Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeTaxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — In Committee[Sitting date: 18 February 2014. Volume:696;Page:15991. Text is incorporated into the Bound Volume.]Taxation (Annual Rates Foreign Superannuation and Remedial Matters) BillIn CommitteePart 1 Annual rates of income taxHon SHANE JONES (Labour): Kia ora Mr Chair and thank you for the opportunity to contribute during the Committee stage of this Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. It is an item of business that has been covered by the Finance and Expenditure Committee. It is something that this party of mine the Labour Party supports but with certain reservations.I want to direct our attention to a portion in the bill. I shall take as read that we are familiar with the purpose of the bill but I just want to isolate a small element pertaining to the rules for Working for Families tax credits. When this policy was introduced it took a while for eligible people to realise the full extent of the policy and like all major policy reforms it has required refinement as time has gone on. It is important that we continually revise the application of such initiatives under our tax system to ensure that the intended recipients are totally aware of their entitlement and so that the information that will eventually flow from these amendments this refinement is put out in such a form that the public realise the extent of their entitlement because unfortunately the public have been sold a line of misinformation recently. We are augmenting this raft of assistance measures to those who require the State to take an active role in lessening the burden of family life and raising children.The changes that are made here are slightly dry but the importance of them is that each time we endeavour to change the provision and access to State largesse for such social good purposes we end up with a system that needs to be simplified. The cost of compliance is always a headache for both I am sure the Inland Revenue Department and those administering it through the various social welfare organisations. It is a constant reminder to us that although we do support this bill and we do claim credit for the architecture surrounding this policy originally simplification is extraordinarily important.I also want to direct our attention to what I think is a very intelligent set of changes designed to deal with the Canterbury earthquake situation. It is useful to note that this bill embraces the notion of an extinction of expiry dates for relief measures. Initially it was not conceived to be necessary. The thing that I return to is that although we support this bill the overarching lens through which I and my colleagues view these things is whether we are simplifying matters. Are we making matters clearer and more lucid? Are we not empowering the accountancy profession to set itself up as high priests so no one can quite understand what is the intent or the extent of such changes? Whatever provision we might be debating or we might be discussing in our deliberations during the Committee stage it is essential that we all members of the Committee bear that in mind. Whether it is the opaque or hellishly complex areas of understanding such as imputation credits—and I will have more to say about Australians tomorrow in the general debate so I will not litter these contributions with further information about the friends of the Prime Minister who are tied up with the Australian supermarkets. That is another matter. The point needs to be made—irrespective of what provision we are focusing on—my plea to us as parliamentarians and the injunction to our professional advisers is to keep it simple and keep it lucid.Dr DAVID CLARK (Labour—Dunedin North): I follow my learned colleague the Hon Shane Jones in supporting this bill the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. However there are some things that ought to be covered in this debate including the introduction of Supplementary Order Paper 413 by the Minister of Revenue which must be regarded as one of the more embarrassing things that we will see in this Parliament this year.The CHAIRPERSON (H V Ross Robertson): Order! Sorry to interrupt the honourable member. I just want to remind members that this debate on Part 1 is about the annual rates of income tax for 2013-14. That is just a general reminder for all members.Dr DAVID CLARK: I am quite happy to come back to that issue in further parts of the debate. I appreciate that there will be opportunities in different parts to raise those issues which are particularly embarrassing for the Government. But there is plenty more to cover in Part 1 that is embarrassing for the Government so I shall concentrate on that as we start off.I guess the embarrassing thing about Part 1 which covers most of the substance of the bill is indeed the fact that it does not cover off those things that would really grow our economy. We see here where the annual rates are set for the taxes and so on and the way in which we agree as a Parliament to continue certain parts of Government business that they are something that can and ought to and should be debated time and again. The Government here has failed to really grasp the nettle. So we fail to see here the Government grasping pro-growth tax reform. Once again the opportunity is slipping by in a tax bill before this Parliament to discuss the opportunities that the OECD would recommend to us that Treasury would recommend to us and in fact that any credible economist around the Western World would recommend to us. In fact mostWestern countries have already adopted instituting pro-growth tax reform in the form of a capital gains tax.A Labour-led Government aims to introduce a capital gains tax to ensure that businesses in New Zealand are assisted in having money that is currently involved in the speculative property sector transferred across into the productive sector. Right now unfortunately there is something of a loophole in our tax system. It does protect the rights of invested capital but what it does not do is use that capital most efficiently in our economy. That loophole very rare in the Western World favours investors in property over investors in the productive sector. Labour regards this as wrong.Of course as I have said the OECD Treasury and other credible Western economists regard this as wrong but this Government has taken no steps to change it. It likes the way it is now. It likes the fact that the very wealthiest New Zealanders do not pay tax. Many of the wealthiest New Zealanders do not pay tax like the rest of us do because they are not on the top tax rate. The Government is not seizing the issue here. It is not addressing the fact that those New Zealanders are not paying tax on every dollar they earn. They treat their income in a different way so that it is not taxed.New Zealanders know that that is not fair. They are seeing fairness and opportunity slip away under this Government as we see in New Zealand inequalities at the widest they have ever been in recorded history in New Zealand. We see in the Gini coefficients and the other measures that economists follow that inequalities in New Zealand are the greatest they have ever been. Here where we set the rates of taxation we are reminded that these were changed—and they are not changed again here. The Government again did not seize the opportunity in the 2010 tax package where against its promise it put up GST taking money off New Zealanders—ordinary New Zealanders going about their business. John Key said he would not put up GST and again almost immediately after the election up it went. We begin to distrust a Government like that say the ordinary citizens of New Zealand.At the same time as that consumption tax was raised the Government sought to give some very big tax cuts to the wealthiest New Zealanders. The top 10 percent of New Zealand earners got 44 percent of the value of those 2010 tax cuts. The bottom 20 percent got just 2 percent of the value of those tax cuts. That was a very unfair tax change as we have seen it from this side of the Chamber. We have seen since then as we start to see here and there signs that the economy is growing that that growth is not being shared fairly amongst New Zealanders. There is no sign of it being shared fairly. Those at the top—the very few at the very top—have been given a big tax cut by this Government and the rest of New Zealand middle New Zealand is struggling. People are not able to get ahead even though they work day in day out. Even though they do those things that are good for our country and good for our future or ought to be they are not able to get ahead for themselves or for their families or for their communities because this Government has set the system through the way it sets up the tax rates in such a fashion that the wealthiest New Zealanders get this big tax break while the rest of New Zealand pays and pays and pays for the services and pays for that tax cut for the wealthiest New Zealanders.This Government is not about fairness and opportunity—those are Labour values the Labour values of fairness and opportunity. This Government is about preserving the interests of the wealthiest. That is why it has not gone near the capital gains tax in this particular bill. That is why it has not helped out New Zealand businesses that are struggling by introducing pro-growth tax reform that would support emerging businesses and that would see money directed towards the productive sector. Instead it is preserving the interests of capital that is already there. It is preserving the big money and big end of town’s interests. That is what we are seeing from this Government timeand time again. We see the echoes of it in the Skycity deal. We see the echoes of it in the handout to Rio Tinto which made record profits. The Government did not ask for any job guarantee and the next day Rio Tinto was cutting jobs. It took the $30 million from the Prime Minister but it carried on with cutting jobs anyway. That is the kind of corporate welfare and the kind of attitude that underpins these tax rates we see here that we reaffirm again today in this Parliament unfortunately. They drive this wedge between rich and poor and undermine the fairness and opportunity that New Zealanders value which are actually what New Zealand values as a culture. This Government is anti - New Zealand with its policy of driving a wedge between those at the very top and the rest of us New Zealanders who are struggling to get ahead despite working hard.It is a great disappointment that that is not being addressed properly in this bill because I think this Government is out of touch in not addressing it. It will in time see the consequences of not addressing it. Ordinary New Zealanders are sick and tired of being neglected and of seeing their hard-earned dollars being transferred to the tax cuts for the wealthiest New Zealanders. So this Government will face a day of reckoning come the next election. We heard from across the House during question time the Prime Minister offering to have the election in a month’s time. It had those echoes ofNineteen Eighty-Four as the Prime Minister off the top of his head said “Well let’s have it next month Sunshine.” I bet he scuttles away from that before too long. He is out of touch but he is probably not out of touch enough to not recognise that that would not go well for him because ordinary New Zealanders are becoming more and more and more concerned about the lack of opportunity and the lack of fairness in our society that is happening under this Government’s watch. They are concerned that the opportunities they had through the schooling system and so on have disappeared. It is now the case that more and more New Zealanders are living in poverty and cannot afford to buy raincoats or shoes for their kids or to feed them so that they can learn in the schooling system.David Bennett: Prove it.Dr DAVID CLARK: They mock across the Chamber. They think that it is a laughing matter that one in four New Zealand kids goes to school hungry. But we on this side of the Chamber think that every New Zealander should have the opportunity to get ahead. We think we should have a fairer tax system where everybody pays their fair share. That includes multinationals and that includes the wealthiest New Zealanders who currently structure their affairs to avoid paying tax. On this side of the Chamber we stand for fairness and opportunity and we think it is a great shame that the Government is not taking the opportunity in this bill to rectify the tax system to make it fairer for all New Zealanders so that they can all reach their aspirations and stay in New Zealand achieve their dreams and educate their children instead of having to take flight to Australia in order to get opportunities.This bill is largely uncontroversial aside from the lack of opportunity it represents and the foreign superannuation changes that colleagues have spoken to.RAYMOND HUO (Labour): Thank you very much Mr Chair.Paul Goldsmith: Really looking forward to this!RAYMOND HUO: Well why not stand up and take a call? Why not? Mr Goldsmith is the chairman of the Finance and Expenditure Committee as I understand. I am very much looking forward to his contribution.Dr Megan Woods: Take a call.RAYMOND HUO: Take a call. OK I will do it quickly and let us look forward to the contribution from the chair of the Finance and Expenditure Committee. Thank you very much Mr Chair for this opportunity to contribute. The Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill has lingered on the Order Paper fora very long time. I believe my learned colleague will correct me if I have got it wrong. I believe that this bill is a result of what has been known for quite a while as a telephone book bill. Labour supports this bill but with some reservations. This bill as my colleague said in her earlier contribution is largely uncontroversial apart from the foreign superannuation changes and I will come to that point later on.Of course changes are needed and these proposals have the great merit of simplicity and should eliminate the uncertainty of treatment which has been a problem since first identified in 2006. The principal issue that was unclear was whether foreign superannuation schemes were subject to the foreign investment fund or the so-called FIF regime and the tax treatment on transfer.The legislation largely follows the proposals set out in the Inland Revenue Department issues paper that was released in July last year but also incorporates some of the submissions made in respect of the issues paper. The new rules will take effect from 1 April 2015 although there are some retrospective clauses in this bill and we will come back to that Supplementary Order Paper later on at some later stage of the Committee of the whole House.Under the proposed legislation interests in