Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First ReadingText is incorporated into the Bound VolumeTaxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First Reading[Sitting date: 10 March 2015. Volume:703;Page:2101. Text is incorporated into the Bound Volume.]Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) BillFirst ReadingHon TODD McCLAY (Minister of Revenue): I move That the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider this bill. The purpose of this large omnibus bill is twofold. First it continues the Government’s work in supporting New Zealand businesses to grow by delivering the initiatives and the policy reforms that will help to create a more productive and competitive economy. Second it focuses on the important job of maintaining the tax system over time so that our tax rules remain clear certain and current and so that they work as intended for all taxpayers. With both these considerations in mind the principal items in the bill deliver important changes to ensure that the current tax system does not get in the way of innovative start-up businesses investing in research and development.Proposed changes to the tax rules for research and development were announced in Budget 2014. As part of the Government’s Business Growth Agenda they focus on enabling business innovation. The first set of proposals that the bill deals with are timing difficulties for small innovative start-up firms. These businesses are often unable to use their tax losses in a timely way—or at all—because the tax rules require them to carry their tax losses forward to deduct against future income. For innovative start-up companies this can pose a significant barrier to undertaking research and development compared with larger firms which generally have the ability to offset losses against existing income streams. For this reason the bill addresses this problem by proposing to allow eligible start-up firms undertaking research and development to claim up to 28 percent of their losses from eligible research and development expenditure in any given year. This cash-out will be delivered in the form of a refund and the losses cashed out will be capped at $500000 for the first year increasing by $300000 over each of the next 5 years to $2 million.These proposed changes are intended to provide a temporary timing benefit only and may be thought of as being in the same category as an interest-free loan from the Government. When the business makes a return on its research and development it will be required to repay some or all of the amounts cashed out by either income tax paid by the business or from any gains on a sale. The proposed changes will apply to income years beginning on or after 1 April 2015.Further measures are designed to relieve a problem with the tax rules for businesses undertaking research and development whereby some development expenditure is never able to be deducted for income tax purposes. This sort of business expense is commonly referred to as black hole expenditure. To deal with this problem the bill proposes to enable capitalised development expenditure either to be deducted over time as depreciationor if no depreciable and tangible asset is created including when a research and development project ultimately turns out to be unsuccessful to be taken as a one-off deduction upon write-off for accounting purposes.The proposals in this bill reflect submissions made in response to the Government’s initial proposals to deal with the problem of black hole research and development expenditure. Most significantly the scope of the initial proposals has been widened to also provide tax deductibility for capitalised development expenditure on intangible assets with uncertain useful lives if the intangible asset has been written off for accounting purposes. These proposed changes to the tax rules for research and development will be welcome news for our innovative start-up firms.A third set of changes proposed in the bill will give taxpayers greater certainty over their tax affairs by clarifying the GST rules for bodies corporate. These proposals will give assurance to bodies corporate by confirming that services provided are supplies for GST purposes and by giving bodies corporate the option of registering for GST. This approach should give some comfort to New Zealand’s 13800 bodies corporate on their GST position. Registered bodies corporate will be able to remain registered although those currently unregistered for GST will not be required to do so. This means that the majority of bodies corporate will not need to take any action. There are also several rules to protect the tax base from the adverse consequences of bodies corporate being offered this choice.Although these are the main items in the bill further business-friendly changes are also proposed. These include changes to tax pooling rules to enable pooling funds to be used to meet outstanding interest liabilities arising from an amended tax assessment or resolution of a dispute and to extend the grace period for community housing providers that are removed from the charities register so that they are not subject to the new tax rules on net assets. Other proposals focus on the important task of ensuring that tax rules operate as they should.These amendments reflect part of the tax policy process that reviews the law after implementation to identify any remedial issues that need correcting or clarifying to ensure the original intent is achieved. They include changes to strengthen the controlled foreign companies test grouping rules to prevent unintended