making it easier for businesses to get their tax obligations right and harder to get them wrong forms the basis of the Government’s new small to medium sized enterprise- friendly tax reform package included in Budget 2016. That is part of two very important budgetary measures that were announced last week. The first was $857 million to underwrite the IT system that will form the basis of these changes and of course the $187 million measure effectively sees the end of provisional tax for small businesses that choose to use their systems to meet their tax obligations not have to comply with Inland Revenue Department’s systems which will change to suit small businesses.This is a small measure. The measures in this bill are actually small—I am sure we will hear Mr Nash and Mr Cosgrove talk about what giant leaps these are not and indeed they are not really intended to be. But the train is very much on the track for the transformation that is required and we have now committedover the next few years to the sorts of changes that can only take place with those IT changes and with the Business Transformation project successfully implemented. It is a very large project—probably the largest Government IT project embarked on in real terms for a very long time but I am confident—Hon Clayton Cosgrove: Since INCIS.Hon MICHAEL WOODHOUSE: Yes it may well be since INCIS—not the exemplar I would suggest and certainly those sorts of things are learning experiences that I know IRD and the Government Chief Information Officer have taken on board. I am confident that we are very much on track to deliver the solution that will enable the small business community—in fact all businesses and taxpayers—to as I said make it easier to get it right and harder to get it wrong.Briefly the changes in this bill will make it easier for employees to participate in employee share schemes where an employer can make source deduction payments rather than rely on the employee to meet their tax obligations at the end of the period. It will allow IRD to prepopulate employee income reducing the need for employees to file returns on this income and of course it will change some of the outdated measures around the requirement to have signatures and the delivery of correspondence by IRD by old technologies like post or in writing. Certainly we are now in a much more electronic and ubiquitous world where those sorts of modern digital communications will make it much easier and more efficient for both Inland Revenue Department and the taxpayer.There are some other taxpayer-friendly changes proposed in the bill. It will allow Inland Revenue Department to give better service to its customers by providing a KiwiSaver scheme with the names and details of members who have transferred out of their schemes in the name of the member’s new KiwiSaver scheme; halving the time that taxpayers with personal tax summaries will have to wait for their refund providing they meet a new automated refund threshold thus benefiting around 400000 more taxpayers; and providing special tax codes directly to the Ministry of Social Development to help people receiving New Zealand superannuation or a veterans pension to meet their income tax obligations.At the Committee of the whole House stage there were some small but important changes and provisions inserted into the bill. Those changes will allow the Canterbury earthquake provisions to continue to apply as intended despite the repeal of the Canterbury Earthquake Recovery Act.In bringing the bill to its third reading I want to thank again those who contributed to its success so far in particular the officials who worked on the policy details behind the measures the drafters the submitters and the very good Finance and Expenditure Committee for its consideration under the guidance of its able chairman Mr Bennett. This bill contains some very useful taxpayer-friendly groundwork for the continued modernisation of our tax administration system and I commend it.STUART NASH (Labour—Napier): With a bill named the Taxation (Transformation: First Phase Simplification and Other Measures) Bill you would expect something at least transformational would you not? You would hope that a piece of legislation actually represents what it is or that at least the name would represent what it is—transformational.We are in an era where we have a whole lot of problems with our tax system at the moment. We are in an era where the Reserve Bank has said that 40 percent of all homes purchased in Auckland are purchased by speculators and the Governor of the Reserve Bank said that they are bought for capital gain because the yields are so low—and yet no capital gains tax. We have a brightline test that the Inland Revenue Department (IRD) said is insufficient to do anything with the housing market.What we have also got is a massive risk to our global reputation by people who are seen to avoid paying their fair share of tax. It is a real problem. It is a problem to the point where reputable international newspapers and magazines are naming New Zealand as a tax haven. That is an issue. A bill that changed that a bill that sorted out that issue would have been transformational. I am not saying that the changes in this bill are not necessary. What I am saying is that they are not transformational. What I am also saying is that we have a whole lot of issues within our tax system at the moment that demand urgent attention on behalf of the Minister of Revenue and I would guess urgent attention on behalf of the ministry to actually get this right not only for the integrity of our tax system but also for the integrity of our global reputation.Let us have a look at some of the things in this bill. As the Minister outlined it does make some pretty common-sense amendments. For example the commissioner can now receive emails or the IRD can send out emails and that is acceptable. I have one slight concern about that. IRD has stated that “Cutting paper use and increasing digital services for Inland Revenue’s customers will see annual paper savings equivalent to 1900 trees or nearly 16 million sheets of A4 paper”. As our forestry spokesperson I have a slight concern that we are actually not using trees and adding value here in New Zealand instead of exporting the logs overseas. But all this bill does is bring the system in to the 21st century. It should have been done a number of years ago. I am assuming that what it actually does is it codifies or legislates what is happening at this point in time.There are a couple of amendments here that I would like to talk about. One is the requirement about personal tax summaries. This is reasonably important for a whole lot of people. Currently what happens is that if a wage or salary earner needs an end-of-year assessment they can ask the commissioner for a personal tax summary to confirm any amounts of tax refund. They can get that within 30 days. If it is an unconfirmed summary for less than $200 then the IRD just pays it into a bank account. What the bill actually does is reduce the time from 30 days to 15 days and it increases the unconfirmed amount from $200 to $600.Why this is so important is that there are over 200000 