non-Australian foreign superannuation schemes will no longer be taxed on an accrual basis under the foreign investment fund regime or if a transfer represents distribution from a company or a trust. In terms of the problems with the foreign superannuation changes the first issue is that it will apply to all transfers even those made into a locked-in scheme such as a KiwiSaver fund. In this case it is proposed to allow the taxpayer to withdraw an amount up to the value of the tax due from their KiwiSaver scheme. This sounds good but it ignores the fact that where the transfer is made from a UK pension fund withdrawing funds would possibly either invalidate the transfer or trigger a 55 percent tax charge in the United Kingdom. Probably Mr Goldsmith could answer that question in his contribution. How can a person who makes a transfer but who cannot access their transferred funds until a later date be said to have somehow derived income—The CHAIRPERSON (H V Ross Robertson): Part 1.RAYMOND HUO: Back to Part 1. The other issue relates to the treatment of transfers made prior to the commencement of the new rules.Paul Goldsmith: He’s got no idea—he’s got the wrong speech.RAYMOND HUO: Take a call Mr Goldsmith. But one thing that I believe Mr Goldsmith will agree with me and with other members on is that this bill as it is presented in its current form represents a huge mismanagement.PAUL GOLDSMITH (National): I am very pleased to be taking this call. I understand we are focusing on Part 1 of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill—this part being discussed relates to the annual rates of income tax—not on Part 2. It is a very important part. It is not a huge part of this bill but it harks back to the single-greatest contribution in the tax area made by this Government. The switch of keeping the income tax rates lower and increasing GST a little bit encourages people to work hard overall in a tax-neutral way in order to reignite the economy in New Zealand by having a tax system that is not hiking tax rates but is ensuring that existing tax bases are applied fairly. Ultimately building a more competitive and productive economy is one of National’s key priorities. Only by lifting our economic performance can we create the jobs boost incomes improve the living standards and provide the world-class public services that Kiwi families need.This bill is the latest piece of tax legislation aimed at making the tax system fairer and simpler and strengthening the economy. An important aspect of fairness in the tax system is that taxpayers must be able to understand and comply with the rules and the necessary tax rules must be cohesive fair and applied consistently. Part 1 of thislegislation here is about the annual rates of income tax for 2013. Only the prudent management of the economy and Government spending by this Government is getting us back to surplus in this year which many people did not believe this Government would achieve. But we will be back in surplus notwithstanding the fact that we have been able to keep the tax rates at relatively low levels and we all aspire to have them lower in the future. Having a strong stable economy run by a sound and sensible Government is the way to go and on that basis I think that this is an excellent piece of legislation.Dr MEGAN WOODS (Labour—Wigram): It is my pleasure to take a call on the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill and discuss Part 1 of this legislation which does refer to the annual income tax rates. The contribution that we have just heard from the opposite member Paul Goldsmith the chair of the Finance and Expenditure Committee showed that there can be no greater evidence about how out of touch this Government is about the lived reality of everyday New Zealanders. We had that member herald the great tax contribution that this Government has made in terms of the great tax switch.Well actually for many New Zealand families this was the great tax swindle. What it meant was that New Zealand borrowed hundreds of millions of dollars in order to give some of the highest-earning New Zealanders tax cuts. Where did this leave everyday New Zealanders trying to make ends meet? Well it left them struggling and the fact that that member can stand up and give the speech that he gave shows the arrogance and how out of touch this Government has become. It does not know what it is like for families who cannot put food on the table who cannot afford to pay their rent and who certainly cannot afford to heat their houses. In my electorate there are houses that have been registered at 9 degrees Celsius overnight in winter with 90 percent humidity. Those people have not benefited from National’s borrowing hundreds of millions of dollars to give tax cuts to some of the highest-earning New Zealanders. This has done nothing to benefit them.We have had from the member who just spoke a recitation of trickle-down economics. He told us that this was going to flow through to ordinary New Zealanders but it has not happened. Members on this side of the Chamber could give you case after case which are sitting on our desks in our offices where we are trying to find some way forward for families who simply cannot make ends meet. For members opposite to claim that this was an achievement of their Government just shows how badly wrong they have gone.As my colleague Dr Clark has talked about not only does this bill not do anything to address the great tax swindle that this Government has pulled on the people of New Zealand but also it completely misses the mark in not having any pro-growth tax policies. My colleague Dr Clark talked about how we actually could have had something that would see our economy be transformed through the introduction of a capital gains tax. But is this Government bold enough? Is this Government brave enough to actually do something that will transform our economy or does it just want to give income tax cuts to the highest-earning New Zealanders? There is a recipe for a growth economy!This bill does nothing to do anything innovative like putting in place research and development tax credits for companies that are there on the cutting edge which are creating the wealth creating the jobs and creating the higher-paying jobs that if the proper skills training is put with it actually could see some of the families in our electorates that we deal with have a better life. But there is nothing in this bill that does that. This is not a tax bill that has anything about sharing the fruits of any recovery that we are seeing fairly it does nothing to set aside the unfair tax structure that thisGovernment put in place and it certainly has nothing that speaks anywhere about having a fair kind of New Zealand where everybody can have opportunity.I look forward to further calls from members of the Government to tell us how their tax policies and the tax that is contained in this bill are going to make life for everyday New Zealanders better. I look forward to members of the Government telling my constituents in Wigram how they are going to pay their power bill this winter and how they are going to pay their rents which they simply cannot afford. I look forward to members of the Government telling my constituents and people all around New Zealand just how they are going to make ends meet because there certainly is not anything in this bill that tells us how to do that.My colleague Raymond Huo has talked about how this bill has lingered on the Order Paper for so long. It simply is another case of this Government not getting legislation before the House in a timely manner to such an extent that we actually have to have a ministerial Supplementary Order Paper revising the implementation date because it has been sitting around gathering dust for so long. Thank you.Dr DAVID CLARK (Labour—Dunedin North): I had a little more to say about pro-growth tax reform the opportunity for which has been missed in the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. I was disappointed that Mr Goldsmith as Finance and Expenditure Committee chair did not have a little more substance to add to the debate. He may be very dry as an economist and he may have written some historically worthy tax books but unfortunately today he was merely spouting the Government line and not really showing the underlying flint and intellect that we have come to expect of him as a promising—one day to be—Minister in a National Government probably decades away after a very long fair and opportune Labour-led Government.That sentiment aside the 2010 tax swindle to which my colleague Megan Woods has referred is really the thing that we are affirming today. I think we need to put it in terms that simple. It is the National Government’s policy to drive a wedge between the very wealthiest New Zealanders and the rest of New Zealand. And it has done it quite successfully. In 2010 the Government put through tax law that drove that wedge hard and here we are today in this bill reaffirming that policy as a Parliament effectively. This Government has not been bold enough to chop down those changes and to say that actually it thinks we need a fairer system and to make sure that we have some way of driving growth in the economy.Let us not forget that we have had a dream run in terms of dairy commodity prices internationally. New Zealand has benefited from the high primary produce prices. We have had trading partners our biggest trading partners which have avoided recession in the likes of China and Australia. New Zealand should be booming. New Zealand should have been booming for the last X number of years. But this Government has squandered that opportunity. It has been so focused on shovelling money towards the wealthiest New Zealanders that middle New Zealand and those who are struggling most have been squashed and pressed and are not able to get ahead. And here it is trying to do it again. Well it is important that we speak out against this and that we speak in favour of fairness and opportunity and in favour of pro-growth tax reform that will actually grow the economy and that can then be shared for the benefit of all New Zealanders.We are also missing in this bill the opportunity for research and development tax credits the likes of which Labour has put forward—the opportunity for businesses to access tax credits for developing ideas that will create a new and innovative economy in this country. That Government opposite seems to have given it all away.One reason we know that this Government has struggled to implement or even propose these changes of course is that the Inland Revenue Department computersystem is simply not up to the task. This Government was told when it came to office 5 years ago that the first computer system the legacy computer system was on its last legs. It was built in 1992. The internet was still in nappies. Google did not exist in 1992 members of the House will know and Facebook was more than a decade away. That is when New Zealand’s tax system was invented and was implemented. The one that we are using today the computer system that is in use in the Inland Revenue Department was put in place in 1992. It has been on its last legs for quite some time and this Government has done very very little about it.Two years ago John Key the Prime Minister said that tax policy was being held back because the computer systems “can’t actually support radical changes from Government.” He said that on Valentine’s Day 2 years ago. The Prime Minister said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” He was giving a nod in the direction of sorting this problem out. Two years on two Valentine’s Days have passed and the Prime Minister’s Valentine’s Day promise appears to have been broken. He showered bouquets here and there in an effort to try to remedy this problem with our tax system and $50 million has been spent on international consultants to look at the tax problem. Do you know what conclusion those people have come to? After 2 years and $50 million they have come to the conclusion in principle that the tax system needs fixing. The Government was told 5 years ago by the Inland Revenue Department that the tax system the computer system needed upgrading. It was built in 1992 and 5 years ago this Government was told it needed upgrading and $50 million later and 2 years after the Prime Minister said that you do not want to be held hostage to it—the Government has spent $50 million on consultants—it has agreed in principle that it needs to be fixed. This is a flagrant waste of taxpayer money—a flagrant waste.The Government has gone one step further than agreeing in principle that it should be fixed. It is also now saying that it will build some more business cases—some more business cases. The Government will spend more millions building business cases. This Government is sitting on its hands not repairing the Inland Revenue Department’s broken computer system and therefore it cannot implement the kind of pro-growth tax reform that is necessary to take New Zealand ahead to grow the economy and to share those proceeds fairly. This Government has been sitting on its hands and not doing anything about it. That is a sad indictment on this Government.It is a Government that is so tied up in scandals in dealing with corporate bailouts like that for Skycity for its casino deal the $30 million for Rio Tinto with Chorus looking at deals there and so on that it is not focused on fixing the basics—the tax system that implements the decisions of this Parliament. So we will see when we get to later parts of the bill that other deadlines are being pushed out because this tax computer system is in disrepair. It is long past its due-by date and this Government has done nothing about it—to its shame.That is part of the reason why even if it wanted to make a fairer tax system it cannot. It is clearly not a priority for this Government. It needs a wake-up call. It needs to understand that ordinary New Zealanders do want tax policy that grows the economy and that gives people a chance to get ahead that is fair so that everybody pays their fair share of tax as indeed most countries in the OECD have in place already. New Zealand is a real outlier in not having a comprehensive tax system and by having this loophole for property speculators we sit outside the OECD norm. The OECD tells us this Treasury tells us this and every respectable economist tells us this. But this Government knows better. It is protecting vested interests and that is to its shame. Ordinary New Zealanders middle New Zealand are struggling to get ahead. They are working hard they are doing the right things but they do not feel like they can getahead. This Government is out of touch if it thinks that the current settings we are affirming here today should not be challenged. They certainly should because New Zealanders deserve a fairer deal. Every New Zealander deserves the opportunity to get