tax advantages as well as measures to clarify the tax treatment of income received by individuals from a superannuation scheme residing outside New Zealand.Measures are also proposed to ensure that the intent of the reformed child support scheme is achieved and to focus the Inland Revenue Department’s effort on reducing child support debt which is currently $3.2 billion and rising. This is the first time the system has been reformed since child support was introduced in 1991 and it will deliver a child support scheme that is much fairer to both custodial and liable parents and their children. Along with the changes proposed in the bill it will also ensure greater compliance and a reduction of outstanding child support debt.There are also changes to Working for Families tax credits and the general filing requirements in order to simplify the administration and to remove unnecessary requirements. This includes reversing the filing changes that were enacted in 2012 but are not yet in operation. These changes will be dealt with as part of the Inland Revenue Department’s wider transformation programme. Clarifications are also being made to the recently reformed tax rules relating to Working for Families mixed use assets and employee allowances and to the livestock herd scheme rules.Collectively these changes recognise the importance of maintaining the tax system for all New Zealanders. They are the result of much consultation review and reprioritisation by the Government with businesses and taxpayers so that our tax system remains current and continues to support New Zealand’s economic growth. I commend this bill to the House.Hon CLAYTON COSGROVE (Labour): I must say that I do feel sorry for Todd McClay. He is the ministerial version of the guy walking behind the elephant with the shovel. After 15-plus years of Peter Dunne being Minister of Revenue—I think he holds the record for the person in that portfolio of any Minister of Revenue in the Commonwealth—suddenly we get this piece of legislation and I give Mr McClay credit because he has made the best fist of it. He has polished it up. He has shellacked it a few times. He has got the spin as best he can but I have to say there is the conspiracy theory and the cock-up theory and we certainly have the latter today.He touched on bodies corporate. Well let us have a look at the history of that. On 6 June the then Minister of Revenue announced that bodies corporate were to be deregistered for GST from that date. The result of that of course was that those bodies corporate lost the ability to claim input tax refunds on their expenses even if that expenditure was funded from levies on which GST had already been paid—for example a double tax of GST on the same expenditure. The Minister’s announcement of course overrode the finding in law reached by the Inland Revenue Department. So that was June 2014. This bill that comes before the House is a clean-up is a reversal of that decision. It is a stuff-up a total—Hon Todd McClay: Clarification.Hon CLAYTON COSGROVE: No no it is a reversal. What it means of course is that this was bad policy. It was bad in principle. It was bad process. It overrode the Inland Revenue Department but I have to say that bodies corporate will welcome the sort of reforming zeal of the present Minister of Revenue because he is prepared to reverse it. But you have to ask this: where has the institutional knowledge in the Inland Revenue Department gone and why has it taken—and this is just strike one—the change of a Minister from a veteran to a newbie for us to find about these sorts of things?Then of course we come to the child support issue. So Mr Dunne the longest-serving revenue Minister in a Commonwealth Parliament says that he looked at this issue and the expenditure went from $30 million to $120 million within a couple of years.Hon Damien O’Connor: How much?Hon CLAYTON COSGROVE: From 30 million bucks to 120 million bucks. Now we asked Mr Dunne: “Could you please explain?”. You know it is a bit like Manuel on Fawlty Towers—“Esplain?”. There was silence from a 15-year veteran who took a quarter-of-a-million-buck salary every year for 15 years. Now he has another job and he passed the steamy brown bag with the mess in it to Todd McClay. So then we asked Todd McClay since he took over what has happened. It went from $120 million to $210 million—that has to be some sort of Guinness Book of Records job that one. Then Cabinet decided to paper over the cracks and revise it down to $163 million.Grant Robertson: By not implementing it.Hon CLAYTON COSGROVE: By not implementing it. I was coming to that bit—by not implementing it. So we have got clauses in this bill tonight to roll back Government policy on child support that was trumpeted before the last election because the Budget blew out.I know how tough it is. I have sympathy. Like Mr McClay I was a Minister. There were late nights. You have to read past the executive summary you have to actually ask some questions and you have to know what questions to ask and sometimes at the weekly staff meeting with your officials when you are dealing with IT projects and the like it pays to say: “Are we on budget? Has it clicked up a notch? Why have we gone up a couple of million bucks?”. Mr Dunne probably waited. Maybe it was like Who Wants To Be A Millionaire?—“I will wait until I hit 120 million because we’ve already got 30 million in the locker and then I might wake up and ask the odd question.” Then Todd McClay comes in and says: “No I can do better than that. I’ll wait till it gets to 210 million and then I will go running into the Cabinet room and say: ‘Boys and girls we’ve got a problem. We have to do something.’ ” Then they send the poor chap down here to try to shellac over the problems.So I have to say that this is on top of course of what we now know is a massive blowout—and I look forward to the select committee tomorrow; that will be a cracker—in the business transformation programme. What an oxymoron that is. That is 83 million bucks so you have got $163 million—four times Novopay and counting; at least $83 million that we know of—spent for no gain whatsoever in a “business transformation project”. Well it is transforming all right. It is transforming a lot of money out of the pockets of taxpayers down the toilet and at 250 bucks in stipend per day on accommodation fees and trans-Tasman flights I think it is goingto Accenture to these multiple consultants who fly over every day who write papers and do all sorts of things. It is transforming the Inland Revenue Department. It is transforming it into the best example that we have had since INCIS. So we have had Novopay. The Government has not learnt anything from that. And we now have a budget blowout which we are trying to peel back tonight of 163 million bucks. What has the Government learnt from Novopay? Zero.So I have got to say that I have some sympathy for Todd McClay tonight. He has been sent down here. He has been given the hospital pass. Although he has got associate trade so fair go that must be the sort of gift that keeps on giving. That will get him out of the revenue portfolio when Tim Groser heads off to a diplomatic post at some point. So maybe that is the consolation prize for taking the bullet and taking the hit tonight.But this is serious. This is serious. Who is accountable Minister for the $163 million blowout? We asked some questions last week and not one Minister—not yourself or your 15-year veteran predecessor—would ante up and tell the taxpayer how this blowout occurred. There was some waffly explanation about depreciation and the capital charge. All that proves Minister is that your department has spent a chunk of dough a big chunk of capital. But there is no explanation at all; no accountability. Maybe tomorrow at the Finance and Expenditure Committee we will get some sort of explanation out of the Minister’s departmental head the Commissioner of Inland Revenue. But one would have expected a Minister—although again I have got sympathy for Mr McClay. I think Mr Dunne is around here somewhere in the ether. He is very happy to wax eloquent on all sorts of other issues except a 15-year legacy of hundreds of millions of dollars of blowout under his watch. But at least he had the ability to admit that he sat there and watched it go from $30 million to $120 million and did nothing. He did absolutely nothing.The other measure that has been waxed eloquent on is the research and development so-called cash-out. Here is the difficulty Minister and I will be very interested to hear what your officials have to say on this. Given this is a highly complex instrument that is based on shareholding based on labour to research and development ratios and a whole series of complex formulae not even consistent with the general definition of research and development has he taken into account the need of small to medium sized enterprises—if they want to participate in this—to have a bucketload of professional expensive accounting advice? I can remember the words of Bill English when we were in Government and we introduced proper research and development tax credits. Bill English said: “This will be a joy for the accountants. This will be a joy for the accountants and the tax lawyers. They’ll make all the dough.” Well I wager that no small to medium sized enterprise Minister will be able to deal with this and take full advantage of this unless it has the resources to go and seek expensive tax advice. This is not simple. Small to medium sized enterprises require simple transparent legislation that is workable. It may be well intended but I would put it to this Minister that it is unworkable.So what we have in conclusion tonight is a botched series of policies embarrassing reversals paper-overs some shellacking by the Minister rolling back of many of the parental clauses simply to save money and tinkering around the edges. But the taxpayers have one little bit of certainty. They know that this Minister took the bill from $120 million to $210 million and then revised it back to $163 million and his predecessor took it from $30 million to $120 million. There were no questions asked—because he would have told us—no holding the department to account no saying: “I want to know if we’re going off the rails.” or: “The million-dollar mark is clicking up. No I’m going to monitor this closely.” There was not a thing—asleep at the wheel. Solid Energy I suspect Mark II. And they send the junior Minister down here to try to paper it over at 9.30 at night hoping everybody is asleep.I say Minister that we will support this going to the select committee because that is the tradition with these tax bills. But this will come under close scrutiny. I suspect we will have a large number of submissions from small to medium sized enterprises from the tax fraternity and from others. We will await with bated breath some sort of explanation from the Minister in the chair or maybe—he is around here somewhere—from his veteran 15-year predecessor who went “ker-ching” every day and let the cash flow out of the taxpayer’s pocket down the proverbial.DAVID BENNETT (National—Hamilton East): It is a pleasure to take a call