people in this country paying secondary tax. A lot of those people actually pay more tax than is necessary. I would suggest that this provision will actually help them. I have said it before and I will say it again to anyone listening to this debate: if you pay secondary tax I urge you to request a personal tax summary and to phone up the IRD—make sure you have got your IRD number—and you could be in for a very pleasant surprise. In the past if you did not do anything you might have got $200; now if you do not do anything you can get up to $600 within 15 days. So I urge people to do that.The other thing is that there is a special tax code certificate. This may seem slightly minor but what it means is an employee can apply for a special tax code for their New Zealand superannuation or veterans pension income or their employment income from one or more employers. What I am hoping this will lead to is actually the necessity to do away with secondary tax. Secondary tax is paid by people who work two or more jobs. Let us make an assumption—let us make the assumption that people work two or more jobs not because they love working 22 hours a day but out of economic necessity.The problem we have got with the tax system as it stands is that they pay secondary tax in that second job. There is a good reason for it. It is a withholding tax. What happened in the past was that people who were working two jobs ended up with a big tax bill at the end of the year that they could not afford and which was a massive imposition. The withholding tax i.e. secondary tax is meant to have mitigated that but it means that it is a major impost on people. The IRD at this point in time actually owes Kiwis about $750 million in overpaid tax. A decent chunk of that—it is hard to quantify how much—is secondary tax. The thing about it is that after 4 years it drops off. So again I would urge people who work two or more jobs and pay secondary tax to actually phone up the IRD to see whether they are owed any money.Another interesting point in this bill is that it repeals special homeownership accounts. These are savings accounts that were closed in 1986 believe it or not. There was a provision in there saying that if you had more than $10000 you could claim tax credits etc. etc. and the IRD says that there are still a number of these accounts in existence—amazing. A number of these will not have been operated for 25 years. What this bill does is it will allow the relevant financial institution—usually a bank; not always but usually a bank—to close the accounts without having to pay back the tax credits as is currently the case. Again I would urge anyone who is listening or if you know of anyone who has one of these old homeownership savings accounts to get to the bank as soon as possible to make sure that you claim those tax credits. As soon as this bill is passed into law those tax credits are no longer available.We are supporting this bill because there are a whole lot of common-sense amendments here around things like automatic signatures. As I have said it brings the tax system into the 21st century. But yet again it is another tax bill in this House that is certainly not transformational. It is a missed opportunity but most important it does not deal with the substantive issues we have with our tax system in this country at the moment. They are New Zealand being seen as a tax haven and that posing a massive risk to our global reputation and the integrity of our tax system. That is a concern. The second one is the number of people who are actually avoiding paying tax because they buy a property not for a yield but for a capital gain.This bill does not deal with the substantive issues that are afflicting our tax system but we do support it; it is common sense. Onwards and upwards let us hope. Thank you very much.DAVID BENNETT (National—Hamilton East): It is a great pleasure to speak on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. This bill is the first phase of the changes to progress the Business Transformation case.Fletcher Tabuteau: Are you sure?DAVID BENNETT: I am very sure of my idea. It includes things like electronic communication simplifying the collection of tax on employee share schemes information sharing and there are some other tax simplification measures around KiwiSaver foreign investment fund schemes co-location of services and special tax codes. As Minister Woodhouse has said this is a bill that is part of a process. It is part of that simplification process. It goes through some of issues around communication that can always be made better especially with a very complex and detailed system such as the tax system. I was interested in that last speaker Stuart Nash who in his comments once again reiterated that there is no capital gains tax—it is the firm belief of the Labour Party to have a capital gains tax. I know that it is somewhat contrary to the Green Party position where it wants to tax property each year on the value increase of that property whether it is sold or not.Stuart Nash: What? Rubbish.DAVID BENNETT: No that is true—that is what the Green Party wants to do.Stuart Nash: Rubbish.DAVID BENNETT: No well ask Julie Anne Genter. The Green Party would have a tax on the capital value increase of a property—that is what it wants to tax on. That is the Green Party policy. It has been enunciated a number of times by Ms Genter. It is one of those difficulties that you are going to see between the new coalition of the willing between the Labour Party and the Green Party. In the past Helen Clark was not so silly. When the coalition was formed she did it—The ASSISTANT SPEAKER (Lindsay Tisch): Order! This is a third reading speech. If the member refers to Speakers’ rulings on pages 136 and 137 it is very clear what is within the scope of a third reading. I will ask the member to come back to that.DAVID BENNETT: In regard to tax there is a dichotomy of points of view.Fletcher Tabuteau: Just wrap it up.DAVID BENNETT: Well it would be interesting to hear New Zealand First’s point of view on capital gains tax as well. I am sure we will come to that soon.On the other side of the House we are hearing that the transformation of the tax bills that those members are seeking would involve that kind of tax system change. That is not being proposed in this bill. This bill is around transformation and simplification in the sense of what is required to make the existing tax system work as well as possible. That is all part of the Business Transformation case that is going on and the money that is being put into the Budget to enable that to happen is also an important part of that process. It is important that the public recognises that there is a difference of opinion on tax in this House. On this side we have a system that we are working to maintain and make the best of. On the other side of the House there are differences of opinion and that will soon show through in their agreements as we go through to the election next year.Hon CLAYTON COSGROVE (Labour):Well that was a cracker. That was a David Bennett special.Fletcher Tabuteau: That was high-level stuff for him.Hon CLAYTON COSGROVE: That was high-level stuff. That