ahead and that goes for the people down in Dunedin in the wonderful electorate of Dunedin North as I am sure it goes for the people right up in Kaitāia.We are not the only country in the Western World with a tax system. Those people in the Government across the Chamber need to accord fixing it the highest priority and they need to stop spending tens of millions of dollars on international consultants who simply tell them that in principle things need fixing. They have had that message before and they have had that message again now. I look forward to seeing progress on that issue so that we can have tax policy that is fair and that allows all New Zealanders the opportunity to get ahead.I also look forward later in this bill to discussing the delays in child support legislation because it is true that that is an embarrassment for the Government and it is inconveniencing New Zealanders. I look forward to hearing more from the Government as to why it needs to make these delays. It must have excuses but I can assure you they will only be excuses. They will not be things that New Zealanders want to hear. New Zealanders are sick and tired of hearing that they are a low priority for this Government that only the wealthiest have their interests protected and that ordinary New Zealanders should not be afforded the opportunity that everyone else at the very top of the heap is afforded when it comes to getting ahead for themselves for their families and for their communities.When Labour is in Government we will implement a capital gains tax that drives this economy forward that moves money from the speculative sector into the real productive economy that creates jobs that makes sure that economic growth is shared fairly and that reduces the gap between rich and poor which has grown and grown under this Government. We will have an economy that grows and shares the benefits fairly with all New Zealanders so that all New Zealanders have the opportunity to work hard and to get ahead. Thank you.ANDREW WILLIAMS (NZ First): I take a call on behalf of New Zealand First on the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. Many good hard-working low and middle income New Zealanders must be looking at legislation such as this and wondering what is in it for them. I guess they would be reflecting on the fact that 3 years ago in 2010 the National Government provided some $2 billion in tax cuts to the wealthiest 10 percent of people in New Zealand. The good average people of New Zealand will be asking why the likes of the Prime Minister received a cut of $1000 a week in the tax he was paying and why the likes of Paul Reynolds the head of Telecom—its chief executive—got a cut of something like $5000 a week in tax on his income. Why is it that this National Government is so intent on helping the rich and its mates but good average working Kiwis are being left out in the cold?Once again this Government is tinkering around the edges. This bill is just sort of fudging the numbers. At the end of the day with taxation in this country there are still those who are benefiting greatly from the whole process while poor families in this country are really struggling. We need a full revision of the tax system in New Zealand not just this tinkering where they bring in these bits of bills here and bits of bills there. We need a full review of the tax system so that there is a fair and equitable system for all and across all areas of the New Zealand economy. At the present time there is still a huge amount of tax evasion estimated to be in the order of $2 million to $3 billion a year—$2 million to $3 billion a year of tax evasion which this Government is simply not getting on top of.In addition to that this Government has put up GST in recent years going up to 15 percent—Dr David Clark: I thought they promised they wouldn’t.ANDREW WILLIAMS: —which it promised it would not do absolutely. Prior to that particular election it promised that it would not increase GST but it did put it up from 12.5 percent to 15 percent. Again the people who hurt the most are those who have to buy everyday goods and services but who cannot afford that extra 2.5 percent of GST.So New Zealand First calls on the Government to have a comprehensive taxation review; to not just help its mates—not just help the wealthy heads of corporates the wealthy financiers and bankers and all that sort of thing—but help good average everyday Kiwis to get on and have a better slice of the cake in the New Zealand economy. We stand for a fair society. We stand for a society where all New Zealanders are put first. We stand for a situation where the Government goes after those who are avoiding paying their dues to the country. There is speculation on so much property and on so many investments in this country and so much in the way of finances and the New Zealand dollar is being speculated on. There are all sorts of other speculative activities that this Government turns a completely blind eye to while large amounts of revenue and profits are being made by rorting the system and taking huge amounts of dollars out of the system particularly for the benefit of that top 10 percent of income earners who are doing very well in this country.The gap is widening between the rich and the poor in this country and this National Government in the 5 sorry years that it has been in power has seen that gap widen. It is time that this Government faced the fact that New Zealand is on a slippery slope in terms of those who cannot afford the daily cost of living: those who are out of work and those who are underemployed. We now have 8 to 9 percent underemployment. These are people who have got only 1 hour or more of work a week. These are people who would dearly love to pay more tax if they had a decent job. But when you are on the minimum wage of $13.75 an hour when you—Maggie Barry: Read the bill.ANDREW WILLIAMS: I am keeping to the bill. This is about taxation. When you are on $13.75 an hour and you are struggling—MAGGIE BARRY (National—North Shore): I moveThat the question be now put.SUE MORONEY (Labour): Thank you so much for the opportunity to take a call on Part 1 of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. Of course Part 1 actually deals with the annual rates part which is really what most New Zealanders come into contact with when they come into contact with our taxation system. So Part 1 is a lost opportunity because there was an opportunity for the Government—and goodness knows that it has had long enough because it has had this bill on the Order Paper for such a long time that it has had to bring amendments forward to actually change the start date of this bill because it has been languishing on the Order Paper for so long. So the first thing that we would have to ask is why that is. Why has this bill been so badly mismanaged that the Government has now had it in front of Parliament for so long that the start dates have to be amended? Also why is it that the Government is so stuck in its old ways—the same old mantra that the National Party always has—that it has not taken the opportunity to recognise the opportunity that this bill presents to actually have a fairer tax system than the one we currently have?Part 1 of this bill continues the problem that we have with every single National Government that I have seen in the course of my lifetime and that I imagine most people listening to this debate have also seen in the course of their lifetime. There is—David Bennett: Come on Sue change the record.SUE MORONEY: David Bennett says: “Change the record.” That is exactly what I am saying to the Government. I am saying to the Government “Change the record.” because here is the record of the National Party. A National Government always cuts taxes for those at the top who do not need it. Then it goes about cutting public services because it cries poor about not having enough money to fund public services properly. Then it flogs off State assets. Then it flogs off State assets. It is the same old formula that this Government has followed and that every other National Government has followed.It starts off with what the Government is continuing in Part 1 of this bill and that is the old tax switch as they call it—the old switcheroo of taxation—which the rest of us would call the tax swindle. John Key despite promising that he would not raise GST in one of his first Budgets—well not his first but probably at his instruction Bill English’s—did exactly that. Despite promising that he would not do it he raised GST from 12.5 percent to 15 percent. Remember when GST used to be 10 percent?The CHAIRPERSON (Eric Roy): Order! This is an income tax bill. It has not got a lot about GST. I appreciate that the member can talk about GST but you have to make it relevant to Part 1 or schedule 1.SUE MORONEY: Thank you Mr Chair. The reason why this debate is relevant to Part 1 is that not only did Mr Goldsmith the chairperson of the Finance and Expenditure Committee raise the issue of GST in his Part 1 debate but also it is the entire package around the whole way in which the National Government has shaped up its taxation.David Bennett: It’s waffle. She’s got no idea.SUE MORONEY: Mr Bennett says: “It’s waffle.” It is not waffle to those people for whom every single item they bought went up overnight. His leader broke a promise to the electorate and that is what happened. Where people were paying 12.5 percent on GST they suddenly found themselves paying 15 percent and everyone’s living costs went up overnight. Did their wages go up to compensate? No but what did happen—and this is where Part 1 continues to make the mistake—is that the people at the top end of the income scale got huge tax cuts. They got huge walloping tax cuts. We believe—and he has never denied it—that the tax cut that the Prime Minister himself got was in the order of $1000 a week. That was not what he paid; that is what he stopped paying. Every week there was $1000 in the back pocket of the Prime Minister and everyone else’s GST went up to pay for it. That was the tax swindle and not the tax switch.That is what Part 1 continues to keep in place. It keeps in place a taxation regime that saw those at the very top end of income—in the middle of a recession for goodness’ sake—get an absolutely huge benefit. What we know about people at the top end of the tax scale is that they do not spend every cent they earn. Every week they get to save quite a lot of money because they earn more than what it costs most people—DAVID BENNETT (National—Hamilton East): I moveThat the question be now put.The CHAIRPERSON (Eric Roy): I will give Andrew Little a go at debating the topic.ANDREW LITTLE (Labour): We should not take lightly what is really one of the central and core functions of this House which is raising revenue for the Crown so that it can discharge its obligations to the citizens of this fine and fair country. So when we are called upon as a House to either set or confirm what the income tax rates are it is not a matter where we should do so with any sense of jocularity or with any sense of frivolity. It is a matter on which we should proceed with great caution and with due solemnity and seriousness. It is in that spirit that I come here to the Chamber to speakon this bill the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill.My colleagues have drawn the Committee’s attention to really the underlying anxiety that members of the Opposition have about this bill and this provision in this bill which is that the tax rate that was set only a few years ago—it seems like a long time now but apparently it was 5 or so long hard grinding years under this Government—has caused hardship and considerable concern to many people. Nobody won an argument on a public platform in this country by saying: “Quick we need to pay more tax.” but everybody understands the argument that if we want a cohesive society if we want fairness and equity and egalitarianism then the Government of the day needs to be funded to discharge those purposes and objectives that the people need in order to provide the bare minimum for themselves and their families and their communities. So the money raised for hospitals for income support for schools for roading—all those things that actually keep communities together provide opportunities give confidence to investors to invest—all those sorts of things are underpinned by the revenue raised by the Crown to do that and therefore by the money that people pay from what they earn. And whether they earn it by selling their labour their time their skills their talent their intellect; whether they do it through interest earned on their investments; or whether they do it through selling a succession of properties which seems to be increasingly the New Zealand way—all those issues are important when it comes to setting our tax rates.We in Labour say—and we have always stood for this principle—that from those who have done particularly well and who earn the greatest more should be expected. That is the basic principle and it happens to be I say to our Catholic friends opposite a very Catholic principle. It still is and Pope Francis exemplifies it every day he goes about his duties. It is a very important principle. Emulating the lead set by St Francis of Assisi the new Pope Francis stands for greater equality and fairness. The mark of fairness in any Government is the tax system how the Crown gathers its revenue—and not just any form of tax but income tax—and those who do very well because life’s fortunes have smiled upon them and they have acquitted themselves and—Dr David Clark: And they’ve benefited from the infrastructure.ANDREW LITTLE: Well people who take advantage of a good State education system and stand on the shoulders of those who have gone before them—good on them. And if they do very well as a result it is not too much to ask that they put a little bit more back into the kitty to sustain the next generation and to sustain those who have not had the advantages of good fortune and a good life. That is very simple and people understand that.Paul Goldsmith: How much—66 percent 70?ANDREW LITTLE: Paul Goldsmith might not understand that. He might not appreciate it. Not everybody is equipped with the same skill for writing hagiographies as Paul Goldsmith. Some people write serious books and some of them do very well. Eleanor Catton does very well and she will not have to retract what she has written because any character in her book winds up in the dock facing criminal charges. That is the difference between Eleanor Catton who writes good books and Paul Goldsmith who writes fiction.But here is the point. We need to make sure that tax rates that we endorse in this bill are fair and our concern is that when you look at the tax package as a whole the weakness in our tax system is what has happened to income tax. We will address that. We will support this bill for now because