on the first reading of the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill.Hon David Cunliffe: More breaks for dairy farmers.DAVID BENNETT: Well it is not actually. If you actually read the bill and looked at the livestock—Hon David Cunliffe: Prove it.DAVID BENNETT: Well we will go to the livestock section then. This is coming from the former leader of the Labour Party. There is what is called a capital gains tax in dairying and that is on stock. And that is the only capital gains tax you have apart from where you sell property within 10 years. So go and see that one Mr Cunliffe and see what it actually means. Mr Cunliffe would love to be able to extend that. But there is something in this bill around the herd scheme livestock and that is around the valuations—that taxable status that you get under the herd scheme for increases in value. So I think Mr Cunliffe should read the bill rather than make accusations in the House.We look forward to this bill progressing through the select committee. I think members of the Finance and Expenditure Committee would like to get their teeth into it. I look forward to working with our officials from the Inland Revenue Department who no doubt will be able to give us some good advice and with the submitters who come to the committee and who will no doubt have their own opinions on how this bill would be presented in the best way possible.The previous speaker the Hon Clayton Cosgrove did not really focus on the bill but there was one thing at the end of his speech that he did talk about and that was the need for some kind of simplicity in tax law. That is a very difficult thing to achieve especially when you are looking at things like deductions and especially in areas like black hole expenditure or foreign investment funds or in research and development. They are not easy areas to deal with in our tax law. They are not things where you can set the simplest of rules and expect to actually have compliance or to actually achieve their purpose. But this bill does look into those three areas along with other areas and intends to provide solutions in that area.One of the first areas that was talked about by the Minister—and it was mentioned just before—was the research and development cash-out tax credits. Basically under the changes that have been looked at in this bill there will be some changes around that to enable research and development - intensive start-up companies to have early access to all or part of their tax losses in the form of a cash receipt rather than carrying those losses forward. So that would be a big advantage to many small or medium sized businesses in New Zealand that feel as the Minister said that they cannot carry those losses forward and have other revenue that would take account of them. So this is something that would be to their benefit.Another area that has been mentioned is in regard to black hole expenditure. The proposed amendments would enable capitalised development expenditure either to be deducted as depreciation or to be deducted upon the intangible asset being written off for accounting purposes. Those amendments would provide relief for black hole expenditure on both successful and unsuccessful research and development. So that is another thing that would assist small and medium sized businesses—and actually larger businesses as well—in terms of that business expenditure that previously was not immediately deductible and was part of the cost of the depreciable asset for income tax purposes and therefore could not have been deducted as depreciation.There are also the GST and body corporate changes. These are to give some clarity to organisations in that area. There are some concerns and some impacts on GST registration for bodies corporate from a tax accounting point of view. This bill seeks to give clarity in those areas so that the bodies corporate have better tax positions in the sense that whether they are GST-registered or not the approach to GST is primarily neutral from a Government perspective. The amendments also include rules on the tax base for any adverse consequences from those changes. This is something that should assist bodies corporate and should assist the Inland Revenue Department in the management of those bodies corporate as well.Those things are significant. They are delicate and detailed tax treatment areas that in many cases will inevitably require professional advicefor many firms. But that is the nature of much tax advice and we should not say that we cannot make these changes or make legislation in this area just because it is going to need professional advice because it is a very complex area. That is something that often happens in this area. Also some changes—Hon David Cunliffe: This is the member’s worst speech of the year.DAVID BENNETT: Well Mr Cunliffe are you up next? I would like to hear your speech.Grant Robertson: Somebody’s trying to avoid talking about something.DAVID BENNETT: Oh that is from the arts graduate who could understand the poem given to us but that was about it.So there are also child support reforms and—Grant Robertson: Oh here he goes.DAVID BENNETT: Yes and—Grant Robertson: Tell us about those.DAVID BENNETT: Well those reforms are going to be great. Basically they should ensure greater compliance and a reduction of child support debt and that is something that all political parties in this House would be looking for. That will be done by clarifying the penalty and write-off rules to ensure that they operate as intended and by bringing forward the commencement of some of the write-off provisions. There