was a demonstration of how transformational this bill is. You would think given the name of it that it was a sort of motion picture: the Taxation (Transformation: First Phase Simplification and Other Measures) Bill 2015. I pay tribute to the Minister who has expedited this bill far faster than one of his predecessors the longest-serving revenue Minister in the history of a Commonwealth Parliament Peter Dunne. I congratulate the present Minister. But that contribution from the chair of the Finance and Expenditure Committee (FEC) who pored over this bill day after day week after week and who purportedly knows it backwards shows the depth and detail and the huge transformations that are going to take place in this bill. He managed in his speech to talk about everybody else’s policy and every other party’s policy—which you then ruled against Mr Assistant Speaker and quite rightly so—and then sort of ran out of puff. That was it.The one page of notes that the National Party—no actually that Chris Bishop a former researcher would have scratched down for him and said “Look here’s a couple of lines. We’ve got to pad this out until 10 o’clock so you’ve got to throw a bit of biffo around.” and he ran out of steam—he ran out of steam. He managed to get out the four main points around the bill but the depth or lack of depth of that speech shows that although we support the Minister’s efforts to be fair he inherited this bill. He was probably told as the new Minister that this is his first big hit as revenue Minister. He could kick a goal in this Parliament in his first couple of days in the job and the revenue handed him this. He said: “Hey this has got a flash name. It’s transformation so I’ll be able to spin a few lines to say this is a hugely authoritative bill heavy on gravitas and heavy on transformational detail and we’ll give it a whirl.” That was the only bit of advice. It was working. He made a good third reading speech until he handed it over to old humpty-dumpty who fell fair and square off the wall.We support this bill. I bet the next tax bill that the Minister brings in—he will not make that same mistake again. It will be Chris Bishop leading the charge on behalf of the FEC for the National Party side. I say to the Minister that I hope you can put humpty-dumpty back together again.This is as previous speakers have said a good common-sense bill. It makes a number of changes which I will not rehearse because I know the Minister quite rightly wants to get this through tonight get the press statement out and talk about transformation. It makes a number of common-sense changes but I have to say as other colleagues have said they are small steps. They will indeed as the Minister said assist business and assist many of the players in our tax system those in the provisional tax area and others to be able to file electronic signatures and for the Inland Revenue Department (IRD) to be able to send and receive emails. Although you have got to say tongue-in-cheek that in this day and age we are passing a bill giving the IRD permission to put down the rocks and stones the chalks and slate the pieces of paper and actually get on the computer and send “Joe and Josephine Taxpayer” an email saying “Hey it’s time to put your return in and by the way if you would like to you can send one back to us.”—transformational stuff. But I blame Peter Dunne. I do not blame this Minister because this should have been done a hundred years ago or whatever. This does bring the IRD back into the 21st century or sort of pulls it into the 21st century kicking and screaming.But I just raise a number of points and I am sure the Minister will recall me raising some concerns in the Committee stage. One is that he made reference to the $800 million - plus allocation in the Budget for the Business Transformation IT programme. Although I accept and it has been a fact for some time that the IRD does need to have a modern robust IT system to cope with the new technology and to make it easier for taxpayers I made reference I think by interjection on the Minister to the last time the National Party put through a big IT project pre-Novopay actually under the Bolger Government called INCIS. It went awry.The place is littered to be fair with IT projects—I am sure it is cross-party when we have been in Government—that have had some difficulties in terms of managing budgets. This is a massive amount of money and a massive business transformation IT project.Fletcher Tabuteau: Call it infrastructure.Hon CLAYTON COSGROVE: My colleague says that it is called infrastructure. Indeed he is right. My concern and I just seek further reassurance from other National Party members given that Chris Bishop is on top of this bill unlike his chairman that that money is going to be managed wisely and monitored very very carefully.We know with some in the Public Service that with these projects there is often a loss of specification control. You get to the end of these projects and the IT consultants turn to you and say: “You didn’t ask me to make it work. You just wanted all these things bolted on.” We want this to work. We want it to be appropriate and we want it to assist taxpayers and the IRD. But we do seek assurances that the money the huge amount of discretionary spending going to the department and senior management is being monitored carefully and we will not get to the end of this—somebody else will make a speech like this in years to come. We will find out we have got a dud and a whole lot of taxpayers’ money has gone down the drain.So I ask the Minister—I think he is a pretty diligent Minister unlike some of his predecessors who were asleep at the wheel or maybe got bored with the job after 20 years in the job as Mr Dunne was. I am sure this Minister will be counting the beans as every dollar goes through and monitoring that it is appropriate.I think the point that my colleague made about the $750 million owed by the IRD—I would say to the Minister that that is a massive amount of money. It is almost equivalent to the Budget allocation for the Business Transformation project. I hope he will ask the department to be as vigorous in trying to repatriate that money to taxpayers as the department is as vigorous at taking money off taxpayers appropriately so in terms of their tax obligations. There must be a way in this day and age to hunt down those taxpayers and say: “Actually we’ve got a cheque for you because you overpaid; you paid too much. It’s sitting there in our bank accounts and we’re going to help you.”Hon Michael Woodhouse: Direct credit in the 21st century.Hon CLAYTON COSGROVE: Indeed. Kiwis could probably I think do a lot with the $750 million that the revenue therefore the Government owes them if that money could somehow be repatriated in part or in whole to those taxpayers.The Labour Party supports the bill as we have always supported practical tax measures. I congratulate the Minister on his diligence in powering this one through. I look forward to the transformational media statement which will come out tomorrow and I certainly look forward to Chris Bishop who will speak next. God help us; I hope it is a better effort than his chairman’s at