Clark David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — First ReadingText is incorporated into the Bound VolumeClark David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — First Reading[Sitting date: 10 December 2013. Volume:695;Page:15374. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North): Labour will support the Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill going to the Finance and Expenditure Committee.David Bennett: Sit down then.Dr DAVID CLARK: Mr Bennett suggests that I sit down at this point but I will not because I have some reservations that I wish to express straight off the bat. We are supporting it going to the Finance and Expenditure Committee because we think that it is a bill that can be improved. We are hopeful that the Government will be willing to work with us on that despite the somewhat limp start that it has made here in this bill that we have before us.We know that many many areas of the tax law need either improving on or proper policing. Just this week we have heard that there is now a billion dollars in tax that is unpaid by self-employed people with hundreds—literally hundreds—of self-employed people owing more than $1 million each. [Interruption] I hear David Bennett asking how their debt has got that high. Well quite frankly it is because the Inland Revenue Department has not intervened early enough. It has not had either the tools or the resources to stop debt growing and to stop those tax bills rising. As a consequence that area of unpaid tax is now over $1 billion and rising which is a quarter of the Government’s asset sales programme. If we look at the complete amount of unpaid tax that sits on the Inland Revenue Department’s books—on the Government’s books—it is now twice the value of the Government’s asset sales programme. I will repeat that. On the Government’s books there is now twice the value of the Government’s asset sales programme in unpaid tax.This is a Government that has taken its eye off the ball. This is a Government that is not collecting the tax that is due. This is the very point that Mr Tremain raised at the start of his speech when he talked about fair tax payment and fair tax collection. But it also gets to the other point that Mr Tremain raised about growth in the economy. In fact we have recognised—and it is important to recognise from the start—that this particular Government has the worst growth record of any Government in the last 50 years in New Zealand. That is not helped by this bill. As it stands this bill is simply not supporting the kind of decisive change that would be needed to transform the economy to make it grow like it ought to in the situation that New Zealand finds itself in where primary produce prices are at record levels. New Zealand has had all of the opportunities in the world but seems to have lagged behind in growth. The unemployment rate has remainedhigh; it is still higher than when this Government took office. This Government has apparently been sitting on its hands when ordinary New Zealanders have been struggling.In recent days we have found that a number of other revelations have come out about the Inland Revenue Department and its stresses because it has not been supported by this Government. As I said at the outset the Government has taken its eye off the ball and so this is why we have got this tinkering. This is why we do not have a bill that actually addresses the big issues. The Prime Minister said nearly 2 years ago that the computer system in the Inland Revenue Department was holding back tax policy. The Prime Minister said in his own words that this computer system in the Inland Revenue Department was holding back the development of tax policy. Two years on—and $50 million spent on international consultants later—we have from the Government an in principle agreement to develop further business cases in order to one day hopefully address the computer issues which are becoming increasingly dire. That is a waste of taxpayers’ money I have to say—$50 million for an in principle agreement to proceed. This is something that the department was telling this Government 5 long years ago when it was first elected. Five long years ago—Andrew Little: Five years?Dr DAVID CLARK: Five years ago the department was saying that its computer system was on its last legs and that something needed to be done. Two years ago John Key finally caught up and said: “Yes something must be done and it is holding tax policy back.” Two years on and another $50 million later we have an agreement that in principle something should be done about it. And then we have the news this week of $1 billion outstanding in self-employed tax owing. The total amount of tax owed by New Zealanders that has not been collected is $8 billion—twice the Government’s asset sales programme value. That is embarrassing and those members opposite might well hang their heads in shame because this is an embarrassment to the Government.Then we have this bill before us which attempts to tinker with some of these things and attempts to tinker with the thin capitalisation rules which clearly and patently are not working. International companies now regard paying tax in New Zealand as something of an amusement. They pay as little as they like. They sometimes pay a little bit for show. But comparable companies with equivalent revenue will pay quite different amounts of tax whether they are listed on the NZX and there is transparency about their tax affairs and a requirement to pay a dividend and sort out the imputation credits that go with it or whether their head office is overseas in which case they tend to pay far far less tax with equivalent revenue flows. This Government has failed to address the issues of the day in respect of tax avoidance by multinationals and it seems to have very few ideas about how it is going to do that.It does not even have an estimate of the size of the tax that it is forgoing. Last week in the financial review of the Inland Revenue Department I asked the commissioner whether the department had an estimate of the tax forgone due to avoidance and evasion behaviour. The commissioner said that the department did not that it did not have the resources necessary to calculate that amount and that it has other priorities right now. I bet those other priorities are piecing the computer system together withsellotape andBlu-Tack. With $8 billion outstanding the department will be doing what it can on its little abacuses to work out how on earth it is going to collect that and the rebuild upon which it has spent $50 million on consultants has reached only the in principle agreement stage. This is disgraceful. This is absolutely disgraceful. More decisive action needs to be taken by this Government than what we find in this bill.In this bill we also have some legislation that has been very quietly kept out of the public eye up until now: the issues in response to the Foreign Account Tax ComplianceAct passed in the United States. That Act required all banks abroad to supply information on US persons. We are not clear exactly what the definition of “US persons” is. The banks do not actually yet know. The Inland Revenue Department has not defined exactly what a US person is. OnWikipedia it is defined very much in line with the surveillance legislation. So what we have here is the kind of thing we saw under the Government Communications Security Bureau Act where the Government is supplying information to the US at its bidding. What is it asking for in return? Nothing. That is what I hear—that is exactly what the Government is asking for in return. This Government is quite happy to hand over information on people with bank accounts in New Zealand but it is asking nothing in terms of tax transparency of the United States—absolutely nothing.This is a Government that seems to be sitting on its hands as far as protecting the New Zealand tax base is concerned. Tax transparency is something it has started to talk about now but there is absolutely no action on that front. Multinationals are choosing whether or not to pay tax. The Inland Revenue Department seems to have no real plan for tackling that issue. This Government has made no statements about the Foreign Account Tax Compliance Act other than smuggling it through in the innocuously named Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill. It will require banks to supply information on anyone who is a US citizen—fair enough—on anyone who might have a US address on anyone who might have somebody carrying out transactions on their behalf in the US and also on people who were born in the US. Whether or not it thinks they have any kind of ongoing relationship with the US the New Zealand Government seems set on supplying their ongoing personal financial information to the United States and asking absolutely nothing in return.The Inland Revenue Department has at this stage no plans it seems to gather information on tax avoidance in New Zealand—that is being resident in haven situations in the US or abroad or that the US Government has knowledge about. It is simply rolling over and accepting that it will comply with that US law that it will demand that the banks conform without actually giving them proper guidance. The banks themselves are upset about the slow progress of the Inland Revenue Department the lack of guidance on those issues and the upset that this will cause to their customers who will now be giving away personal information they would not previously have expected to give away.This is a Government that is in turmoil in respect of tax collection. The outstanding amount of $8 billion is ringing in our ears. The Inland Revenue Department’s statistics were due yesterday on its poor performance on the dropping compliance in the tax system. We learnt in the select committee that the department is expecting to answer three out of four phone calls now and it is not meeting that target. It is not hitting the target of answering three out of four customer inquiries. That is an absolute disgrace. It is a department under pressure. It is a department that is not performing under a Government that has taken its eye off the ball.David Bennett: More lies—just lies.