Parker David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeParker David: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Second Reading[Sitting date: 05 December 2013. Volume:695;Page:15320. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Deputy Leader—Labour): One of the notable matters in respect of this legislation the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill which was not unduly delayed at the Finance and Expenditure Committee—indeed it was reported back within a reasonable time by the select committee and has been put on the Order Paper by the Government reasonably promptly thereafter. Yet between the time of its first reading and now a lot of political events have happened. It was introduced by the Hon Peter Dunne whose dishonour was later highlighted by the Prime Minister who removed him—John Hayes: Don’t be uncharitable—it’s Christmas-time.Hon DAVID PARKER: “Don’t be uncharitable at Christmas-time” I have heard from Mr Hayes. Well charity should go only so far and the National Government is always talking about how there should be limits to the beneficence of the Government. To see it being contemplated that Peter Dunne having been forced to resign for having leaked theKitteridge report—according to the Prime Minister there is now the possibility that to keep his shaky coalition going and to maintain some sort of prospect however slim of winning the next election he will shoehorn Peter Dunne back intoŌhariu. The Prime Minister is now saying that Peter Dunne is a person whom he might reinstate perhaps back into revenue which I would think would be a diabolically low standard.In respect of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill I note that we are voting for this legislation because it does have some good remedial provisions. But I would also note that that should not be taken as acceptance by us that the annual rates of income tax for the 2013-14 year which are effectively set by clause 3 of this bill and include the tax cuts of the National Government in the last term were fair. Forty percent of them went to the top 10 percent of income tax earners and this bill entrenches the effect of that by continuing that circumstance into the future.Of course that is one of the reasons why New Zealand has the highest rate of inequality that we have had since good records began. It is one of the reasons why that inequality continues to grow. And if people were already worried about the effects of inequality they would have been doubly concerned when the report came out with the international measurement of educational performance this year which showed a dire decrease in the educational performance of 15-year-olds. That is not all the fault of this Government but some of it is the fault of this Government given that 5 years into this Government those results are poorer than they were the last time they were reviewed most significantly in maths and science. Of course according to the report that is in part driven by increasing inequality. That is not the only reason for it but an important part of the reason for declining educational performance in New Zealand schools according to that report is increasing inequality. Of course the tax rates that are referred to in clause 3 of this bill are one of the causes of that rising inequality.My colleague David Clark referred to the remedial matters that are addressed in this bill and then started to list some of the remedial matters that ought to be in the bill and are not and that threaten our tax base and undermine the strength of our economy. I want to mention a couple more. We have now known for more than 5 years—admittedly it would have started before the end of the last Government but it has become far more prevalent a problem—that revenue is being taken out by overseas companies from the New Zealand economy without their paying tax on the effective profits they make in the New Zealand jurisdiction.In the last 5 years since this Government has been in power we have seen the explosion of the internet as a source of commerce and we have seen increasing advertising revenues being garnered from the New Zealand economy by Google and byFacebook to name but two. Virtually no tax is paid by those entities on the revenues that they take out of the New Zealand economy. That is wrong both in a tax fairness sense in terms of the loss of revenue to the Crown but also perhaps more important in its effect on New Zealand - based businesses that employ people in New Zealand and that do face a tax burden. Whether it is the Fairfax Group or the APN group which employ journalists—including the journalists whom we rely upon in the press gallery here to keep democracy honest and to present to the New Zealand public the differing policies that different parties stand for—or other groups they are being severely and I do mean severely disadvantaged relative to groups that do not pay taxation in New Zealand but compete with those newspapers radio stations and television for advertising revenue and do not pay tax on it.I think it is very very lax of the Government to have done nothing effective to control that tax avoidance. This bill does not do that. This is a complaint I hear from New Zealand businesses in Auckland including big businesses successful business people and men and women who complain that it is not fair that there is so much multinational tax avoidance. Transfer payments are being made to overseas jurisdictions in order to limit New Zealand profits and therefore taxes.John Hayes: Table the evidence of what you’re saying.Hon DAVID PARKER: Mr Hayes might not understand this but he should pay attention because it is happening not just with Facebook and Google; there are transfer payments that are being made in respect of intellectual property transactions for example. Trademarks and things are being used to take revenue out of New Zealand to overstate New Zealand expenses so as to decrease notional profits and taxable profits in New Zealand and therefore to decrease taxation in New Zealand. Again that is not fair to other taxpayers because those other taxpayers have to effectively pay the taxes that the Government needs in order to fund pensions education and health services. That burden falls on other taxpayers; it does not disappear. Neither is it fair to the New Zealand - owned companies that do not play the same tricks and do pay a higher effective rate of taxation.The hollowing-out of New Zealand’s corporate tax base in this way is something that I am not surprised that National does not pay much attention to. We know that National makes lots of unprincipled decisions in this space whether it is for RioTinto paying a $40 million subsidy in order to get the Meridian Energy sale off the books—John Hayes shakes his head but he seems to have missed that one as well. That happened—John Hayes: Christmas Grinch aren’t you?Hon DAVID PARKER: What is that?John Hayes: Christmas Grinch.Hon DAVID PARKER: I am the Christmas Grinch according to John Hayes. Actually no. You know if that $40 million sat in the Government’s accounts the Government would be able to do $40 million worth of good things for New Zealanders—quite the opposite of being the Christmas Grinch. Another example where we have had poor practice which in effect wastes taxes is in the corporate welfare that we are seeing and have seen in respect of other corporates from the big end of town whose interests are preferred by National.I want to say some positive things in respect of the bill because we are voting for it. There are two notable things for me. I do think that the prior rules that related to the taxation of foreign superannuation funds were wrong. They were discouraging people from transferring money in. They were so complex that most people could not understand them and a lot of people accordingly ignored them. There was therefore a difficult policy decision to be made. Because the rules were so arcane at one level we had a bit of sympathy for people who were not meeting those rules. On the other handwe ought not to be rewarding people for not voluntarily complying with their tax obligations. This bill tries to strike the right balance collect some tax get people into the tax system but not unduly penalise them and not make them too well off compared with the people who did despite complexity meet their tax obligations. I think we have got to the right position there.The other point that I would support is some of the other changes made to ensure that if someone says that they have got a right of mining expenditure at the exploratory phase because the mine was not going to proceed but then miraculously finds that they can develop the mine then the tax deductions that they have had at the exploratory phase ought to be written back. They ought to have to amortise them over the period of the mine rather than just keep the money that they have had the benefit of from the earlier tax deduction.