the FEC.CHRIS BISHOP (National): I do not know about my colleague Mr Bennett but I for one am going to miss Clayton when he shuffles off his political coil into whatever venture he journeys to outside this Parliament. I will miss Mr Cosgrove for his contributions. I was going to say “learned contributions” in the debates but I am not sure you could call them learned but they are certainly amusing and certainly he has provided a few comical moments in the debate on this bill with the other readings and indeed in the Finance and Expenditure Committee.I was absent for various parts of the deliberation on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill.Hon Clayton Cosgrove: They were very long days when you weren’t there.CHRIS BISHOP: Very long days when I was away says Mr Cosgrove. Well I am sure they were. They are very long days when I am here too to be fair because we are a very hard-working committee the Finance and Expenditure Committee. I do just want to pay tribute to Mr Bennett because people listening on the wireless tonight watching on Parliament TV or watching online could be forgiven for thinking that Mr Bennett is not a diligent and dutiful chair of the Finance and Expenditure Committee and nothing actually could be further from the truth. He is a very hard-working chair and he does do a great job. Despite all that we will miss Clayton when he goes.I just want to pick up on one of the remarks that Clayton made. He said that I should have written David Bennett’s speech. Well we now know what is going to be happening to Labour Party speeches going forward in that they will be written by the Green Party because we have just had the tie-up of all tie-ups today the political marriage—The ASSISTANT SPEAKER (Lindsay Tisch): Order!CHRIS BISHOP: —where one person promises to not be monogamous.Hon Clayton Cosgrove: I raise a point of order Mr Speaker. With respect you have given a ruling and I think Mr Bishop has got “David Bennett-itis”.The ASSISTANT SPEAKER (Lindsay Tisch): That is not a point of order. I will just remind members that this is a third reading speech and the content of the debate is what has been referred from the Committee back into the House for the third reading. I mentioned earlier that there are Speakers’ rulings a number of them on pages 136 and 137. I will ask the member to come back to the bill.CHRIS BISHOP: I apologise Mr Assistant Speaker. I was just trying to wind Clayton up a bit but—The ASSISTANT SPEAKER (Lindsay Tisch): No no. Just carry on with the bill.CHRIS BISHOP: I do want to commend this bill because members opposite have said a few things—that it is not the transformation that the tax system needs—and they have tried to I think mitigate some of the actual expansive benefits that the bill does provide. For example I think it is very good that with these amendments going through we are going to reduce the threshold for personal tax summaries allowing for automatic refunds from 30 days to 15 days. That is actually to be fair going to be of substantive significance for a large number of New Zealanders. Thousands of New Zealanders are going to benefit from that. We are increasing the threshold for automatic refunds from $200 to $600 and we are reducing the wait time from 30 days to 15 days. That will be of benefit to a large number of people.People might say “Well look it is just a small change.” but actually sometimes it is the smallest changes that can have the biggest effect on people—actually it is things like having to wait 15 days for your refund to come through and that threshold. Sometimes it is those small changes that are significant for people.The other thing that I just want to quickly point out is that as Mr Nash I think mentioned the bill does in some ways bring our tax law and bring our Inland Revenue Department up to date with modern technology and up to date and into the 21st century. It is a little bit silly that certain communications have to be in writing or delivered by post even though of course delivering information electronically is by far the preferred means for many taxpayers and of course it is cheaper and more efficient for both the customers and the Inland Revenue Department. So that does make sense.The bill also updates some of the language in our tax laws and we had some very amusing conversations I have to say at the select committee about the various definitions of words and the various—Andrew Bayly: Very technical—very technical.CHRIS BISHOP: —cross-references into the literal mountain of tax legislation that this Parliament has managed to pass over the years. My colleague Andrew Bayly points out that it was very technical. Yes we were really down—I think the colloquial phrase is “down in the weeds”. We were down in the weeds of the legislation but actually that stuff makes a difference. As a lawyer—well as someone who has a law degree; I am not allowed to say I am a lawyer—I know that words matter and actually you have got to get that stuff right. Andrew Bayly in particular did a really good job in the committee of sorting some of that stuff out. I think we have got a better bill as a result of the select committee consideration.Look members opposite might say that it is not the huge great step forward—and we wait with bated breath as to what that new political marriage will deliver. Members opposite may condemn the bill a little bit but actually it is a substantive step forward I think for our tax legislation and I commend the bill to the House.JULIE ANNE GENTER (Green): Far from condemning the bill as Mr Bishop was concerned that members opposite might be doing I rise of course to speak in favour of the bill on behalf of the Green Party. It does make a number of very minor amendments that will make the tax system easier for ordinary New Zealanders to deal with every day. It will bring it back into the 21st century—I think Stuart Nash mentioned that earlier tonight. That is the sort of riveting stuff this bill does. It means that we can now use electronic signatures get those automatic refunds a little bit earlier and the Commissioner of Inland Revenue can now receive emails. All of that has to be done; there is no question. The Green Party is very happy to support that work in the House.I will of course join with my Labour Party colleagues and no doubt New Zealand First colleagues in saying that this bill could be doing a lot more to make a substantial difference to New Zealanders. These sorts of below-the-radar amendments are necessary but they are fundamentally not going to do anything to create a fairer New Zealand or a simpler more transparent tax system. All of that could be done. The National Government has made a lot of excuses for why we cannot make those sorts of improvements to have a fairer tax system. It just says it cannot be done. For example we cannot have a proper capital gains tax on investment properties even though it is really clearly unfair that people who go and work hard from 9 a.m. to 5 p.m. for a pay cheque have to pay tax on their income and those who are well off enough to own a couple of investment properties in Auckland can make hundreds of thousands of dollars a year and not pay any tax on