Tremain Chris: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Second Reading 
Tremain Chris: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Second Reading 
[Volume:629;Page:1902] 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak in support of the Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill of 2005. The National Party has very high goals for this economy. Unfortunately the Labour Party has given up its goals of getting New Zealand back into the top half of the OECD. Today I drew some statistics from the Parliamentary Library’s intranet website. It is interesting to see where New Zealand now sits in its wider goals for the economy. I will read through the top statistics that came out of that review. I will start with economic growth. In 2004-05 growth was 4.3 percent. This year it is down to 2.7 percent. If we look at unemployment we are holding our own and staying even at 3.6 percent. Inflation was 2.7 percent in 2004-05 and it is now 3.2 percent. Our current account deficit was $8.7 billion in 2004-05 and it is now $12.9 billion in 2005-06. Interest rates were 6.83 percent in 2004-05 and they are now 7.53 percent. All the indicators are going the wrong way. If we are looking at getting ourselves into the top half of the OECD this does not look like a good way to go about it. 
I would also like to refer to the much-maligned business confidence surveys that have been coming out as indicators of where the economy is going. I will read comments on one particular survey: “The Government needs to face reality and cut the red tape and cut the tax burden on businesses.” A couple of economic surveys have come out—in particular the New Zealand Institute of Economic Research quarterly survey of business opinion which shows that firms are the most pessimistic they have been since 1986. Seasonally adjusted the surveys have been the most despondent for 35 years since 1970. That is significant. 
Labour Party members stood and said that National is talking down the economy. I would say that this is an orange light as to where the economy is going. It is very important that we stand up and look at the indicators that I have just talked about—economic growth is going down; unemployment is the same; inflation is going up; the current account deficit is going up; interest rates are going up; and business pessimism is the worst in 30-odd years. These are key indicators of where our economy is going so it is very important that we put a group of policies together that will drive this country forward. There is no silver bullet whatsoever. It will require a raft of policies to take our economy forward. 
The first one that we saw before the second reading of this bill was Wayne Mapp’s Employment Relations (Probationary Employment) Amendment Bill that has come before the House. It is a fantastic bill and it is great to see that a National Party policy from the election has been put forward and has been successful in this House by a good majority. It is a fantastic result. My hat goes off to Wayne Mapp and his success with that bill. It is also great to see that another bill against the Government came through last night. I do not believe that that bill will necessarily increase productivity—although it might within this House. It is fantastic to see two bills against the Government coming through within the one day. It will be interesting to see where that goes over the next while. 
I come back to not having a silver bullet to take the economy forward. We need a package of business-friendly things that will take us forward. Obviously Wayne’s bill is fantastic in that regard. I do believe that this taxation bill will help businesses in a number of ways. I stand in support of the bill on that basis. I would just like to touch on a couple of aspects in the bill that I think will be significantly business-friendly. First is depreciation rates. It is great to see depreciation rates improving for fixed assets. I think that will help businesses to invest their capital more wisely. It will help businesses to go forward; I think that is excellent. One of the things we brought up in the select committee was that depreciation rates have improved and the threshold has improved which is another excellent situation whereby we have brought the threshold from $200 for the write-off of a fixed asset to $500. That is a significant improvement but there were a couple of issues that were of concern. 
Large companies are forced to lump many assets together in one chunk. For instance if a large company went out and bought 50 chairs it was forced to lump them together in one lot and depreciate them overall. That is silly because the chairs could be bought individually and not be subject to depreciation at all. They could be written off because they would be under the $500 threshold. 
The second area which Dr Lockwood Smith spoke about earlier is that there is no threshold where assets can be written off if they are initially brought into the balance sheet at above $500. That to me having run many many businesses in the past is ludicrous. One of the members on the other side of the House said that they would eventually be written off. But people like me who have been running businesses for years do not actually go around counting every computer and calculator in their businesses at balance date. If small-business people had to go around identifying where every asset they had brought into their balance sheet was then that would be compliance gone crazy. They would spend hours doing that. It would just be a waste of time. That is why we need a threshold where assets can be written off fully and finally. I accept that $500 was too high. The committee came back and told us that it was far too high and that fiscally it would be a big drag on the economy and I accept that. But even if the amount was $10 and people knew they could write off assets from their registers fully and finally those of us who have run businesses know what the value of that would be. It would be a fantastic idea. 
The other area I want to talk about is provisional taxation alignment rates. Having been in business for many years it defies me why it has taken so long for this to come into action. People who have run businesses year after year understand that they cannot guarantee what the turnovers of their businesses will be this year next year or the following year. It is ludicrous to expect people who run businesses to guess what their provisional tax will be for the following year and then be penalised if they get it wrong. It is nuts—absolutely nuts—particularly if we look at some businesses whose turnovers fluctuate wildly from year to year. 
Take development businesses for example—businesses that are out there investing in the infrastructure of the economy and taking it forward. Those people do not know when their investments may settle. For instance land developers may take a punt and buy a piece of land for development only to be held up by major issues with the Resource Management Act consents from the local body. They never know exactly when they may be able to settle on their land. A good example is of people who might embark on projects this year thinking they might be able to settle in the coming financial year. They pay out exorbitant amounts of provisional tax in advance because if they do not the Inland Revenue Department whacks on massive interest rates. Because they are held up by obtaining Resource Management Act consents from the local council they may have gone through a whole financial year and settle in April after having paid provisional tax all year. Sure they can get that refunded from the Inland Revenue Department but financing provisional tax in advance is another cost to their businesses. So this measure is I think a fantastic opportunity that businesses will grab with both arms. They will have the opportunity to align their provisional tax payments with their GST returns. That is excellent. 
In supporting the bill I believe that to take our economy forward we need not one silver bullet but a combination of business-friendly packages. It has been fantastic to see Wayne Mapp come in with policies as part of that business package. National will be fighting for a range of different policies to put up against the Government. We have proved in the last few days that we can come up with excellent policies such as those from Mr Wayne Mapp. It will be great to see them driving this Government forward and driving our economy forward. 
Bill read a second time.