Cunliffe David: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee Third Reading 
Cunliffe David: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee Third Reading 
[Volume:657;Page:6652] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I welcome the remarks of the Minister of Revenue Peter Dunne and I state again at this point in the third reading of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill that the Labour Opposition will be supporting the passage of the bill. 
I concur with the Minister’s warm remarks to officials. It is very easy for us parliamentarians as we debate the generalities of the bill to overlook the amount of detailed consideration that has gone into even just the drafting of its 800-plus pages. Even the remedial Supplementary Order Paper is over 50 pages long and there are other Supplementary Order Papers as well. The fact that typographical corrections and changing commas took 50 pages reflects the volume of work involved. It is really extraordinary. Leafing through the bill I see that every page has its highlighting underlining and revision tracks and every paragraph matters because millions of dollars’ worth of taxpayer funds rest upon such things. We are highly reliant on the good offices of our very dedicated officials and advisers and I join with the Minister in thanking our excellent team. The public are so much better off for the quality of work that has been rendered. I hope the officials and advisers will pass on the thanks of all parties in Parliament to their colleagues for this mammoth piece of work. 
Here the out and out bouquets stop. I think it has been well reflected in the discussion that the process of getting the bill to the third reading could have been on reflection a little bit better. The Minister reminded us that the first reading of the bill was in August 2008 following its introduction in July. There had been working papers and an extensive consultation with interested organisations in advance of that introduction. The bill was referred to the Finance and Expenditure Committee and then the general election happened. I do not know whether it is fortunate or unfortunate but given the election loss at least off the good ship  
Labour Government 
 there were a few lifeboats and the Minister of Revenue took one of them. He managed to steer the bill on its passage through Parliament. The issue was whether the select committee had the time to do justice to the bill and I do not think the dedicated members or even our excellent chairman Mr Foss would in their heart of hearts be able to attest that we were able to give the depth of scrutiny that we would ordinarily like to give to every page of this bill. 
The ambit of the bill if I might take a minute to reiterate themes that I attempted to summarise late in the Committee stage is broad. The commentary on the bill states: “We do not consider it desirable to put a number of very distinct and significant proposals into one bill simply because they relate to one area of law.” The reason is that even a third or a quarter of this volume would have been more than enough for a select committee process to get its head round. Having said that the bill provides for the important reform of international tax rules particularly in respect of controlled foreign companies. The bill regularises and extends life insurance taxation rules closer to the accounting treatment of life insurance portfolios and particularly around modern practices in that respect. It provides for payroll giving; I think parties around the House agree that that is a good way to assist the charitable sector. Taxation of emissions units is provided for. The definition of “associated persons” has been tightened up a bit in the Committee stage. The tax treatment of relocation payments and meal allowances has been optimised. 
There has been significant discussion about the provisions for tax treatment of petroleum mining. Let there be no mistake: in the earlier Committee stage discussion the Labour Opposition strongly supported the Government’s moves to close this egregious loophole which has been ruthlessly exploited by members of the international petroleum industry. I say shame on them for pushing it that close to the line. When one pushes things that close to the line the line gets moved because officials and parliamentarians have a responsibility to stand up for the public interest. So I hope there will be a lesson in that to the market. Labour raised the issue of an unintended consequence or potential unintended consequence. Enough has been said about that issue except that we will hold the Government to its indication of a willingness for there to be a good-faith process with officials on the basis of the common law position. 
It is incumbent upon me as Labour’s finance spokesperson to say that the country is pressed upon by many serious taxation issues not all of which are of the technical nature of even the international tax rules contained herein. New Zealand has in the latest month achieved a vast improvement on our current account deficit. It is only 6.6 percent of GDP this month; that is still bad in most people’s books. Our national debt is in net terms up to 100 percent of GDP and nearly 150 percent in gross terms. This country has to deal with some significant issues. In summing this up I guess Labour has a concern that this bill is a tome of necessary technical and somewhat rushed amendments and that this House is not giving its attention to the priority tax matters. 
What are those priority tax matters? Well there was very interesting debate around Budget 2009; there was great reference to the international credit-rating agencies and the reports for example of Moody’s Standard and Poor’s and Fitch Ratings. Although they came to different conclusions on whether we needed to have our ratings changed they all made the same underlying points: they had counted upon the Government’s fiscal prudence not just because it is a good thing in itself but because it was papering over the cracks of an economy that is fundamentally not saving enough and not exporting enough. How does tax policy play into that? Well we know that we have to innovate more. The rating agencies have made it very clear that we cannot diversify our economy unless we improve our rate of innovation. That means that the tax rules have to better support private sector research and development. The previous Government met the OECD average but private sector research and development was at less than a third. That is why the research and development tax incentives were critical. We cannot see an alternative push from this Government to come up with some better idea. If it in some way did not like the way the incentives were crafted I ask that we have a mature discussion in the national interest about how to carry our research community and our primary sector forward. 
Similarly although it is not a tax matter the Government canned the Fast Forward Fund but has not come up with an equal alternative. KiwiSaver in terms of tax matters saw the employer subsidy withdrawn and the Crown subsidy cut in half. There is a tax-related element to those changes: they were done to fund the 1 April tax cuts. Those income tax cuts dropped the top tax rate and changed some thresholds but the bottom line was that a third of the benefit went to the top 3 percent of earners. The top 3 percent have the lowest marginal propensity to consume and therefore the least multiplier effect during the recession. The cuts did not make equity sense they did not make tax policy sense and they did not make macroeconomic sense. 
We talked about emissions units in this bill. We have the bizarre spectacle this week of a Government that seems to be falling over itself to do some very strange deal with Te Pati Maori at a time when the Maori Party has given nothing more than a nod to the bill going to select committee with no promise of support after that. That might look like a bad deal. I think that the Government apparently gave the Maori Party precisely zero in return for that nod other than indexing benefits which if common media parlance is to be believed were already indexed. The real problem with the emissions trading scheme is that there is no cap on the trade and that means that the Crown’s exposure to the fiscal loss—the tax loss—alongside that is unlimited. The more the pollution is the more the tax subsidy will be. That has to be amongst the most perverse taxation effects this House has considered for some time. Finally of course the manipulation of the carbon price for different public relations purposes will leave the taxpayer—the fisc—picking up the difference between the cap on the carbon price that is used and the international price. That is a severe exposure. 
Although much in this bill is to be recommended and although the process could have been better my final word in this debate is to ask Parliament and to ask the Government to respectfully lift its sights because this country faces absolutely critical issues for our economic future. Although this bill makes a useful contribution to the modernisation of some tax rules it has skirted around the fundamentals just as Budget 2009 did. We look forward to a sensible discussion with the Government about the next steps for our tax system and the contribution it can make to guarantee a prosperous and independent future for New Zealand.