that income. It is unfair it is inefficient it is bad for our economy and it is bad for financial stability.The Reserve Bank has been talking about this for years now. Treasury has been talking about it for years. All the National Government has managed to bring in during its term is this brightline test which applies only to residential land and applies only to properties bought and sold within 2 years. That was a very flawed piece of legislation which really should have—well I think we are going to see that the truth is that legislation will not have the impact it needed to have to cool the housing crisis in Auckland. It certainly does not make the tax system fairer or simpler. It makes it much more complicated because it applies only to residential land and it does not apply for a long period of time to make a substantial difference.Of course this legislation because we were working on it for such a long period of time tidies up all sorts of laws that exist. It makes a whole lot of amendments and tidies up the tax law and takes the language seriously. If only that level of detail and work had been applied to the brightline test which was clearly a half-measure that National was forced to bring in at the last minute. It is that kind of very last-minute and you know just superficial approach to law-making I guess that really typically represents this National Government. It is more interested in doing things around the edges tinkering here and there doing things for public relations reasons to get the bump in the polls it needs but not actually in addressing the substantive issues in our tax system that are long overdue for being addressed.Of course this bill does not do anything to make our tax system more transparent which is something the Green Party and I am sure other Opposition parties and most New Zealanders would like to see. I attempted to move an amendment in the Committee stage of this bill that would have cleaned up and increased the transparency around foreign trusts—The ASSISTANT SPEAKER (Lindsay Tisch): No. The member cannot refer to that because it was ruled out of order. So the member cannot refer to it in the third reading.JULIE ANNE GENTER: Thank you Mr Assistant Speaker. So this bill of course does nothing to improve the transparency around our foreign trusts which is something that it could well have done. I think the National Government is going to find it is really not on the side of public opinion when it comes to New Zealand being used as a tax haven. It is because of this core value of fairness that New Zealanders have—and they would like to have a fair tax system. They would like to have legislation that ensures fairness whether that is in New Zealand or overseas and they probably do not think it is right that New Zealand is being used by wealthy foreigners to hide assets without having to declare any—The ASSISTANT SPEAKER (Lindsay Tisch): I have brought to the member’s attention that you cannot refer to anything that is not in the third reading. This is a report back from the Committee. What the Committee has reported back that is what we are debating now. The other information is out of order and I ask the member to come back.JULIE ANNE GENTER: You know it is quite difficult for the National Government members that people should hold them to account for what they are not doing in their legislation and so they try to shut down Opposition parties that would like to be able to speak about this. It is amazing—The ASSISTANT SPEAKER (Lindsay Tisch): Order! The member will sit. That is an attack on the Speaker and I would ask the member to be very careful. It is not the Government that is making these decisions. I was the one who ruled your Supplementary Order Paper out of order in the Committee stage not the Government. I was the one who ruled it out because I was the presiding officer at the time. That was a decision I made and to bring that up now and to say that the Government was involved in trying to do something underhand is not acceptable. I would just ask the member to come back to the bill otherwise I will have to terminate her speech.JULIE ANNE GENTER: I raise a point of order Mr Speaker. I just raise the point that we have heard about a wide range of topics related to tax in the previous speeches on this bill.The ASSISTANT SPEAKER (Lindsay Tisch): No. I have ruled and you were here when I brought other members to account for what they were doing and what they were saying. I have mentioned the Speakers’ rulings that are appropriate in this case. In your case you have been referring to matters that are completely outside scope. I am the presiding officer; the judgment is mine. I have mentioned it to you on two occasions and I will ask the member in her final few minutes to actually concentrate. The third reading speech is on what is reported back from the Committee to the House.JULIE ANNE GENTER: One of the issues that have not been mentioned in this bill is the changes to KiwiSaver membership. The bill extends the provision for information sharing between the Inland Revenue Department and KiwiSaver fund providers in relation to email addresses and address contact details. It extends that to phone numbers and also may provide a scheme provider with certain information including the names of scheme members who have transferred out of their scheme and the name of the members’ new provider and the names of the scheme provider’s new members. I am sure that people watching at home tonight would be riveted by this information in this bill and they will think it is quite important.Another incredibly important change that this bill makes is that it allows members who have been incorrectly enrolled in KiwiSaver when they were minors to now opt out of KiwiSaver up until their 19th birthday. If they are under the age of 16 they must have the consent of one of their guardians and if they are 17 or 18 they may withdraw without guardian consent. Those are the types of monumental changes that are in this Taxation (Transformation: First Phase Simplification and Other Measures) Bill. But I would say that New Zealanders are facing much bigger issues today such as inequality in climate change and the tax system could go a long way towards addressing those issues while having broader economic benefits and making lives better for all New Zealanders. But we will not see that kind of change from this National Government because it is protecting the status quo.FLETCHER TABUTEAU (NZ First): It is my pleasure to rise on behalf of New Zealand First to support the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. I would just like to thank Mr Bishop. I did always –well “always” is a big term but I listened intently to Mr Bishop’s contribution. He has got quite a background. He is a knowledgable young man. I just have to say he is kind of not standing up and stepping up to his usual standard. He was only slightly above par with Mr Bennett and that is a low hurdle to jump over. Mr Bishop—next time.Mr Bennett took the opportunity to attack the Opposition parties. He put the question mark out there about a capital gains tax. I just put it to him and to the National Party that you already have a