Wong Pansy: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading 
Wong Pansy: Taxation (Base Maintenance  and Miscellaneous Provisions) Bill — Second Reading 
[Volume:626;Page:21436] 
PANSY WONG (National) 
: 
 National supports the Taxation (Base Maintenance and Miscellaneous Provisions) Bill but let us reflect on the raft of taxation legislation that has been coming before the House in the last 3 to 4 years. In 2004 the House passed the Income Tax Act 2004 which is over 1000 pages long. That Act tried to tidy up and combine all the amendments. Since then a lot of taxation legislation has come before the House. Last week we saw another one the Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill go to the Finance and Expenditure Committee for consideration. The issue that I want to bring up is the raft of taxation legislation that has come before the House. Some pieces of legislation are unavoidable; we have a lot of understanding for the ongoing tactics by some corporations to minimise taxation. But one can argue that others would be avoidable if we did not have such a complicated tax regime. 
 That tax regime is further compromised because the Labour Government is continuing to use it also for targeting activities or for influencing behaviour. Every time that is done we find that tax legislation becomes even more complicated. 
Let me demonstrate by saying that it is well known that Government MPs and Cabinet Ministers are always standing up and saying that Labour is intending to reduce compliance costs—which include taxation—in its legislation. But the truth is if we look at the estimates we see that the Inland Revenue Department is telling us it has put aside $3.25 million to set up a unit in order to familiarise small to medium sized enterprises with their tax obligations and educate them so that they understand them. 
Tonight we are debating legislation that once again runs to 170 pages which is why that special unit will have to be set up in order to familiarise and educate those small to medium sized enterprises; that to me is not simplifying compliance tax. 
The other complication the Labour Government is introducing is an increase in the Inland Revenue Department’s workload in terms of delivering social welfare issues. For example $66 million has been set aside for the Working for Families package so the more the Inland Revenue Department’s workload has been diverted to purposes other than the collection of tax the more complications we have in terms of debating taxation legislation. 
To demonstrate that once again in the estimates of the Inland Revenue Department we find that it has allocated $117 million for information dissemination etc. The assessment of tax on the other hand is allocated $66 million which in itself tells us that something is not going very right for the Inland Revenue Department which is set up to collect tax supposedly to finance necessary Government expenditure. 
One of the most controversial or high-profile issues contained in this Taxation (Base Maintenance and Miscellaneous Provisions) Bill relates to what we call the thin capitalisation rules which are meant to close the loophole of foreign-owned banks that claim excessive interest expenditure. We support that. 
I also ask the House to reflect on the fact that on one hand our Inland Revenue Department says that it wants to close loopholes and that it does not want foreign-owned banks to take advantage of our taxation legislation—indeed one of the Inland Revenue Department’s objectives is to enhance and promote compliance with our taxation law—but I cannot help reflecting on the other hand that our State-owned enterprise Transpower has apparently entered into a financial transaction about which today the Hon Michael Cullen has not seen fit to share information with us in terms of whether that transaction really does not cost New Zealand taxpayers. 
There is an ethical issue involved; we are passing legislation today to ensure that foreign-owned banks do not take advantage of loopholes in our tax legislation so one has to ask what sort of example our State-owned enterprise is setting in its undertaking. I actually asked the Inland Revenue Department whether it conveyed the message of tax compliance to State-owned enterprises to ensure they do not enter deals that could be seen to be taking advantage of tax loopholes both here and internationally. Quite interestingly the answer I got back from the Inland Revenue Department was that it treats State-owned enterprises in the same way it treats any other corporate taxpayer and the department always tries to encourage self-compliance with legal requirements and provides assistance to do so. 
I asked about the types of deals but the Inland Revenue Department in talking about the types of investments State-owned enterprises would make said that that was not a matter for the department—correctly so. Those enterprises are responsible to the guidance set by shareholding Ministers. But the Inland Revenue Department continued to say that any encouragement or guidance regarding tax compliance directed specifically at State-owned enterprises has to come from shareholding Ministers. 
It is interesting that the Inland Revenue Department then went on to say that it was aware that such guidance had in fact been provided. So I am really looking forward to seeing during the Committee stage whether the Minister will disclose to us so that we can see whether we are adopting one law for all and whether all State-owned enterprises in return are also observing or complying with legislation in the spirit of paying their fair share of taxation. We are looking forward to asking those specific questions during the Committee stage. 
As I mentioned National is supportive of this bill and we welcome some specific provisions. But in saying that we also say that every time we look at the provisions even the provisions we support we find that the compliance for the tax provision is complicated. The National Party has promised ultimately that it will cut the company tax rate and also personal tax rates because that is the only way to achieve more simplified taxation legislation. 
When company and personal tax rates are set at high levels there is so much incentive for tax advisers individuals and companies to spend a lot of their energy in engaging in tax arrangements. I remember being an accountant myself that in the late 1990s my accounting colleagues told me that they were actually spending more time in doing management consultancy and in helping companies to grow but ever since the Labour Government put up the personal tax rate a whole raft of tax advisers and consultants have come into play and tax compliance has become complicated—[ 
Interruption 
]—as the Labour member yelled out—which is why we have been constantly brought back into this House to debate tax legislation. I think that any Government that wants its private sector and others to concentrate on expanding their businesses should bring taxation down.