it will get us through the next financial period but we will debate these issues and the underlying principles of the income tax system in a few months’ time because New Zealanders are crying out for greater fairness. They are crying out for a better chance and at least a chance to get ahead. Even those who arepaying modest sums of income tax know they are struggling to get ahead not because of the tax rates they are paying but because of the whip hand that has been given to employers to suppress their incomes.Part 1 agreed to.Part 2 Amendments to Income Tax Act 2007The CHAIRPERSON (Eric Roy): This debate is on clauses 4 to 107 and schedules 1 and 2.Dr DAVID CLARK (Labour—Dunedin North): I want to speak about Supplementary Order Paper 413 to start my contribution the amendments to the Child Support Act 1991—Paul Goldsmith: That’s Part 3.Dr DAVID CLARK: —but my colleagues opposite tell me that is Part 3 so I shall despite my eagerness save that for my debate on Part 3. It is something that I do look forward to discussing. It is one of the more embarrassing parts for the Government where it is delaying again child support changes because it is not able to implement them because it has a computer system that is out of date.Within Part 2 though there is plenty to debate here in this Chamber because Part 2 covers a number of elements of amending our tax system that Labour supports. Indeed Labour will support the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill through the House as my colleague Andrew Little alluded to in his recent contribution—because we do need to have some rates set and we need the system to carry on—but we actually also want to ensure that these things are properly debated and that we get to a fairer society in the future. We are not conceding the point that this could be a much fairer bill that this bill could be directed to driving New Zealand’s economy forward and that a future Labour Government will indeed do that. Mr Little quite rightly makes that point and hopefully that will come sooner rather than later. Mr Key’s threat of bringing the election forward to a month away would be good news for New Zealanders because they are getting sick and tired of this arrogant out of touch Government and they are ready to see a new Government with big ideas willing to tackle the real problems that New Zealand has by implementing measures such as pro-growth tax reform in the kind of capital gains tax that would see money shift from the speculative sector into the productive sector and decent KiwiSaver policies. I could go on but I am going to come back to those things that we are supporting in this bill.The reason that Labour is supporting the bill is that there are some sensible things in this bill. Although it may pain me to say that it does have some sensible content in the middle of it: the disposal of emissions units the way in which foreign superannuation withdrawals are treated albeit that we see some difficulty with the anomalies between Australian treatment and the rest of the world. If we say that a set of twins goes on their OE and one goes to England and one goes to Australia the twin who goes to Australia will get much more favourable treatment as they bring their savings back to New Zealand. We see the anomaly in that treatment. But we also see in this bill some definitions around mineral mining that are designed and were debated extensively at the Finance and Expenditure Committee under Mr Goldsmith’s guidance from his position as chair. We looked at the ways in which mining would be treated so that it set the right incentives that massive profits were not raked that the system was fair and that it would work from an industry perspective.We also set some rates to do with damage from the Canterbury earthquakes and we also debated those points in the committee. It is one of those situations where across the Chamber we can have a really constructive discussion to make the law better and fitting for all New Zealanders. It is always a pleasure to be a part of those discussions in selectcommittee and a part of making law better through detailed investigation and through the contributions of many people who came into the select committee gave of their own expertise and advice in order to make the law better and more applicable in the national interest in the best sense of that term. We amended things in terms of the calculation of family credits parental tax and so on—definitions that were changed in the bill in relation to the Canterbury earthquake situation.We looked also at International Financial Reporting Standards financial reporting methods. There were a number of technical aspects that we worked on considered the submissions on and made our own decisions on and agreed as a group that the law could be improved on. So I want to offer my commendations to those I work with on that committee for their efforts in making that part of the law better.But I want to turn to foreign superannuation changes because changes are needed. The proposals do have the merit of simplicity which should eliminate uncertain treatment which has been a problem since it was first identified in 2006 but there are a number of things with which people will be uncomfortable. We have seen in recent days the Minister move a further amendment that pushes out a date so that the legislation does not become retrospective on the basis of those who have already lodged a complaint. Because this legislation is obviously moving slowing through the House it could capture another group who were not intended to be collected on the way through.Withdrawals in the first 4 years after a person becomes a resident will not be taxable in future and this is designed to ensure that things are translated from the Australian system to the New Zealand system in a way that is fair. I have alluded to the double standards where we have different countries adopting different rules and we know that we inch towards fairness. It is good to see the Government making changes based on a principle of fairness in this part of the bill in sharp contrast to the first part where we reaffirmed rates of taxation which we on this side certainly see as unfair—where the wealthiest have benefited and middle New Zealand struggles to get ahead because of that 2010 tax swindle which took so much out of the pockets of ordinary New Zealanders to pay for the wealthiest.I welcome the Minister in the chair Michael Woodhouse and look forward to his contributions on this debate because it is a debate about fairness in our tax system. He was answering questions on fairness in terms of the lot of veterans earlier in question time. I heard a question raised about the RSA in Mosgiel and whether Mr Woodhouse knew that members there were going without meals as a consequence of an unfair system which brings me back to the point about fairness in this bill. That is why I look forward to the member Michael Woodhouse’s contribution on the fairness—or lack thereof—of the overall bill. If you will Mr Chair please allow him that breadth of discussion as we certainly on this side will be prepared to do because we are interested in what he has to say in that particular instance. It is not good to hear that our veterans are going hungry in New Zealand because of an unfair system and particularly in Dunedin a place that I care deeply about.There are problems that do exist with the superannuation changes. The first issue is that it will apply to all transfers even those made into a locked-in scheme such as a KiwiSaver fund. In this case it is proposed to allow the taxpayer to withdraw an amount up to the value of the tax due from the KiwiSaver scheme. It sounds good but it ignores the fact that where the transfer is made from a UK pension fund withdrawing funds could possibly either invalidate the transfer or trigger a 55 percent tax charge in the UK. We know there are ways around this and we know that it is going to be very important that there is a clear education campaign put forward by the Inland Revenue Department and we trust that it will do that in a manner that is comprehensive and competent because largely it is a competent department. Unfortunately it has not always beenguided by competent Ministers and that is probably why it is struggling to keep up in terms of its computer system and in terms of implementing changes that would make a fairer tax system. But we know that the officials who appeared before the Finance and Expenditure Committee have great integrity take away our questions and supply us with full and helpful answers on the committee. I take my hat off to them in passing as we debate these changes put forward in this bill.So I draw my comments on this debate on Part 2 to a conclusion with Labour’s support for the sensible changes it contains to ensure that the taxation of mineral mining is done fairly in a way that does not allow exploitation of the rules and with some reserved support for changes to taxation of foreign superannuation and support for the Canterbury earthquake tax measures. We worked constructively at the select committee across the House and it is a pleasure to be able to support those aspects of the bill that make a difference to our tax law and that make it fairer. We are just disappointed that in terms of the overall picture of our tax system we do not have a system currently where middle New Zealand has the opportunity to get ahead. Those who are struggling and working hard do not have a system that enables them the opportunities to get ahead where cost of living is rising and those at the wealthiest end of the spectrum are reaping the real gains of any economic recovery. Thank you.MAGGIE BARRY (National—North Shore): I rise to take a call on the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. This bill is all about making the tax system simpler and fairer and also strengthening the economy. That is the way we approach this as a Government. We do not choose as the Opposition does with its alien notions just to tax the rich and hike the tax rates up. The Opposition’s more ludicrous recommendation today was to make a Man Booker Prize winner the chair of the Finance and Expenditure Committee. The level of contribution to this debate that has come through from the Opposition is pretty well indicative of the level of intellectual rigour that it brings to many of the debates in this House and it is woeful.I would like to talk mostly about the taxation of foreign superannuation because our moves to make it fairer have in fact benefited from the process of the select committee. We have made several recommendations to improve and to clarify the rules. For those of us who have electorates many of us have received complaints either from people who have shifted to New Zealand and have not understood the complexities of the lump-sum payments when they are bringing over their superannuation schemes or from New Zealanders who are moving back. They too are a little unclear about how the system actually works. When you look at the base of what we are doing with foreign superannuation we are trying to make it as clear as possible.The Minister who has proposed this bill the Hon Todd McClay has sought to provide even greater flexibility over foreign superannuation because the people who are needing to make adjustments before this bill goes through in April of 2014 probably need a little bit of time to adjust. So too do the financial advisers I think because the complexities that existed in the old system have not quite been ironed out. But there is as I said earlier a degree of rigour that is bringing a lot of clarity more transparency and greater simplicity to the way we do things.The bill introduces a 15 percent option. That is very important for those who withdrew a lump sum or who made a transfer from their foreign superannuation scheme and did not comply with the rules at the time. A lot of people did comply with the rules and as far as they are concerned they want to see everybody I guess playing on a level playing field. That is why we went to such a lot of trouble and why the Minister intervened—Hon Trevor Mallard: I raise a point of order Mr Chairperson. With all due respect to the member I think she is referring to Part 3 of the bill rather than Part 2. Is the debate not on Part 2 at the moment? The foreign superannuation stuff I understand—the bits that I have found are in Part 3 of the bill.The CHAIRPERSON (Eric Roy): I have to confess that I have not read all 107 clauses that are in the bill.Hon Trevor Mallard: Oh come on! Ross Robertson would have.The CHAIRPERSON (Eric Roy): I take offence—almost—to that comment. The Minister has passed me a schedule of what is in Part 2 and taxation of foreign superannuation is mentioned in a number of clauses.MAGGIE BARRY: Thank you Mr Chair. As I was saying speaking to Part 2 of the bill as I was on foreign superannuation and for those members of the Committee who were not paying attention this is a piece of legislation—and this part in particular—that deals with foreign superannuation. As I indicated many of us have received complaints from people who are in genuine distress. When you are ushering in a piece of legislation that is this comprehensive it is important to make sure that people are not left out and that they are in fact able to make their adjustments.I was talking about the 15 percent rule and I think that when we look at what Todd McClay has proposed there the 15 percent option is a change that will extend the availability of the 15 percent option to those whose funds have not actually been transferred before that date of 1 April 2014. Funds transfers as those of you who either through your constituents or through your own experience know are a very lengthy process. It is a tricky one and this extension is in fact very good news for those who are wanting to take up that option. In fact I think it would have been very difficult for them otherwise.When we look at the way that it used to be the foreign investment fund used to have its rules applying to foreign superannuation interest. It is not going to be involved any more. Instead of that taxpayers will have the option of calculating the actual income earned during their period of residence if they have a defined contribution scheme. That is a very good thing. I think much of the confusion was around the application of the foreign investment fund to a range of foreign investment schemes many of which were in the UK. The Australian one is a little bit different because there is a lump-sum withdrawal or transferring of interest to a New Zealand or Australian scheme still being allowed under these new rules.All in all this is a bill that does aim to make things fairer and simpler and to strengthen the economy. It also from the perspective of individuals makes it a lot more straightforward to iron out the complexities in order to make it easier for older people who want to settle