capital gains tax. It is based on intent and you choose not to enforce it or empower the Inland Revenue Department (IRD) to do its job properly hence the mangled attempt at a clean-up which was called the brightline which made the legislation even worse. We had some good contributions from this side of the House outlining how that actually complicated and made the tax system more opaque and more difficult to deal with.The Minister got up and spoke about removing obstacles to reform. That is kind of half the story. Actually what he is doing is picking on people who have student loans and he is picking on people without fixed abodes which seems to be becoming more and more of a problem especially in Auckland but definitely around the whole country at the moment. It seems that this Government will let the problem grow and continue to grow into the future. Empowering the IRD to bill people without actually advising them and breaching their human rights is probably in National’s eyes a great way to go about trying to get those few pennies and the pound of flesh owed by New Zealanders.The Minister spoke about the IT upgrade. It is quite amazing to describe in the Budget nearly a billion dollars of spend on an IT upgrade as a core infrastructure spend. It is bordering on misleading. It is an interesting use of phraseology and terminology. People would think that that huge sum of money—what was it; $2.2 billion or $2.8 billion—was about investing in the infrastructure of New Zealand. Actually what we see from the past is that Mr Cosgrove spoke eloquently about Mr Dunne’s contributions as one of the longest-serving revenue Ministers. But under Mr McClay’s watch we had a supposed $35 million budgeted spend ballooning out to about $87 million. There were huge concerns around that. It was a blow out of the budget—I mean it was more than double for goodness’ sake. For the Minister to stand up and talk about nearly a billion dollars of expenditure on an IT upgrade—he put Dr Evil to shame.We acknowledge as a party the need to upgrade the technology of the Inland Revenue Department which is primarily the reasoning for our support tonight. We agree that the technology required is a necessity. There is a requirement for the IRD to upgrade its IT infrastructure in order to facilitate better communications in two directions with the New Zealand taxpayer. We need to get into that space.Finally for goodness’ sake the commentary from New Zealand business on this legislation—more about the time it has taken to get to the House—has been unbelievable and quite derogatory of this National Government. It has taken way too long. It has taken 8 years too long to get here. For example biometric scanning and things like that so that you can ring and tell them on the phone who you are—under this legislation that is OK and it is OK. We have seen banks especially lead the way showing us that there can be security of content and some security for users and the IRD that yes the integrity of that system is in place.What beggars belief and I think this is the main attack on the Government’s slow move forward is the need to simply allow businesses and individuals to communicate and do business with the IRD using email. We are only—I say “we”; the National Government is legislating for this only now. It is just unbelievable. So now the legislation allows—for example I use an accountant. I can say to the IRD: “You can communicate with my accountant using email.” That is a reasonable form of communication. It does not have to be in writing. We do not need the signatures at the bottom. Let us facilitate meaningful communication in a fast and expedited manner. Let us get the business done basically.What I do want to touch on though and I alluded to it before—I think there were about 500 student loan cases where the Government cannot track down these people in Australia so it is doing this two-way communication strategy with the Australian Taxation Office saying: “We need your help. We need to track down these student loan dodgers who aren’t paying their loans back.” So we had a discussion about this in caucus. The fundamental thinking here is yes fair enough. If you have got a student loan you used the New Zealand education system and you need to pay that back. But what we see here is that the ideology and the focus of this Government is so misdirected.The other case was—I do not have the numbers in front of me but I am sure I will be corrected by the other side of the House if I get this wrong—there were about 174 cases that the Inland Revenue Department (IRD) provided to the Finance and Expenditure Committee when it identified the need to bill employers for the tax commitments of their employees because it simply cannot find the employees. It cannot track them down. It cannot serve them notice in writing through a physical address so it is going to do it for the employer. We were told this was a breach of human rights but they are going to do it anyway for 174 cases. It just beggars belief and it paints a picture of where this Government is getting it so so fundamentally wrong. This is its priority list: 500 Kiwis in Aussie who are not paying their student loans—yes we should get them—and 174 people who do not have a fixed abode and IRD cannot track them down.I want to bring it to the attention of this National Government that there were many instances where IRD’s time could have been so much better spent in terms of digging into the big businesses that are avoiding their tax contributions—those that are using New Zealand not necessarily as a tax haven but overseas tax havens—and actually getting in there and communicating with not just Australia but other overseas jurisdictions to make meaningful changes. The numbers are amazing when put in perspective. I think we are talking about a $700000 tax take with the focus of this legislation versus 100 times that number $7 billion if we actually chased the corporate elite but this absolutely goes against what this Government believes in and what it is trying to achieve. For the practical solutions that this legislation offers New Zealand First will support the bill. We hope the Government sees that it is missing out on huge opportunities in terms of tax compliance and fairness as we move into the future. Thank you.ALASTAIR SCOTT (National—Wairarapa): I would like to focus on the title of the bill—the “Transformation” word the words “First Phase” and the word “Simplification”—because today coincidentally there was an announcement of the first phase of the relationship between Labour and the Greens. Very simple—it is a nice simplification of what we now have to deal with in the Government vis-à-vis the Opposition because now we are dealing with a much simpler Opposition. We no longer have to deal with the flip-flopping nature of Labour because we know that we are going to be dealing with—The ASSISTANT SPEAKER (Lindsay Tisch): Order! The member has been here and I have made rulings in the course of this debate and I will ask the member to come back to the bill. We are not interested in what is happening outside. We are interested in what has been reported by the Committee back to the House for the