Copeland Gordon: Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — Second Reading 
Copeland Gordon: Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — Second Reading 
[Volume:606;Page:3895] 
GORDON COPELAND (United Future) 
: 
 I rise in support of the second reading of this important bill. Many of the bill’s provisions are non-controversial and are aimed at both reducing compliance costs for taxpayers particularly businesses and clarifying areas of uncertainty with regard to the present law. These provisions will be welcomed by all taxpayers.  
For example the provisions relating to charities will I believe be welcomed by that important sector. The change made is relatively minor but it is a precursor to the Government’s announced intention to establish a charities commission that will register and monitor the activity of that sometimes under-appreciated sector of New Zealand society. It is a sector that United Future wants to see strengthened in every way possible because it is so fundamentally important to the functioning of a robust civil society. For example research estimates that a dollar of social benefit delivered to families and individuals through charities would cost the taxpayer $2 were it to be delivered through the Government bureaucracy. Peter Drucker the guru of modern management and organisational excellence has concluded that charities are the most efficient organisations ever devised.  
There is one aspect of this bill however that has proved to be controversial and it relates to the new Maori authority tax regime. That has been signalled already by Dr Cullen and was well exemplified by the speech we have just heard from the Hon Lockwood Smith. It is a pity that this has become controversial because from a tax policy point of view the matter is clear and straightforward. The new rules simply align the rate of tax paid by a Maori authority with the marginal tax of its beneficiaries. In this particular instance a 19.5c in the dollar rate has been struck because that is the rate that will be paid by 90 percent of those beneficiaries. This in my view is exactly right in principle just as it would be right for a rate of 39c in the dollar to be struck if 90 percent of the beneficiaries of Maori authorities were in that tax bracket. Business New Zealand and other submitters to the Finance and Expenditure Committee expressed their wholehearted support for the new Maori authority regime and specifically asked the Government to extend its principles into other areas such as superannuation and life insurance funds so that there too the tax rate paid will coincide with the marginal tax rate of the members of those funds. Dr Cullen has indicated that at least in principle he agrees with those submissions.  
However the point I want to emphasise is that Maori authorities as defined in the bill are a reality and have their origins in the culture and customary practices of Maori prior to the arrival of other races in Aotearoa New Zealand. 
If our history had been different and the authorities involved were Vietnamese Chinese English or Scottish then that would not alter one iota the principles involved and any pretence to the contrary simply does not stand up to the analysis of common sense. In my judgement it is mischievous and shallow to attempt to classify the situation as an example of race-based laws. In that connection I add that it is also the conclusion of well-known tax commentator by the name of John Shewan of PricewaterhouseCoopers who has also come out publicly and said that this is not an example of a race-based law.  
However the other discussion on this issue centred on competition—the point dealt with by Dr Lockwood Smith. The argument was that the 19.5 percent rate for Maori authorities would give them a competitive advantage over other types of businesses that may be paying tax at say 33c or 39c in the dollar. I felt that argument was put to bed very clearly by Robin Oliver the general manager of tax policy for the Inland Revenue Department. He pointed out—in my view entirely correctly—that so long as we have a progressive tax system in New Zealand determined by income bands then similar organisations with relatively higher or lower tax would end up paying tax at different rates.  
Let us take an example. Let us suppose that there are two sole-trader panel-beating shops operating alongside each other. One shop is not faring too well and its owners are paying tax at 19.5c in the dollar. For the benefit of Dr Lockwood Smith I would like to point out that it does not matter whether that panel-beating shop is owned by a Chinese a Vietnamese a Scotsman or an Irishman—it has nothing to do with race. The other shop is a roaring success and its owners are paying tax at 39c in the dollar. [ 
Interruption 
] I am responding to the member’s challenge to Clayton Cosgrove to name any business owned by other than Maori that would be paying tax at 19.5c in the dollar. I am saying to him that any sole-trading panel beater of whatever race who is in that income bracket will pay tax at 19.5c in the dollar. In those circumstances how can we claim that the business paying the higher tax rate is at a competitive disadvantage? In fact it is obvious that it is exactly the other way around and that the poorer business—the guy who is making less money—is struggling. That exactly parallels the situation here.  
Whilst it may be true that profits retained by the Maori authority at least from a timing point of view attract tax at a lower rate than income retained by businesses paying say 33c in the dollar that is only one side of the coin. The other side alluded to in my example of the panel beaters has to do with the overall wealth of the organisation and in particular its access to new capital funding. When it comes to new capital Maori authorities are in reality at a competitive disadvantage for two reasons. Firstly as mentioned above 90 percent of their shareholders or beneficiaries are in the lowest income tax bracket—hardly a fruitful source for new equity. Secondly lending institutions are sometimes more reluctant to lend or lend at higher interest rates because of the communal land ownership structures that are a feature of these organisations. Personally I am entirely satisfied that when we look at the bigger picture the competitive argument can safely be dismissed.  
Perhaps I could conclude by emphasising how important it is for Maori business in New Zealand to flourish. As a nation we have growth aspirations and that will not happen unless Maori business also lifts its game and becomes more profitable. For that reason I would be very satisfied indeed if I should live to see the day when 90 percent of the beneficiaries of Maori authorities were paying tax at the top end of the bracket rather than at the bottom. United Future will support the second reading of this bill.