here or for New Zealanders who want to come home to have a very fair approach to the way they are taxed. Therefore their planning for their retirement will be a lot easier. That is why I commend this to the Committee.CAROL BEAUMONT (Labour): It is a great pleasure to rise to speak to the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. As my colleague Dr David Clark has said although Labour is supporting this bill and we think there are some very positive elements in it we have some reservations. He started outlining some of those.This bill was originally introduced of course by the Hon Peter Dunne. Or is he that honourable in fact given that we have had such a terrible time in the House in recent days in trying to get Mr Dunne to actually clarify for us what information he had and whom that information went to? But anyway getting back to Part 2 of this bill this is of course where the substantive part of the bill lies. Part 2 has got numerous provisions actually putting in place most of the major changes that are identified in this bill and isas I have said largely uncontroversial. In fact the new rules will clarify a number of important matters.I thought I would identify some of the key elements in here but before I do that I would like to acknowledge my parliamentary colleagues who were on the Finance and Expenditure Committee which dealt with this because this is clearly a very technical bill and deals with a lot of quite complicated matters around taxation. I think it is a substantive bill obviously and those people some of whom are in the Chamber at the moment have obviously worked very hard to get it to this point.In Part 2 we deal with a number of matters dealing with foreign superannuation withdrawals and taxation related to that as well as matters relating to mining. I just want to outline some of those. Basically Part 2 looks at the mining of specified minerals to make the rules less concessionary and more consistent with those for taxpayers generally. It clarifies the rules for Working for Families tax credits makes remedial technical changes to rules for general and life insurance businesses and makes a number of other changes that are quite technical to many of us but are important. One of the things I did want to comment on is the importance of having a fair taxation system and having a taxation system that works in a way that ensures that those who can afford to pay do pay their fair share and that that is invested into our country.One of the problems we have on this side of the House—and we saw it in the House as recently as today in fact when the Prime Minister was saying: “Oh well as for the extensions to paid parental leave you’ll have to wait and see but really what Labour is proposing with an extension to 26 weeks is unaffordable.” So in other words he is saying that there is not enough income for the Government to pay for that. One of the things that is conveniently forgotten in this House is the fact that that is a deliberate thing. It was deliberately done by the National Government when it first got into power. Basically it cut taxation income tax rates for those on the highest incomes and in fact put some of the burden—quite a significant amount of the burden—on the taxpayers with the lowest incomes. It was supposedly a taxation switch.Paul Goldsmith: What’s this got to do with Part 2?CAROL BEAUMONT: Well we are talking about income tax in this bill Mr Goldsmith. I am really just talking about a well-functioning tax system to which in Part 2 we have a number of changes proposed in various areas including in relation to mining. These changes are to make this fairer and to deal with taxation rates that are applicable to that circumstance—for example in the mining sense—to make them less concessionary and more consistent with those of taxpayers generally.My point is really that this is a Government that has favoured those on very high incomes at the expense of other New Zealanders who are struggling to make ends meet. They have higher costs as a direct result of the so-called taxation switch introduced when this Government first got into power which raised GST. That directly went on to the costs that families face in this country. One of the things that that means is that household incomes are really squeezed. Prices are rising. Incomes are not rising for most New Zealanders—the 40 percent who did not get a pay increase last year.While we are talking about tax I would note that those people are the same New Zealanders who have to pay each and every dollar of taxation that they are required to pay. They cannot escape paying their taxation whereas in fact many others especially those at the big end of town do.Hon SHANE JONES (Labour): Kia ora tātou. I direct our attention to Part 2 of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill and the portion of it dealing with mineral mining. I shall preface my remarks knowing that there are quite polarising views around this type of economic activity. I will definitely avoid worsening any polarisation of that matter but it is one of the two areas I am going tofocus on in this 10-minute call with your support Mr Chairperson. The first area is the question of at what point in time and how does an investor in an area riddled with uncertainty enjoy the opportunity to claim back the entirety of the dough or the capital they are expending? Obviously on one side we want to avoid a situation where an enormous amount of dough is poured into it—John Hayes: Do you mean money?Hon SHANE JONES: Well yes I do mean money. Yes we are supportive of the notion that when the funds in our domestic economy are absent there is nothing wrong—subject to suitable guidelines and legal parameters—with that money coming into our country but those people investing in our country need to abide by whatever the statutory framework is. I will have more to say on the pū and competitiveness framework tomorrow; that is another matter.I am talking about the broader framework that relates to mining as an activity—in particular the period of time over which the spread of money invested can actually be legitimately claimed back. We do not have a capital gains tax in New Zealand so one thing we certainly want to avoid is that if something is spent and the asset—if it does turn into an asset—is sold there is no way for the State to claim back what it is entitled to. It is reasonable that for an investment of this nature there should be some way given that these people are putting money at risk they are paying wages and they are paying exorbitant fees to geologists. I guess a similar thing pertains to lawyers; I only hope I do not fall into that trap myself. What we are saying is that when the expenditure is spread over the life of the project we want to ensure that it is also relevant to the level of production that is secured.This is something we agree with. It is tidying up an area that I suppose you could say is quite a controversial area. Some will say that the tax system should abandon this approach because there is no rightful place in a modern economy for mining. Obviously we say that it is an indelible feature of the modern economy but if there is a way of transitioning our economy into other economic activities then we hope that investors will move us in that direction. Rest assured by the end of the year help will be on the way and we will move with a greater level of alacrity to a more balanced economy; one that generates fewer environmental bads and actually stands for the long-term prospects of less volume and more value in the economy.But we are stuck with the endowment resources that nature has given us and we are stuck with those investors who are putting money into this sector. In my view some of the more responsible investors are not using the tax system to avoid any of their liabilities but this bill clearly outlines that if you are in this particular area there are specific obligations that from now on you will be required to meet. But that does not mean that such investment will be blacklisted or that it will not be regarded as an acceptable part of the modern economy. The challenge of course is to ensure that the surveillance by tax inspectors—I do not even know if we still have tax inspectors—is actually such that these measures are implemented in such a way that the corporate advisers the accountancy advisers and the general counsel of the various firms investing huge amounts of money into mining activity understand what the new regime is and what their obligations are.I know it is a rather odd sensation for members on the other side of the Chamber when we are actually agreeing with some of this. Of course some of these changes are caused by that side of the Chamber playing catch-up rugby. These are things that were adumbrated outlined quite some time ago. I also want to direct our attention—[Bell rung] Mr Chair?The CHAIRPERSON (Eric Roy): Yes the Hon Shane Jones.Jami-Lee Ross: Close call—close call.Hon SHANE JONES: Thank you very much Mr Chairperson. I heard one of the animal kingdom squeak over there. Is there a need to call for first aid? Was that a mole a little noise I might have heard coming from under the earth or was that a butterfly learning to fly—a monarch butterfly? Probably not.I want to direct our attention to one of three other things in respect of Part 2 but I have to say before I settle upon it that the Finance and Expenditure Committee operates quite effectively. On this occasion there was adequate opportunity given to our colleagues from the Green Party—probably far greater than I would have given them had I been in the chair but I am just an Opposition MP. I have to say that they had an opportunity and the submitters had an opportunity.Despite the great effort being expended by the current chair of the Finance and Expenditure Committee Paul Goldsmith he unfortunately did not follow the party tradition that the Finance and Expenditure Committee chair is immediately moved into Cabinet. I have some commiserations in that regard. The chair of the Finance and Expenditure Committee will unfortunately go through his career having never been a Cabinet Minister because by the time 2021 2024 or 2027 arrive he will perhaps be approaching Jim Anderton’s age. It is hardly likely that the party will have a place for him then because that is when that man will be back as a member of a Government. They need to bear in mind that one swallow a spring does not make. Although that poll result over the weekend was difficult for me personally to swallow it is just a small ephemeral passing phase. The flagging fortunes of that member’s party will soon become evident once winter and autumn strike interest rates go up and a host of other woeful things beset us. But help is on the way.Hon Dr Nick Smith: Wishful thinking—wishful thinking.Hon SHANE JONES: We are hearing from a very senior member of Parliament. We are hearing from Dr Smith. Recently I was referred to as someone who along with my matua from Woodstone has suffered a few calamities but has stood again. I am in a kōhanga reo when it comes to comparing my fortunes ebbing or flowing as they may be with those of that particular member. I will tell you one thing though: he does understand the truth. He does understand the truth. So I thought it was rather bizarre that John Banks today should challenge me—I seek a little bit of acquiescence from you Mr Chair—The CHAIRPERSON (Eric Roy): I am not sure you are going to get it. Come back to the part.Hon SHANE JONES: OK OK OK. I am extraordinarily disappointed that there is not the sense of latitude that one would expect commensurate with your not inconsiderable size Mr Chair—a man of girth a man of substantial southern ardour.There are several other portions here not least of which are the almost incomprehensible sections dealing with imputation credits. Each successive Government endeavours to address this particular issue. We stand with our colleagues on the other side of the Chamber and seek those refinements. When I spoke earlier— slightly to the irritation of Mr Chairperson I suppose I would say—I delved into the complex matter of Working for Families and he reminded me that is not in this part. But families are everywhere and I can tell you that when things do not quite work out as families should they can be incredibly expensive. But that is another matter. I do not think that has to do with tax.Dr David Clark: It’s Part 3—that’s Part 3.Hon SHANE JONES: You mean that pleasure awaits me?Dr David Clark: Yes indeed.Hon SHANE JONES: That pleasure awaits me. I only hope that I am on the Māori news or something before Part 3 arrives. But I bring us back to the somewhat technicalsections. They do pertain to the minerals sector. Contrary to what is tossed around about us we do see that sector as being deserving of appropriate tax treatment. There is a fear because of the long-term development rights associated with it and the need to put money into it year by year that the tax system may not fully collect from those investors what it is entitled to. I say that providing people realise that the tax treatment of those investments—it has to be simple it has to be clear and if we do scare away investment—Hon TREVOR MALLARD (Labour—Hutt South): I too want to make a few comments on Part 2 of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. I would like to preface my comments by expressing my disappointment that I am yet to hear a call from either the Minister who introduced the legislation the Hon Peter Dunne or the Minister who is currently in charge of the bill the Hon Todd McClay. This is a matter that is highly technical and with all due respect to the Minister in the chair the Hon Michael Woodhouse I have heard nothing from him either to indicate that he is across what is very important detail in this legislation.Of course if the Minister who introduced the bill had been in the Chamber he would be the subject of interrogation as to the holding of information the importance of the integrity of the taxation system and the way that that relies on people who are involved in it including the Minister not sharing information—obviously except with the Commissioner of Inland Revenue—that they come across when case matters are referred to them. I should say that it is a matter of a lot of concern to the House. Maybe in the end when the backdated inquiry occurs into the comments that Mr Dunne has made and into his making available otherwise confidential information it could well be that we want to ask the question about whether any taxpayers’ information as well as Government Communications Security Bureau (GCSB) information was made available. Of course I am sure that the GST that was due on the GCSB information would have been paid but it is a question of what was made available and whether there was any consideration involved in that. What was the price that Mr Dunne paid other than his