third reading. That is what we are focusing on.ALASTAIR SCOTT: Thank you Mr Assistant Speaker. We are dealing with transformation and part of that involves change. That is what we are seeing from the other side of the House and that is what we will be dealing with going forward. I commend this bill to the House. It is a very good bill. It makes things more convenient for the taxpayer through the simplification processes. It deals with electronic signatures. I commend this bill to the House.Dr Megan Woods: Mr Assistant Speaker.The ASSISTANT SPEAKER (Lindsay Tisch): Is this a split call?Dr Megan Woods: This is a split call yes.The ASSISTANT SPEAKER (Lindsay Tisch): I call Dr Megan Woods.Dr MEGAN WOODS (Labour—Wigram): It is my pleasure to take a short call on this bill. The last speaker Alastair Scott said he was going to focus on the title of the bill the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. I will come back to that. I think the reason the last speaker read it out is that really he had nothing to contribute to this debate. I think what we have seen in this House tonight is an incredibly low standard of debate a low standard of debate where actually there is some political consensus around what should be—I mean these are very simple measures.If we take for example the flexible tax for business: this is going to be a popular policy. I know this because when I was out talking to businesses in Wigram when Labour launched this policy they liked it and they thought it was a good policy. So to have the kind of standard of debate we have had in here tonight where all that people can talk about is grown-up political relationships and what they mean is disappointing. All I can say is that it smacks of someone whose relationship is going bad. After all they have David Seymour through all the Budget debate telling everyone in front of everyone—Alastair Scott: I raise a point of order Mr Speaker. I was talking about relationships and I was sat down.The ASSISTANT SPEAKER (Lindsay Tisch): Look I am the judge of this. The member Alastair Scott will sit and I will ask the member Megan Woods to come back to the third reading.Dr MEGAN WOODS: Thank you Mr Assistant Speaker. I was just pointing out the absurdity of the level of debate and just how obsessed the Government is.But if we are going to talk about this legislation—and other speakers have talked about this—I think that what this piece of legislation suffers from is a branding issue because it has a very grand name. It purports to be transformational and then we have some very micro changes. If we are thinking about the kinds of changes that we could have after 8 years in Government is this what we would dream up? Is this the big idea that the Government has got? It is a tired old Government that has run out of ideas has nothing new to offer and cannot even string a 10-minute speech together from its backbenchers on a piece of legislation that should be a walk in the park. It should be a doddle because there are some sensible measures in this legislation. I have talked about the flexible taxation for business. We are seeing some sensible measures like the fact that the Inland Revenue Department can now send emails and not a pigeon to communicate around some of these issues which is sensible.This bill is about bringing our taxation system in very small ways into the 21st century but it does not address some of the big transformational ideas about taxation that we on this side of the Housewould like to see. There is nothing in this legislation that addresses the very real and growing concern that New Zealand is being increasingly internationally recognised as a tax haven. That is because that is an issue that this Government will not own up to. It is an issue that this Government will not own. It says “Not a problem. Nothing to see here look the other way.” while all the time New Zealand is developing a reputation on the international stage as being somewhere where tax-dodgers can hide their money away and not pay their fair share. That is the kind of issue that we would see as needing to be addressed in a bill that purports to be about transformation issues in terms of our tax system. We know that there are many things that we need to do in this country and many of them do involve our tax system because it is an important lever.JAMES SHAW (Co-Leader—Green): It is my pleasure to rise on the third reading of the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. I wanted to just pick up on one of the points made by my colleague Megan Woods in her contribution just now which is that for a party that is nominally the party of business it does seem strange to me that this Government has made such anaemic efforts in terms of tax reform. There is a lot more that it could have been doing over the lifetime of this Parliament and over previous Parliaments during which they have governed. But I would like to say that the Green Party of course will be supporting this bill.The Green Party fought the 2011 and the 2014 general election campaigns on a platform of tax simplification including measures similar to those that are contained in this bill particularly the ones that are around making it easier for small businesses to simplify their provisional tax arrangements.Having run a small business myself in a country with a relatively high tax burden I can say it is very difficult. When you are a small business you have limited revenues and you do not have a lot of wiggle room to be able to manage your affairs in such a way as to be able to easily handle the provisional tax requirements. So this bill does go some way towards making it easier to run small businesses in New Zealand. As we all know there are many hundreds of thousands of small businesses in New Zealand—many more people are employed in small business arrangements than they are in other parts of the economy. So that part of the bill we are particularly keen on—I am particularly keen on as somebody who comes from that sort of background.The other point that I wanted to mention was that the bill also allows employers to manage the tax implications of employee share purchase agreements which I think is tremendous news because there was a time when—particularly in the 1980s and in the early 1990s—businesses were much keener on including their employees in the ownership of the business than they have been over the course of the last 15 to 20 years.Providing that kind of incentive making it easier for both the businesses and the employees to participate in share ownership schemes will help I think. We all know that there is plenty of evidence that shows that businesses that have got employee share ownership schemes tend to outperform those that do not because the employees are thinking not just about their take-home cheque at the end of the month but also about all of the conditions that make that business profitable and therefore what they will be able to participate in in terms of dividends in that company; and that helps them to think about the overall business. So those businesses do tend to be more effective and more productive than companies that do not have share ownership schemes. So I am glad