Nash Stuart: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
Nash Stuart: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
[Volume:675;Page:20779] 
STUART NASH (Labour) 
: 
 As the Minister of Revenue said there is some very good legislation in the Taxation (Tax Administration and Remedial Matters) Bill. The Finance and Expenditure Committee went through it with a fine-tooth comb and on nearly every single point we came to agreement and consensus and we agreed that this is fantastic legislation. This bill as it stands reaches to about 130 pages and on about 129 ½ of these pages we were in full agreement but there were two lines in this bill that we did not agree on and those were lines at the very end of this bill in clause 110 of 110 clauses. Those two lines read: “No gift duty is payable under the Estate and Gift Duties Act 1968 in relation to a gift made on or after 1 October 2011.” 
That is the shame of this bill. Labour will not be supporting this bill because of those two lines. We believe that the abolition of gift duty is not a good step for New Zealand or the New Zealand tax system. As the Minister mentioned gift duty has been around since 1885. This measure was part of the Estate and Gift Duties Act. Estate duty was abolished about 30 years ago but gift duty was left intact for a very good reason and that is because legislators understood that gift duties stopped avoidance behaviour which we are very very concerned about. 
As we know in the last few Budgets under Labour and National the Inland Revenue Department has been given significant amounts of money to chase those who avoid tax. I think in excess of $100 million has been provided to chase those who are avoiding tax. As officials of the Inland Revenue Department will know this bill will in fact make it easier for certain sections of our society to avoid tax and that $100 million will have to be spread a lot wider as the department seeks to find a lot of avoidance activity that will take place. 
Let me give members an example. There are 325 fraud cases being looked at by the Inland Revenue Department at the moment and four of those cases total $420 million—just four of them. We have received advice that in fact if the House abolishes gift duty there will be a lot more of this money-go-round as it will make it incredibly easy. In fact it will drop any barrier to the movement of money between legal entities trusts companies and whatever. This just adds to the overall complexity that the Inland Revenue Department faces in terms of chasing those who defraud the tax system or who engage in avoidance behaviour. 
I would like—and I very rarely do this—to read out a good chunk of Labour’s minority report on this bill. It is not very long but it is very important. We said: “New Zealand Labour … believe the analysis upon which the gift duty abolition proposal is based is fundamentally flawed because it does not adequately take into account the full range of potential tax avoidance opportunities.” We grilled the Inland Revenue Department on this issue. In my short brief experience in this House and in the Finance and Expenditure Committee Inland Revenue Department officials are very very good at what they do. They answer questions brilliantly but I got the very strong impression that they were operating under orders saying: “This is what the Minister wants and this is what this Government wants; therefore do it. Ram it through.” It was probably one of the very few times when I was not convinced that the Inland Revenue Department was happy with the legislation going through. 
As mentioned there are 130 pages in the legislation and 129 pages were actually very good. We all agreed about it. It makes the tax system more efficient as the Minister outlined. The Minister himself outlined some of the measures we all agreed on—they are great but the abolition of gift duty is not one of those. We also said: “no sensitivity analysis has been provided. No options analysis has been provided. The policy process would not meet the standards expected under a thorough Regulatory Impact Statement.” This bill gets rid of a tax that has been there for well over 100 years. We expected a lot more. We said we were “concerned that the analysis does not address any of the social equity concerns raised by a number of submitters and Labour members on the committee. [We] believe in the first instance that any legislation proposing the abolition of gift duty should [at least] be delayed until the Law Commission’s review of trust law is complete.” 
We made this clear; we asked the officials why they could not hold off. We asked them to just hold off and then if the Law Commission came out with a ruling a strong view or a strong recommendation on trust law they could bring it back to the Finance and Expenditure Committee and we would consider it. We would consider it; we understand the compliance costs related to administering this tax. But they would not hear of that. They would not hear of that because the Minister Peter Dunne made a deal with National and National accepted that deal as part of his support. It will be bad law. 
David Bennett 
: Give it up Stuart. 
STUART NASH 
: It has resulted in bad inequitable law and Mr Bennett knows that. I bet that Mr Bennett on 2 October or maybe midnight of 1 October or midnight on 31 September will be going straight to his tax accountant to say: “Anything I have not gifted into any of my trusts move them across now.” He may have to stand in line because I suspect there is a whole lot of people lining up at the moment as was said to me by a trust lawyer in Napier. A trust lawyer in Napier who makes a lot of money out of this sort of stuff said to me that he has major concerns about this provision. He has major concerns about this—about the equity. An accountant said to me that this is not good law—this is not good law. In fact the only person who believes that this is good law is Peter Dunne. I do not know whether John Key’s Government was hoodwinked or what happened. 
Hon Tau Henare 
: Why are you worried? 
STUART NASH 
: I am worried because this legislation will screw a hell of a lot of New Zealanders. Like a lot of tax legislation put through by that member’s party it is not good for 90 percent of New Zealanders. His party is being consistent this is consistent tax legislation because it favours the wealthy few at the risk of the great many. New Zealand Labour members believe in a fair tax regime that promotes social and fiscal— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I advise the House that politics as we all know is the art of the possible. The possible we will explore today is good order. There are 402 Standing Orders in this place. They grant us good grace and good order and an opportunity for all members to make a commanding contribution. 
STUART NASH 
: The New Zealand Institute of Chartered Accountants submitted that although it welcomed the abolition of gift duty in its view there are “a number of tax avoidance opportunities that may arise in the absence of gift duty”. The institute went on to list five. Part of the reason why not much money was collected under gift duty is that there is ignorance of the law. Let me give members one example. I have a friend who is a wealthy individual and we were talking about how hard it is for young people to buy houses. He said he helped both of his children to buy houses; he gave them $100000 each. I said: “You gave them $100000 each?” and he said “I gave them $100000 each.” I asked whether he paid gift duty on that and he said no he did not pay any gift duty on that. I asked whether he knew that any gift over $27500 attracted gift duty. He said: “Oh shivers. No I didn’t know that.” But ignorance is no defence—ignorance is no defence. 
What we should have done in this House is wait until the Law Commission’s report came out done a thorough study on the impacts of the abolition of gift duty and then made an informed decision. This is a rushed decision which the Inland Revenue Department knows will have significant impact upon its ability to chase those who engage in avoidance and fraudulent behaviour. This is not good legislation. Labour will not back it. We think this is rushed and we think this is legislation at its very worst. The abolition of gift duty should not go ahead. Thank you very much.