ministerial post for a relatively short time? And what has the effect of that been on the revenue? Although I do note that the effect on the revenue through the changes seems to have been positive because there are now more Ministers than there were previously. But the Government’s fiscal position is negative because we are paying extra. We are paying an additional Minister. So the net effect of the change led by Mr Dunne’s forced resignation is in fact something that is negative.I would now like to go to something that is pretty specific and it is around the clauses in Part 2 of the bill that go to classification of mining expenditure and in particular the timing of the deductibility of various aspects. The first point that I would like to focus on is the acquisition of land and the timing of the deductibility of that acquisition. In fact without drawing you into the debate at all Mr Chair I know that those who are well versed in Southland mining issues know that there has been massive acquisition of land in Southland for the purposes of lignite mining. After the mineral rights have been stripped from those titles that land has then been onsold in some cases—not in all cases; in some cases it is a long-term lease. That is clearly an interest in the land and that interest is recognised within this.If one looks at the net position of Solid Energy which is almost certainly the organisation that has done most of it my question is whether that is the type—I do not want the Minister to answer questions about a specific taxpayer even if it is a State-owned enterprise. “Enterprise” is probably the wrong word; “State-owned liability” might be a better expression for Solid Energy the way that it is now.Dr David Clark: It wasn’t under Labour.Hon TREVOR MALLARD: Well under Labour it had a damn good Minister. The question I want to ask the Minister to address is whether it is appropriate to give a deduction to a loss-making mineral organisation—for exploration prospecting and prospectively mining—for the loss of the interest in the land as a result of stripping the mining rights away from the land. Clearly land is bought at one price and is sold at another price which is almost certainly lower than the original price. This recognises the difference in value to the organisation that strips the mineral rights. The question I have is whether the value of the stripped mineral rights is taken into account in deciding the value of the land once it has been sold or whether if a piece of land has been sold minus the rights then the full loss that the organisation makes is deductible. My next question is whether that is fair.I acknowledge that if it is a State-owned enterprise that is doing it then actually the net position of the Crown is unchanged. The core Government position is different but the total position of the Crown is unchanged. What we are preparing here is law for all parties and we are preparing it in a context where organisations may not always be State-owned enterprises. So the relatively simple question that I have for the Minister is about the loss on the acquisition of the land—which is really a loss of disposal that difference between the disposal price and the acquisition price which we know is something that is deductible in the year that it occurs. Even if mining is not going to occur for another 30 or 40 years that is a deduction that occurs in the year of disposal. My question is whether that net loss takes into account the matters that I referred to earlier.Clearly what we do know is that under new Subpart DU 12(3) inserted by clause 35 “Mining development expenditure does not include—(a) the cost of land:”. But what is also clear later on—Paul Goldsmith: It’s not clear at all.Hon TREVOR MALLARD: Sorry?Paul Goldsmith: It’s not clear at all.Hon TREVOR MALLARD: Well no no it is. It is clear. It is on the face of the bill. It says in new Subpart DU 12(3): “Mining development expenditure does not include—(a) the cost of land:”. Was Paul Goldsmith on the committee that considered this bill?Dr David Clark: Yes he was.Hon TREVOR MALLARD: Did he chair it?Hon Shane Jones: Yes.Hon TREVOR MALLARD: Well have we seriously got interjecting now in this Chamber the person who was in charge of the bill through the select committee process and he is not aware of the question of the deductibility of land acquired for mining? I accept that it is not an insubstantial bill but the deductibility of mining expenditure is something that is very important when one is considering the bill. I am just going to toss back at the member that if he has not read the bill well enough either in its introduced form or in the report back then that is shameful. It is absolutely shameful that the National Party has as the Prime Minister’s nominee to chair the Finance and Expenditure Committee someone who cannot be—Paul Goldsmith. Just make sure. We will put a name on him. I do not want to generally slur the members of the Finance and Expenditure Committee because there have been some good ones. But Paul Goldsmith has made it clear in this Committee that he has not read a major part of the bill—really one of the main operative clauses on mining expenditure. We have a chair of a select committee who is so damn lazy. He is working hard to lose an electorate seat. He is working hard to lose an electorate seat.The next question I want to ask goes to the question of mining rehabilitation expenditure and the deductibility of that and what is effectively it appears to me a double deductibility. With due respect to the comments that my colleague Shane Jones has made and even those of David Clark earlier who seemed to indicate that there is a relatively fair regime I wonder whether we are heading into an arrangement now where we have a Crown subsidy for mineral explorers whose projects fail. So again it is an area of relatively simple change and this is one of the areas of amendments made to the legislation by the select committee. The rehabilitation expenditure “means expenditure that a mineral miner incurs … directly in relation to the rehabilitation of land that is the permit area of their mining operations or associated mining operations carried out as a result of”—I am summarising—the permits the Crown Minerals Act access arrangements the Resource Management Act conservation or authority under the Historic Places Act.So what we are saying is that miners get a set of obligations. There is no doubt. The question I have got is whether if they are foolish enough to do prospecting and exploration and make a mess of an area it is really the job of the taxpayer to subsidise their clean-up and rehabilitation costs through what is effectively double deductibility. Is that a good use of taxpayers’ funds to say that miners can destroy a monument and then rebuild it as part of the exercise? I will be interested in the comments of my Green Party colleagues in this area because I have heard the explanations from two of my own colleagues and frankly those and the contribution by Maggie Barry are a little bit wanting. The explanations are a little bit wanting.You know we have the Prime Minister saying in this House today that we are short of funds for paid parental leave but somehow we have money to subsidise miners in their rehabilitation costs. Why is it? Why is it? What are the priorities? What are the priorities of this Government? What are its priorities if it is not prepared to say that it is important for parents—especially mothers—to bond with their kids for 6 months as part of paid parental leave but if you are an overseas miner we will subsidise you through additional deductibility in order to do rehabilitation which is what you have got to do in accordance with the law anyway? Again I am not saying that I will vote against it but I am just asking a question about where this Government’s priorities are as far as particular actions of that sort are concerned.I will be interested in the explanation from the Minister in the chair the Minister of Revenue on the new “Mineral mining” section section EJ 20B(2) inserted by clause 37G(1) which is the spreading rule. I think this is an important part of the legislation. It has come in again as a result of the select committee. There is a question that the Minister has to ask about the establishment of the “ratex value” formula that is in there. I know that unlike Paul Goldsmith Todd McClay will be right across the detail of the legislation and will be able to go to the rate questions and tell us about either the straight line or the diminishing value approaches which are available in new section EJ 20B(4)(a) and (b). The question I have got is—JAMI-LEE ROSS (Junior Whip—National): I moveThat the question be now put.A party vote was called for on the questionThat the question be now put.Ayes64New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.Noes56New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1.Motion agreed to.The question was put that the amendments set out on Supplementary Order Paper 413 in the name of the Hon Todd McClay to Part 2 be agreed to.Amendments agreed to.Part 2 as amended agreed to.Part 3 Amendments to other ActsDr DAVID CLARK (Labour—Dunedin North): I have been keen to speak about this part of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill right through the debate. Members opposite have held me back on various occasions saying that the place for the debate on the delay of child support legislation is in Part 3 of the bill. I see that the Minister of Revenue who has resumed responsibility in the chair is indeed the Minister currently responsible for the bill. No doubt that is an indication that he is preparing to defend this embarrassing—embarrassing—back-down as the Minister responsible for having backed out of the commitments he made to try to make the tax system fairer for those who deal with the child support system.Those of us in electorate offices already know that the child support system payments and so on cause a great deal of anguish. The anguish of course originates often in very unhappy family situations where relationships have broken down. But often that pain is exacerbated by difficult arrangements or arrangements that have been agreed on but not met and so on. It is the stuff that electorate offices around the country deal with and that members of this House make their best efforts to resolve in a fair manner according to the law. Nobody will ever be entirely pleased with the child support arrangements. There will always be people who are better off or worse off as a result of changes.It is fair to say that when we debated these changes in the select committees that have debated them in recent years in the term of this Parliament we have thought about the issues of what is the fairest way and what is the trade-off with complexity. There is no doubt that the new formula the Government introduced is more complex. It is complex because the Government believes that that is a way to reach a fairer outcome or that is the rhetoric that it has put forward. There is also no doubt that this is a big shift in responsibility on to often the mothers the primary caregivers who are likely in many cases to receive less support in terms of the childcare they give and the funds they are entitled to. But regardless of all of that debate the Government then put forward a proposal to implement a new formula. It acknowledged that along the way there would be a high cost involved in retraining staff in the use of this formula. How it expects ordinary New Zealanders to understand it is not clear but the Government said that it was fairer. It said that it was willing to spend a whole lot more money in the bureaucracy in order to train officials around the country to use the new formula all on the basis that they would implement these changes to our child support systems.Then just a few days short of Christmas we had a press release out of the blue—and “blue” is the right word—from the revenue Minister announcing that the child support overhaul would be delayed. The Minister if I can quote him said: “… Inland Revenue has informed me”—indicating of course that the Minister was unaware of where the legislation soon to be implemented was at this time—“it needs more time to implement the new scheme to the high standard that the government expects”. Well these are wise words. These are high-sounding words. But actually let us not forget that the Minister is responsible for the implementation of this legislation. He is the one who brings this bill to the House and says we need to make changes in this Parliament to make the system whatever he wants to make it—fairer or reasonable or whatever the line is that he is pushing. Parliament spends quite a lot of money effectively—in termsof all the salaries for the support staff and so on in this building—passing law. And then in this case we have a Minister coming back to say: “My department has just informed me that the legislation soon to be introduced cannot be introduced.”It is the second time changes have been delayed. The Finance and Expenditure Committee held back the changes previously and now we have a situation where the Minister is pushing them out yet again. The change affects over 200000 children in New Zealand. Many many families will have taken legal advice on the basis of anticipating these changes as to what it will mean to them. And then on top of that many of them will have taken financial advice—[Bell rung] Mr Chair.The CHAIRPERSON (Lindsay Tisch): Dr David Clark. Part of what you are talking about is in Part 2 and we have already—Dr DAVID CLARK: Sorry this is Part 3.The CHAIRPERSON (Lindsay Tisch): I know.Dr DAVID CLARK: This is expressly Part 3 that I am talking about.The CHAIRPERSON (Lindsay Tisch): Well part of what you have been saying has been on Part 2 so can you be specific on Part 3 and draw my attention to where—Dr DAVID CLARK: Part 3 of the bill is about the Minister’s Supplementary Order Paper 413. I am debating the Minister’s Supplementary Order Paper 413.The CHAIRPERSON (Lindsay Tisch): OK.Dr DAVID CLARK: Thank you Mr Chair. I should have perhaps been more explicit in that regard. You are quite right. So the Minister’s Supplementary Order Paper introduces these delays which will see 210000 children affected. Many families will have taken both legal advice and then subsequently financial advice because their personal circumstances will have changed as a result of the proposed changes to be implemented. Now the Minister announcing a few days before Christmas has told them that they must again seek advice because the changes will not take place now; they will take place later.This affects not only the obvious 210000 children in the kinds of ways that one might expect in terms of primary care arrangement who owes what to whom and so on but also in ways that members of the public may not be aware of unless they are facing the circumstances themselves in