that there is a provision here that could lead to the expansion of share ownership schemes in small businesses—well in all businesses—in New Zealand.Of course one of the bill’s main provisions is that it updates tax law to account for developments in electronic communications putting them on the same footing as paper communications which I am amused by of course because the World Wide Web was invented in 1990. So here we are 26 years later putting electronic communications on the same footing as paper communications.So I commend this bill to the House.ANDREW BAYLY (National—Hunua): This is a great bill. I am pleased to be part of the Finance and Expenditure Committee which considered it. I have said before in the House that New Zealand has a wonderful great simple tax system. This is a further refinement of our tax system. It does the right things: it removes references to outdated communication it allows earlier tax repayments and it allows the Inland Revenue Department to share information. On that basis I commend this bill to the House.Dr DAVID CLARK (Labour—Dunedin North): We will be supporting this bill on this side of the House—not because it is true to its title in being truly transformational but because we support the small steps in it towards simplification and towards making our tax system more robust. Actually across the House we like a robust tax system. I think there is a shared view that our tax system should be broad-based and fair and should encourage people to pay their fair share. What we on this side consider to be a fair share and what they over that side consider to be a fair share might be different and might be differently spread but we all agree that we need a tax system to afford those things that New Zealanders really care about: health education and so on—the stuff of Budgets.Of course it has to be said also that although there are some simplification measures in here there are things that are not addressed that should have been addressed in this bill. We could have had a fairer tax system overall. We could have had a system that worked for middle New Zealand not just the wealthiest New Zealanders which seems to be what this Government is hell-bent on achieving—a system that really is tilted towards those people who are engaged in the Panama Papers and so on. We on this side of the House would like nothing more than to have a fairer tax system where everybody pays their fair share and where opportunity exists for middle New Zealand to get ahead but that unfortunately is something that is becoming increasingly difficult. We know we have got the lowest homeownership rates in New Zealand in 60 years I think it is—50 or 60 years—and that is a disgrace. We would like to see more done in that area. We would like to see the health cuts that this Government has put through stop. We would like to see schools funded properly—you know getting the basics right rather than a focus on the super-rich.Among the issues that have been raised in the Committee stage was one of particular concern about whether the Government is able to implement this bill. I was pleased to see the Government putting some money towards the transformation project that the Inland Revenue Department is undertaking and I congratulate the Minister Michael Woodhouse on progress in that area. It has been a long time coming and it is good to see some genuine progress being made. Time will tell what that system looks like and how well the money is being spent but I do wish to offer my congratulations on the early steps to my colleague who also resides in Dunedin.We will be supporting this bill as I have said from the beginning. We have concerns about the overall fairness of the tax system the rating drop in the Transparency International Corruption Perceptions Index and the way the tax system could be made better but we do support the incremental steps being made here to make sure that breaches in our tax system are covered over and to make sure people can interact more easily with the tax system. We see that in this bill for example in allowing electronic communications where previously only a letter sufficed; that is bringing the tax system into the modern age. We do support that. Thank you.TIM MACINDOE (National—Hamilton West): Somewhat unexpectedly I find myself taking a call on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. I do so with great pleasure and I want to acknowledge the work of those members of the Finance and Expenditure Committee who have considered the bill. I thank the members of the House who have spoken tonight and I think in the main have engaged constructively with the principles of the bill.I am intrigued to follow Dr Clark and I say to Dr Clark that when he first entered this House I saw in him a gentleman who I thought would go a very long way in the Labour Party but I am disappointed to find that in recent speeches he seems to be resorting to clichés and dogma and he is not speaking with great conviction. I would suggest to him that instead of trying to parrot out these lines suggesting that the National Party is looking after its corporate mates that we have got a taxation system that is only looking after the fair and all the rest of it what he might actually consider is the fact that this is a Government that has lowered the tax burden for hard-working Kiwis on low and middle incomes to the lowest level ever. I am very proud of that. I was very proud to support that when we passed that measure through in 2010 with the tax switch.Dr David Clark: You borrowed more than Muldoon along the way though.TIM MACINDOE: Instead of listening to me Dr Clark you simply decided to shout over me. I did not shout at you Dr Clark and it would be lovely if you might actually listen instead of just shouting while I am speaking. I do believe that Dr Clark is better than that and I do know that he is an intelligent man who I am sure could understand the issues and could give a much more effective analysis of them.Dr Megan Woods: This speaker needs some speech notes. Someone pass them.TIM MACINDOE: No I do not require any assistance from Dr Woods either. I am very happy to point out the fact that this is a Government that is committed to a fair tax system and understands that a low tax rate across the board is one that ultimately produces greater revenue because it is one that has incentives for people to work hard. The higher the tax burden—and you see that in many of the Third World countries—the lower the actual revenue that is achieved because there are far greater incentives to avoid tax and for corruption and all the rest of it. This is a bill that is contributing further to the fact that the New Zealand economy benefits from one of the best tax systems in the world.I acknowledge my very good friend Mr Woodhouse the Minister of Revenue who has signalled through the Budget announcements that there are further significant transformations coming in the tax area. I look forward to that. I know that the business community looks forward to that. Ultimately I believe that they will be of benefit to all New Zealanders. So it is for that reason that I am delighted to support this bill.Bill read a third time.