have been some changes around child support legislation in this bill which assists in the tax planning.Also there are some other changes in regard to international-type tax treatments. For foreign superannuation there are some changes in regard to the tax treatment around foreign investment funds and also controlled foreign companies. Controlled foreign companies and foreign investment funds are complex areas that often do involve changing legislation as the Inland Revenue Department gets to grip with the changing nature of how business operates in those areas. So this is part of that process of trying to make sure that those rules are as fair and as accurate as possible. There will be some changes around the areas regarding the controlled foreign company test grouping rules and one of the changes is in regard to the acquisition and disposal of a group of controlled foreign companies part-way through an accounting period. So there are a number of changes in that area that would be important in the context of tax.The Working for Families tax credits—there are also changes made here in regard to deposits made by persons in their associated companies and trusts in the main income equalisation scheme. So that is part of the change in this bill as well. Then there are a lot of other minor changes including some issues around the herd scheme tax pooling provisional tax disputes and other parts of the tax system.So overall this is a bill that will cover a lot of tax areas. The main areas are research and development black hole expenditure and child support. Those are the fundamental areas that are being addressed in this bill. But it also covers off a number of other issues that you find in the tax system and this is normal for a tax bill at this stage. There are always some tax planning bills that have to be passed that will encourage a better system and a more accurate ability for us to collect tax also for taxpayers so that they have greater certainty and also so that we get the right payment of tax by the right people. Thank you.GRANT ROBERTSON (Labour—Wellington Central): Is it not interesting that in the two contributions that we have had from the Government speakers so far they have devoted a grand total of around 30 seconds to Part 1 of this bill which is around child support. There is a reason for that. What we discover when we look at the regulatory impact statement and we cast our minds back to the Child Support Amendment Act of 2013 is that Part 1 of this bill is about trying to clean up one of the biggest messes that we have seen in the administration of government in many years. We are talking here about a patch-up job to make sure that there is only additional expenditure of $163 million. That is how bad it has got—it is actually an improvement on the situation when an additional $163 million has to be shelled out.Part 1 of this bill relates to measures around the changing of collection of child support that were supposed to be implemented by 1 April 2013 then by 1 April 2014 and are now being implemented already today for 1 April 2015. And this legislation will not have passed by then so it will be retrospective legislation on legislation that was meant to have been passed 2 years ago. This is incompetence. This is incompetence that is costing New Zealanders hundreds of millions of dollars and it lies at the feet of this Government and of the revenue Ministers Mr Dunne and now Mr McClay.Do not think that this will stop at $163 million because what lies at the heart of the problem here is a capital project—an IT project at the Inland Revenue Department—that is out of control. No one on that side of the House over the last 3 or 4 years has had their hand on the wheel of this project and it has spiralled and spiralled out of control. We are talking about a billion-dollar IT system upgrade that the Inland Revenue Department claims it needs and the costs just keep on increasing. It is going to make Novopay and the stuff-ups around Novopay look like a rounding error in David Bennett’s cheque book reconciliation. This is the biggest stuff-up that this Government has overseen and more details of it will come out.What we learn when we look at the regulatory impact statement on this bill is that the original cost of implementing these child support reforms was $30 million—a big price tag. There were people in the Inland Revenue Department at the time who baulked at that cost. But what is interesting is that as the business case was developed the costs escalated to $120 million—a huge level of expenditure. As those costs escalated one of the reasons they did—and this is from the regulatory impact statement—was that “One of the main assumptions in the business case was that the vast majority of expenditure would be operating cost.” So that means that at the get-go the Government did not even realise that fundamentally changing the way it collects child support might have some IT impacts and it might actually mean that the old clunky Inland Revenue Department system was not going to cope. So the cost escalates from $30 million to $120 million and then as 2013 and 2014 go on as small changes are made to the bill the cost escalates out to $210 million of extra expenditure.We are raising questions in the House every day about how Bill English is going to scrape through to a surplus. Well he has got big problems coming down the line here—here is another $163 million. So it goes out to $210 million and Todd McClay comes in on his white horse to save the day by choosing an option that delays part of the child support reforms. So