terms of whether they are responsible for payments for teenagers attending educational institutions. That has changed from one minute to the next with this announcement from Mr McClay. It is not only embarrassing for the Government that it has passed this legislation and is now rapidly backing out of it because it cannot implement it but also horrific for these families who are often in straitened circumstances dealing with difficult relationships to discover that they now have to rearrange their affairs take further financial advice—which often in many cases they will barely be able to afford—and perhaps additional legal advice in order to rearrange their affairs once again for a delay. This Minister must take responsibility for this embarrassing back-down by the Government this embarrassing change.Of course it was doing it because it wanted to avoid another Novopay-style debacle. This Government has spent $50 million let us not forget on international consultants in trying to get the system right to cope with this change. We have been told in the select committee that $50 million had been spent already on international consultants who have come back with the decision that in principle—in principle—the system needs to be upgraded. We knew that 5 years ago but in principle the system needs to be upgraded so that changes can be made that will affect this kind of legislation which is before the Committee right now and contained in Supplementary Order Paper 413.This is a very germane point because without a system that can cope with these changes we will see more parliamentary time wasted. We will see more embarrassing back-downs by the Minister of Revenue if the system is not up to scratch. The PrimeMinister promised 2 years ago—well he did not promise; he used some clever words. Let me quote him so that I do not quote him out of context. Two years ago on Valentine’s Day the Prime Minister said that tax policy was being held back because the computer systems “can’t actually support radical changes from Government.” He also said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology”.Paul Goldsmith: That’s a voice of thunder!Dr DAVID CLARK: Those are the Prime Minister’s words Mr Goldsmith. Those are the Prime Minister’s words. We should be outraged—it is a voice of thunder because we should be outraged. The Prime Minister said 2 years ago that this situation here should not occur and I am interested to know what the Prime Minister is doing to hold his Minister to account for this kind of embarrassing back-down in the House that costs millions of dollars of taxpayers’ money to correct as we end up debating the issues again and that costs many more millions of dollars I do not doubt in expenses for those who take financial advice around the country—the inconvenience of having to change financial arrangements the personal time that is wasted and the misery that is created by chopping and changing and trying to create a fairer system. Well it is not fair if it messes ordinary New Zealanders about.It goes explicitly against what the Prime Minister said. The Prime Minister has thrown $50 million at the problem but we have got only to the point where we have an in principle agreement that there is a problem and that more business cases will be developed. Well more business cases and more business cases—we can imagine tens more millions being spent telling us that more than in principle it is in actuality that we need to change the system. Well it is blatantly obvious to ordinary New Zealanders. It is blatantly obvious to us on this side of the Chamber that the system needs upgrading. We want the Inland Revenue Department to get on with it. It needs clear direction and clear support from its Minister but clearly it is not getting it because the Minister was not listening to the Inland Revenue Department when it raised this issue with the incoming Minister 5 years ago when National came into Government.This is a Government that is clearly not prioritising these issues. It is clearly not prioritising creating a fairer tax system for New Zealanders and so we have this kind of child support issue which I want to speak a little bit more about the detail of. What we see in new clause 122 referred to in Supplementary Order Paper 413 and covered in Part 3 of this bill is a change in the dates. Effectively all of the way through we see the date pushed out by 1 year—consistently throughout. We have this document which I will hold up for the benefit of those at home. This is the Minister’s Supplementary Order Paper. I have highlighted where it says “Child Support Act 1991” and there are dates—pages and pages of dates—where we have postponement. We have the Government postponing changes that affect over 210000 New Zealand children.I am looking forward to the Minister taking a call to explain this embarrassing back-down to explain to ordinary New Zealanders why they should have to rearrange their financial affairs once again—where their most intimate and difficult arrangements have been settled and made in the interests of their children—and to explain why they should have to revisit them because of his Government’s inaction on a system it was told 5 years ago desperately needed changing. This Minister is relatively new to these responsibilities. I will give him that but I will not give him too much slack because he was the chair of the Finance and Expenditure Committee before that. He knows where these bills come from. He knows their history. He has taken over and he is also a Minister of the Crown and has the responsibility for sorting this out.The Prime Minister made a promise 2 years ago that it would be sorted out and it has not been. This promise that the Prime Minister made needs to be honoured in theinterests of creating a fair tax system that can implement the kinds of changes that give New Zealanders security in their future planning for their support payments for their children for their personal arrangements for their children and for the futures that those children represent in theory and in practice. These are the children who will hopefully go on into the workforce and be earning a better future for New Zealand when those of us sitting in this Chamber are in our dotage. We depend upon these children and they deserve the kind of certainty that this Government ought to be able to deliver.The first system that sits in the Inland Revenue Department the legacy system was built in 1992 as we know. It is not new to the Minister. It cannot be new to the Minister. He has heard these things in the select committee. He knows that the system that we are operating on was designed 10 years before Facebook. It was designed before Google for goodness’ sake! Hardly anybody uses computer software that is that old. This must be a priority and we must get beyond a simple in principle agreement. We must get beyond spending tens of millions of dollars to point out the blatantly obvious. We must get to a point where this is fixed so New Zealanders can have a tax system that is fair and equitable and where we can make other changes that will be in the interests of growing the economy.Pro-growth tax reform is desperately needed. In the Prime Minister’s words you do not want to be in a position where Parliament is held hostage to a lack of technology. We must move on. We are not the only Western country with a tax system. It is not rocket science. It cannot be rocket science. This Minister needs to step up to the plate explain the embarrassing back-down by the Government apologise to those New Zealand families who have been affected—make an apology on behalf of the Government—and lay out a credible plan for fixing this tax system so that we all can have the surety that those things that ordinary Western democracies take for granted like education systems health systems roads and so on will be funded into the future because we have a tax system that can actually collect the tax that is due and a tax system that can implement change that is in the interest of New Zealanders.So I am looking forward to what the Minister has to say. I am looking forward to his apology for this embarrassing back-down but more than that I am looking forward to the Minister outlining a credible plan that details when we can expect a new system to be in place that can cope with changes that can cope with a capital gains tax—which would mean pro-growth tax reform for New Zealand—that can cope with changes to the child support system in a timely manner as and when they are needed and that can cope with creating a better New Zealand which we on this side of the Chamber want to see. It is a New Zealand that is signified by fairness and opportunity for all citizens.The question was put that the amendments set out on Supplementary Order Paper 413 in the name of the Hon Todd McClay to Part 3 be agreed to.Amendments agreed to.Part 3 as amended agreed to.Schedule 1 agreed to.Schedule 2The CHAIRPERSON (Lindsay Tisch): Is this a point of order?Dr David Clark: Sorry Mr Chair. I thought we were at the title and commencement—The CHAIRPERSON (Lindsay Tisch): No we are on the schedules—[Interruption] No no you cannot. The schedules are included in the part. We are just voting on the schedules.Schedule 2agreed to.Clauses 1 and 2Dr DAVID CLARK (Labour—Dunedin North): I am first to express my disappointment that the Minister in the chair the Minister of Revenue did not rise to apologise to the families in New Zealand and the 210000 children affected by the delays in Part 3 of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. He is a member who often will acknowledge when he has made a mistake but on this occasion he seems unwilling to do that. He seems unwilling to outline a plan for when we will have a computer system in place that will be able to effect in a timely manner without wasting parliamentary time and without wasting the time of ordinary New Zealanders changes that make our tax system fairer and more efficient and effective for growing our economy.I come to the title and commencement clauses. I think that this bill has a very innocuous-sounding name. It is the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. In my view it ought to have a livelier name because I think that would draw ordinary New Zealanders’ attention to just what we are doing here. It is actually quite a significant bill that we are passing through this House. I am looking forward to some contributions in this final debate in the Committee stage from the members opposite—the current chair of the Finance and Expenditure Committee Mr Goldsmith one of his perhaps more erudite contributions would be welcome; and also Mr Ross opposite who often opines on such matters; as well as contributions from my colleague Mr Little and others; and Mr Mallard who I am sure will have something to say about the innocuous-sounding name of this bill and the effect that it will have across New Zealand.In the annual rates section of this bill we are reaffirming the income tax rates that were set down in 2010 in the so-called tax swindle—named politically neutrally as a tax switch—that this Government put into place where 44 percent of the value of the tax cuts went to the wealthiest 10 percent of New Zealanders and the bottom 20 percent got just 2 percent of the value.Paul Goldsmith: Distributionally neutral.Dr DAVID CLARK: Mr Goldsmith says that it was distributionally neutral. I do not think that even Mr Goldsmith believes that judging by the smirk on his face because even though he may represent Epsom I am certain that he knows of people who are struggling and who were impacted on by the GST change that happened at the same time—the GST change that the Prime Minister said he would not make and then made—which harmed New Zealanders at the bottom who spend most of their income on consumption. He knows that those 2010 tax changes have disproportionately affected middle New Zealand and middle New Zealand is struggling. It sees a Government that is out of touch and that is not listening to its concerns any more a Government that was once aspirational for New Zealanders but now seems to have let go in favour of simply transferring money to the most wealthy.We are being asked in this bill to reaffirm the income tax rates. Of course we must do that as a Parliament but we on this side of the Chamber do that part of it very begrudgingly because we do not see any offsetting plan for growth in our economy and we do not see any fairer tax system coming in in terms of the kind of pro-growth tax reform that we on this side of the Chamber would like to see in the shape of a capital gains tax which would shift money from the speculative sector into the productive sector creating more jobs for New Zealanders and creating a wealthier economy that is able to distribute that wealth fairly rather than just sending it all to the top. We knowthat we have the biggest gap between rich and poor in New Zealand that we have ever had.So I would like to see “Annual Rates” in the title renamed. “Taxation (Annual Rates” which is the first part of it—I am going to come to each part in my contribution—I think should say “Taxation (Affirming the Imbalanced Tax Changes of 2010 Without Any Compensatory Measure” and then I will come to my comma and talk about the next part which is “Foreign Superannuation”. I am quite happy for that part of the title to stand because I think the bill does address foreign superannuation. That part of the title is fair. But when we come to “Remedial Matters)” this touches on Part 3 of the bill which we have just debated where we see—Hon Trevor Mallard: We hardly debated it.Dr DAVID CLARK: But only just because the Government did not respond to questions placed on that part of the bill as to why—well I expect an apology actually from Mr McClay for the changes affecting 210000 New Zealand children that were announced just before Christmas. But I would like to see “Embarrassing Back-down)” replace “and Remedial Matters)” because the embarrassing back-down that is represented in the final part of the bill is not only embarrassing for the Government but has a widespread impact on New Zealanders. So as I said at the beginning of my contribution I am wanting to see a livelier title one that is actually more descriptive of the kinds of changes we see in the bill.The embarrassing back-down of course is particularly embarrassing because it goes against what the Prime Minister signalled. I will take those members of the House who have just arrived and are back in their seats who have been having perhaps some useful conversations in the foyer and those people who are watching at home and who have just switched on the television back to Mr Key’s words 2 years ago on Valentine’s Day. The Prime Minister said that tax policy was being held back because of computer systems and “cannot actually support radical changes from Government”. He also said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” and