Cosgrove Clayton: Taxation (Transformation: First Phase Simplification and Other Measures) Bill — First ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Taxation (Transformation: First Phase Simplification and Other Measures) Bill — First Reading[Sitting date: 13 October 2015. Volume:709;Page:7159. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): Firstly can I thank the Minister of Immigration for his clear description of the facets and the technical nature of this piece of legislation. The Labour Party will be supporting the legislation to the select committee. Obviously we want to have a look and see whether the Minister’s eloquence is borne out by fact in submission.I know the Minister is an enthusiast when it comes to the tax system he was telling us that before the dinner break. There are a number—and I will not reiterate what the Minister said—of practical measures that will simplify the tax system and make it more efficient for New Zealanders who have to meet their tax obligations especially those who are in business.I suppose I want to also just widen the discussion slightly and say that though this is a worthy piece of legislation I do hope and I have some confidence having listened to the acting Minister that this piece of legislation is in far better shape—and not only in far better shape but that it actually does what it says it will do—than the rather bizarre piece of legislation we dealt with which was the land registry legislation through the Inland Revenue Department and what comes post that which is the brightline test. Having worked through the submissions again where every submitter on the brightline test opposed it and almost every submitter agreed that it basically would not achieve the policy objectives then I do hope that this is a quality piece of legislation.I do not mean any detriment to the officials but I hope that this is a quality piece of legislation and at its basis and on the surface it seems to have some very positive and practical effects for taxpayers. They are not earth-shattering by the way—electronic signatures sharing information and the share technicalities in KiwiSaver. These are on the face of it pretty practical and efficient measures but they are not earth-shattering.I think there needs to be a philosophy change within the Inland Revenue Department. The Inland Revenue Department at its core function is to preserve the integrity of New Zealand’s fiscal position and ensure that we as taxpayers pay our fair share. That is critical. It is critical to our economy. It is critical to the running of a Government and of a country and that goes without saying. However the Inland Revenue Department I think in recent years has had a philosophy. Its philosophy is that we are going after the cash. We are going to go after the cash and we are going to go after as much cash as we can. As I have just said it has an obligation to do that but I think there needs to be a shift in focus also—and you do not have to have one without the other—to flexibility. If you are a small-business person basically the tax system is not designed for you. It is not flexible for you. The tax system runs you. You do not have a lot of options within the tax system.Andrew Little put out a discussion document—a very detailed discussion document vetted by one Robin Oliver. For those who do not know who Robin Oliver is he was a longstanding former deputy commissioner of the Inland Revenue Department—an eminent person. I would say that even if I had had no involvement with him in respect of the discussion document but I would say that regardless he is an eminent person. He is a person who has probably the best mind in New Zealand I would argue in respect of the mechanics and technicalities of our tax system. I suspect that members on both sides of the House who have dealt with Robin—those of us who have dealt with him over the years—would agree on that.We put together a provisional tax policy and we asked Robin—he is now a professional financial accounting adviser to businesses around the country—whether he would look at our ideas would vet them and would he go through and tell us whether they work because we do not have access to officials. Essentially our proposal in terms of provisional tax gives businesses of any shape or form and of any volume the ability to align their tax payments with their cash flow setting their own rates and still having to meet the tax obligations of course. They do not pay any less tax but they can align their cash-flow arrangements and their tax payments with their cash-flow arrangements. I will not bore the House with that. But that is out there in the ether and has received very positive comments.My only question is why it is that the Inland Revenue Department—under the stewardship of Peter Dunne originally the longest-standing revenue Minister I think in the history of the Commonwealth Parliaments; I have checked the record and that portfolio was inherited by Todd McClay—has not been mandated to get stuck into some of those gritty issues and things that would really help small business.If you were a motelier come summer the rooms are full and the money is coming in but you are taxed the same way. Come winter the rooms are empty the cash flow is down and you are still taxed in the same way and you are subject to that evil that is provisional tax which has often been the death knell of many businesses—not big businesses—not because the business person is incompetent not because they are a crook just because of the total inflexibility of the provisional tax system.I remember when I had a business—I was lucky enough that I had made enough money so that I could hire an accountant—handing over a suitcase full of the documentation and the receipts and saying: “Sort it out for me please.” For most of our small businesses the partner—the husband the wife the kids or whoever—under dark light in the evening is doing the books or the proprietor themselves is doing the books and trying to wade through and make ends meet and make the system work for them to meet their Inland Revenue Department tax obligations.We would argue that this is on the surface a pretty practical piece of legislation but we hope it is better than the land registry which is a farce. We hope it is better than the brightline test which is an equal farce—that is what every submitter who opposed it said. Even the National Party’s mates opposed it. We would hope and we pray that this piece of legislation will be far more practical and will have a positive effect and will actually meet the policy obligations unlike those other two farcical pieces of legislation one of which I think we deal with this week.As I say I think the Inland Revenue Department needs to broaden its focus. We are not saying the Inland Revenue Department should slack off in going after taxpayers and ensuring it meets its obligations but it should be also looking very very clearly at the spend—what $130 million and counting—on a business transformation project where I do not think we have struck a keystroke on a computer yet. We have got a few reports but it ought to be looking at how it can be more flexible and how the functionality of that tax system can work for businesses.I am sure colleagues over there—I know one in the corner is a vintner who runs a very successful business. That gentleman—whose name forgive me I cannot recall—will have a large amount of experience I suspect in dealing with the Inland Revenue Department and will be able to explain to us tonight I am sure the strictures and the mind-bending problems that you have unless you are a large business with an accounting department or access to top-class accountants and if you are a small entity the real challenges and difficulties you have with a rigid and inflexible tax system.So my plea to the Government is to put up these pieces of legislation. We will support it to the select committee and we will have a good look at it. Hopefully there will be one or two submitters who will support it and not the 100 percent who opposed the last piece of legislation that Mr Bennett put through the Finance and Expenditure Committee. But my plea is that the Inland Revenue Department needs to really look at hard-core practical measures that will assist and allow flexibility for businesses so businesses can have control of their own financial situation and so the department can in a practical and operational way acknowledge that businesses just do not make the same money every week or every year or every season—they have fluctuations they have seasonality and they have different cash-flow difficulties.Maybe the National Government may want to take up the challenge grab our discussion document—as vetted by Robin Oliver an eminent tax expert in New Zealand—and have a look at it in a bipartisan way and may want to adopt it although I am told by the rumour mill that since we released that document the Inland Revenue Department has gone into hyperdrive. It has grabbed it got the xerox out flicked it around the department and said: “Hey how did the Opposition with no resources come up with this?”. The Minister said: “Maybe we’ve got to pip them at the post and come out with our own proposal that will mirror theirs before the next election.”But we live in hope. I am going to enjoy Mr Bennett’s speech because he will be able to give us a dissertation on the practicalities of this legislation and how it is going to benefit those tens of thousands of small businesses. I pray that somebody out there when the submitters submit to the select committee actually does support it.