actually it is not like we are saving the money; the Government is just not implementing part of the reforms. So actually it is still costing $210 million; it is just that today we are approving spending only $163 million of it. This is a shambles and Peter Dunne and Todd McClay have to answer some questions about where the oversight was. Did the National Government learn nothing from Novopay? Did it learn nothing from INCIS? What we have seen here is poor incompetent management of taxpayer money and every head on that side of the House should be down because this falls at the feet of the National Government—the people who tell us that they are great managers of the economy the people who shout and scream across at parties on the other side that they think have ideas for expenditure that might cost a bit of money. Well look after the $163 million. We are not taking it from the National Government any more. This is straight-out incompetence.When we actually go through and look at what was said at the time the Child Support Amendment Bill was passed—and I do want to give credit to the Labour Party members who when the bill went through in late 2012 actually raised with the Government the issues with the implementation of the system. The Labour members said in the minority report: “We continue to have concerns about the adequacy of [the computer system] at Inland Revenue … The Prime Minister admitted [that the system is not up to this]”. It goes on to talk about the fact that although the Inland Revenue Department suggested there would be implementation issues it thought that it could deliver this. It could not. It did not work and no one on that side of the House was keeping watch over the expenditure of taxpayer money.So what we find ourselves with now is a bill that is in front of the House to try to clean up this mess. And we are going to have Government speaker after Government speaker talking about anything else other than that. Yes there are some other measures in this bill that are worthy of consideration and that we must look at. I am sure that other colleagues will talk in more detail about the issue around research and development. But we have had calls consistently from the business community for a simple solution on how to encourage and support research and development and on how to make sure that those companies at the beginning of their lives can invest—but not just at the beginning; onward throughout a company’s life so that they can continually make investment. Companies want certainty; they want simplicity. That is why the Labour Party has consistently proposed a 15 percent research and development tax credit. What we have got in front of us here is a complex system that will benefit a small number of companies and nobody is completely clear yet about how it will really operate.This was an opportunity for the Government to actually adopt a clear and consistent policy. It is worried about the fact that business wants something like the research and development tax credit. But what is being proposed here is a fraction of that in a more complicated way and we will obviously want to ask questions about that when the bill comes back before the House. We recognise on this side of the House that the best kind of tax system is one that is fair one that is simple and one that is appliedconsistently and where there is avoidance it is followed up. There is a failure in this bill on two significant counts on those core principles of a tax system. The first of those is the failure to come up with a decent idea on research and development and the second of those is a child support system that is completely out of control.I might say that electorate MPs from all sides of the House I imagine—and perhaps some list MPs as well—will have been starting to get people coming into their offices in recent days as the first letters about this new system are going out. And there is confusion—there is complete confusion going on. There are so many issues here that we believe the Government has not thought through properly. When the Child Support Amendment Act that is being amended through this bill went through minority reports were issued by the Labour Party the Green Party and New Zealand First. All of us raised concerns about adequacy of payments and about the implications particularly for women of the changed apportionment of care costs. The 28 percent shared care threshold in the legislation is low. It is going to provide a significant concern for a number of parents and they are the ones showing up now in offices saying: “How is this fair?” yet here we are in March 2015 with the legislation finally in front of us for that very thing. It has been implemented in law. People are getting letters telling them that they have got to make these payments and the Inland Revenue Department is not even ready for it. The Inland Revenue Department does not even have a system to manage it today. How could this be managedany more incompetently?We will support this bill going through to the select committee because we have to sort this mess out but mark my words the cost to the taxpayer of this stuff-up—of this failure of management by the National Government—will be hundreds of millions of dollars and this Government must take ownership of its incompetence.JAMI-LEE ROSS (National—Botany): In the speeches we have had so far from the Opposition members I have heard them complaining and moaning about things they would like us to be talking about. Well let us just be reminded that this is a tax bill and let us just be reminded that the Labour Party