that is the embarrassing situation we are in today. We are being asked to back out of legislation affecting 210000 New Zealand kids and their wider families who are already being put in the situation where they are having to share money around in a way that they may not all be entirely comfortable with they are having to share time with their children and they are having to reach arrangements in an uncomfortable situation and Mr McClay is telling them that now they are settled in to making these changes they have got to change them again and go back to where they were before. They will probably seek new financial advice because in the meantime they may have arranged their affairs anticipating these changes and then later on they will have to change them once again when the law actually comes into effect—impacting on them in some cases in 2016.I am sure that this is an embarrassment to Mr McClay. I do hope he has the decency to make an apology in this part of the debate. More important though I would also like to see him outline a credible plan for fixing the Inland Revenue Department’s computer system; $50 million spent on an in principle agreement that the tax system needs fixing is really not music to New Zealanders’ ears. The Minister of Revenue in the incoming National Government was told 5 years ago that the 1992 computer software might need updating. It was not rocket science but it was a pretty clear message in the briefing to the incoming Minister: the computer system needs updating. This Government has sat on its hands because tax reform in the interests of growing the New Zealand economy and creating a fairer tax system just has not been a priority. The Government has been more interested in entrenching wealth that is already there by giving tax breaks to the wealthiest. It is happy it seems to let small business in New Zealand suffer and happyit seems to let middle New Zealand—those who work hard every day and pay income tax on every dollar they earn—suffer.The Government has not been interested in implementing a capital gains tax. We know this because it would have needed to repair update and complete a change in the computer system in order to implement a capital gains tax which would generate that growth in our economy and would be able to cope with the kinds of changes that would not only enable growth but create a fairer tax system for all of us—the kind of tax system that sees money go from the speculative sector into the productive sector creating jobs for New Zealanders—Paul Goldsmith: What’s this got to do with it?Dr DAVID CLARK: —and creating a future that we would like to sign up to. Mr Goldsmith asks what this has got to do with it. That really is an indictment on his contribution to the debate today which has been very limited. These are the kinds of points that illustrate the need for a more informative title for the bill Mr Goldsmith because these are the effects on ordinary New Zealanders of the legislation that we are passing today. It reaffirms the annual rates; the changes—the tax swindle—where the GST took away any gains for most New Zealanders and only the very top were better off; the foreign superannuation changes; and the embarrassing back-down. These are the changes that we are debating here in this bill and the title of the bill if it were more accurate might alert more New Zealanders to the kind of Government that we have.It is the kind of Government that has created the biggest gap between rich and poor in New Zealand’s recorded history—the gap that sees middle New Zealand struggling to get ahead. It sees those New Zealanders who go out and work day after day and who try to save but without decent savings policies without pro-growth tax reform and without the kinds of research and development tax credits that would support our business sector and so on struggling to get ahead. These people want to see some vision from the Government. They do not just want to see $50 million thrown at international consultants to tell them what they already know. That is an outrage. Mr Key really needs to talk to his Minister and ask him to set out a credible plan because Mr Key is swimming here. Two years on his concerns have not been addressed.Hon TREVOR MALLARD (Labour—Hutt South): Thank you Mr Chairperson for giving me a call in this debate on the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. These clauses—clauses 1 and 2—are particularly important because what we are doing here is effectively confirming the continuation of our taxation system as well as making what is a series of both minor and major adjustments to it.I would like to differentiate myself somewhat from the comments made by my colleague Dr Clark. I am not going to say that the honourable Minister of Revenue Todd McClay should apologise on his own behalf for the cock-ups that occurred in the 5 years that Peter Dunne was running the revenue portfolio and failed to do his job in the development of an appropriate computer system. If one is absolutely fair then it might be that during the last year or two of the Labour Government when Peter Dunne was failing to do his job properly then there might have been some criticism that could have occurred. But what we do know is that from the briefings to the incoming Government in 2008 and in 2011 the briefing that the Minister received in the middle of 2013 and the update that occurred at the end of last year the National-led Government—the John Key - Government—has known that it has not had a fit for purpose information technology system in the Inland Revenue Department.It is not often that I am generous to National Party members but I think we all know that there is within the National Party one person who can get his head around these issues. Going right back to the INCIS project the Hon Maurice Williamson wasrepeatedly on the record—repeatedly on the record—for warning the Bolger Government when he was a Minister in that Government that the approach the police were taking in that particular case would not work. It is probably not fashionable these days with open source and all of the new things that I do not really understand—but which Clare Curran I am sure will explain to me afterwards—but in those days what he said was that if Microsoft could not do it then it was pretty unlikely that the New Zealand Police would be able to develop the system. And that was the case here. The problem—The CHAIRPERSON (Lindsay Tisch): Come back to the bill.Hon TREVOR MALLARD: The point that I am getting to is that in this legislation Mr Chairman we are deferring the implementation of a child support system that can only be fairer than the current one. My challenge is this. Is there a single member of Parliament at least one who has a constituency—and I think that most members who are currently in the Parliament other than Mr Goldsmith do have people coming to see them to discuss taxation. Most members other than Mr Goldsmith who deliberately loses—he is a deliberate loser Mr Goldsmith when it comes to constituency matters—do in fact have people coming to see them who want to discuss taxation issues and most of us at least every month get someone who comes and tells us about the anomalies and the unfairness in the child support system.In fact I see no one in the Parliament who is prepared to defend as fair the current child support system. And so for a number of years at least 5 and probably 7 it was Peter Dunne’s job to work on developing a computer system that inter alia would handle those changes. What has he done? He has spent $50 million. He has spent $50 million mainly on overseas consultants—something that I find particularly suspicious. I find it particularly suspicious that such a large amount of money has been spent on overseas consultants. It is money that has gone offshore and money that ignores the New Zealand information technology industry. Did Government members even go and talk to Jade Software Corporation? No they did not. There are people in New Zealand—[Interruption] Not if you are going to spend what is it $700 million on the change. So $700 million is the current amount and rising.Dr David Clark: Up to $1.5 billionHon TREVOR MALLARD: Up to what?Dr David Clark: Up to $1.5 billion.Hon TREVOR MALLARD: So it is between $700 million and $1.5 billion on upgrading the Inland Revenue Department’s system and what all of us know is that the appropriate way of doing that is to do a bit of a base system and to do the rest of it in chunks—break it down and invite New Zealand firms to bid for it. Keep the money in New Zealand.Is anyone surprised when you spend $50 million on overseas consultants that they recommend an overseas solution? Well I am relatively certain that most of these consultants get matching finance do they not? They get matching finance from the people whose systems they are effectively paid to supply. That is an outrage but unlike Dr Clark I am not ungenerous. I think the Minister who is currently in the chair and who is the Minister responsible the Minister of Revenue should apologise on behalf of the Key Government. But I am not yet assigning him personal responsibility for 7 years of failure on the part of Peter Dunne to do a good job and to convince people. I will blame John Key because John Key could have put Maurice Williamson in charge of the project. He could have got some expertise. John Key could have got someone—we are not in question time so I am allowed to refer to Maurice Williamson’s professional background—who has a professional background in the information technology area and understands how these things work—but not now.The next point that I would like to make is that I do not think I have ever seen a commencement clause that is as ugly as clause 2 of this bill. This commencement clause refers to first of all—and it is outrageous—section 114 coming into force on 24 October. It is not 24 October 2014 but 24 October 2001—2001. It is retrospective taxation of the worst possible form. Is that alone? No section 116B the responsibility of Paul Goldsmith as the chair of the Finance and Expenditure Committee comes in on April Fool’s Day of 2005.I thought taxation was meant to be prospective. I thought we were meant to have clarity going forward. Are we now taxing people for income or not allowing deductions from the periods starting 2001 and 2005? If it is true it is absolutely outrageous. There are a few further minor sins. Sections 14; 16; 29(1) (2) (3) (5) and (9); 31; 57B; 59(1A) and (3); 65; 99; 99B; 102(2); 103(4); (13); (39); (52); 112; 112C; and 117B(a) all come into force on April Fool’s Day 2008.Hon Member: Which clauses?Hon TREVOR MALLARD: I cannot tell you again from memory but what I can tell the Committee is that this bill is entitled the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill 2013. So this is legislation that at its very worst was meant to come into effect last year. What we have got is legislation that is even further outdated.DAVID BENNETT (National—Hamilton East): I moveThat the question be now put.Hon TREVOR MALLARD (Labour—Hutt South): The next point that I would like to make and I am going to refrain from reading them because I think people would go cross-eyed is that there are 10 full lines of numbers starting at section 6 and finishing at section 117 and 117B(b) that come into force on 1 April 2014. What we do have is quite a large section where it is prospective but again I want to—[Interruption] Poor old Paul Goldsmith. He is not allowed to talk in the debate but he is sitting there shaking his head like a little boy in the primers. He is shaking his head like a little boy saying: “No no no.” If I am wrong and if those sections do not come into force then he should take a call and tell me when I am wrong.I am one of the relatively simple members of Parliament who reads the bill and takes Ministers at their word. I know it is an old-fashioned approach but when a bill says that it is a Government bill when it is in the name of a Minister—in this case the Hon Todd McClay—and it says that a few sections come into effect on 1 April 2014 I believe him. If Paul Goldsmith doubts Todd McClay’s word—well we have all heard Paul Goldsmith say that he should have had the job and not Todd McClay so there is no secret about Paul Goldsmith’s opinion of their relative abilities. I am on Todd McClay’s side. Minister I am on your side. I am on your side not Paul Goldsmith’s side. In fact if we got it right Paul Goldsmith would be in the ACT Party and John Banks would be in the National Party because that better fits the economic views of the relative individuals and would probably make things better around corruption and other issues which of course I will not refer to with regard to the Hon John Banks at the moment.The bit that my colleague David Clark has focused on the most as to the timing is in clauses 37BA 52D and 55B. I understand that those are the matters that have to do with child support. Those are the proposed sections that come into play on 1 April 2016. The question I would like to ask the Minister is whether any consideration is being given to families who have looked at the changes watched what the Government promised watched what went into the Finance and Expenditure Committee made submissions took the select committee at its word and made financial arrangements on the basis of the undertakings given by Peter Dunne John Key and Bill English.I am sure all of us will have constituents or people who have approached us in our offices and I do not know anyone who will be totally satisfied with this legislation because no one is ever totally happy with the very matter of child support. It is either too much or not enough depending on whether you are paying or getting it. There is perceived unfairness around whose income counts and which family’s income counts. There are always questions about the timing of the income. But what happens when Government promises change is that people rely on its word. People enter into financial arrangements they buy businesses they buy houses they take out mortgages they make arrangements for their kids they sometimes do schooling arrangements they enter into debt and they do it on the basis of an undertaking from the Government. My question to the Minister and I am looking forward to the Minister taking a call in this debate is whether he is prepared—JAMI-LEE ROSS (Junior Whip—National): I moveThat the question be now put.A party vote was called for on the questionThat the question be now put.Ayes64New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.Noes56New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1.Motion agreed to.Clause 1 agreed to.The question was put that the amendments set out on Supplementary Order Paper 413 in the name of the Hon Todd McClay to clause 2 be agreed to.Amendments agreed to.Clause 2 as amended agreed to.Bill to be reported with amendment presently.