on the other side is the big-spending big-taxing party of Parliament. If the Labour members really want to talk about the issues that New Zealanders are concerned about it is the big-spending monster sitting on the other side of the House and if it were putting forward this tax bill the tax that New Zealanders would be facing would be substantially more.Hon David Cunliffe: What hogwash! Nobody believes you.JAMI-LEE ROSS: I see David Cunliffe interjecting on the other side. Can I say to Mr Cunliffe while I have an opportunity please do not go up those kauri trees because that will provide an incentive for those kauri trees to be felled. So Mr Cunliffe stay away from the kauri trees and stay away from interjecting in Parliament here tonight. I know he is interjecting because he does not like the bill but when Labour proposed about $18 billion of extra spending under his watch which led to thousands of people staying home and not voting Labour he was ashamed. I am glad that Labour is not putting forward this tax bill because that would not be good for New Zealanders. Taxpayers would be very concerned about the bill they would be facing. It is one that we are proud to be bringing to Parliament and one that implements some changes.The Minister of Revenue talked about two new tax measures to support business research and development. Labour talks a lot about research and development but we are the Government that is delivering on research and development for New Zealanders. Through the systems we have put in place there is more research and development taking place in this country and there are more opportunities for research and development to take place. That is important for the country. Innovation is something that this country is very good at. Innovation is something that this country thrives on and prospers on and it is important that research and development is supported by the Government. This Government is delivering in that area. We have already committed to spending $566 million—Hon David Cunliffe: Less than half the OECD average—miserable.JAMI-LEE ROSS:—over 4 years on research and development to grow business research and development. If Mr Cunliffe got out there and talked to real people instead of trees he would probably find that there are people out there who are prospering through research and development grants we are putting in place. Innovative Kiwi businesses in this country are investing in research and development and they will benefit from the tax measures that we announced in Budget 2014 that are put in place in this bill.Loss-making start-up companies will be able to cash out all or part of their tax losses from research and development expenditure. Although all businesses will be allowed tax deductibility for research and development black hole expenditure is currently neither deductible nor able to be depreciated.Hon David Cunliffe: What about Chatham Rock? No rock star.JAMI-LEE ROSS: They keep going on the other side. I feel sorry for them—I feel sorry for them. I feel sorry because they are at a loss as to what to produce for New Zealanders. The member over the other side cannot handle the fact that he was resoundingly defeated last year—resoundingly defeated last year. [Interruption] Well Mr Assistant Speaker if he is going to interject I am going to give it back because New Zealanders sent him a message. I am happy to send him a message here in the House tonight as well.When it comes to this tax bill I want to get back to research and development because it is something that this Government is putting in place new measures to assist with. The two initiatives that are going through in this bill are together estimated to return a net $58 million in tax to innovative companies over the next 4 years and both are part of the Building Innovation stream of the Government’s Business Growth Agenda. The Government is targeting an increase in business research and development to 1 percent of GDP by 2018 to help build long-term growth and prosperity for New Zealand.We heard previously from Mr Robertson about what he believes electorate MPs will be hearing from their constituents. Well I happen to be in an electorate with a very big manufacturing sector that is thriving. I know that members sitting alongside me are in electorates in strong regions that benefit hugely from growth through the innovation that research and development helps to bring to their regions. If anyone wants to hear about what electorate MPs over this side of the House hear about it is the fact that we are supporting business. We are putting in place the economic settings that allow business to grow the economic settings that allow jobs to be created and the economic settings and the tax policies that allow businesses to invest more in their companies and invest more through research and development.We are the Government that is delivering for New Zealanders. This Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill is another area in which we are delivering for New Zealanders. With over $1.5 billion in expenditure over 4 years through the research and development grants and then further through the tax changes in this bill we are seeing improvements taking place.Hon David Cunliffe: Desultory performance—desultory.JAMI-LEE ROSS: What is that Mr Cunliffe?Hon David Cunliffe: I say it is rubbish.JAMI-LEE ROSS: It is not rubbish. Mr Cunliffe rubbish was less than 25 percent in the polls. That was rubbish Mr Cunliffe. That was rubbish Mr Cunliffe and that is why he is sitting on that side of the House and not on this side.Debate interrupted.