Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeTaxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill — In Committee[Sitting date: 02 July 2013. Volume:691;Page:11743. Text is incorporated into the Bound Volume.]Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) BillIn CommitteePart 1 Amendments to Income Tax Act 2007The CHAIRPERSON (H V Ross Robertson): I am looking for someone to take the call.Hon David Cunliffe: Mr Chairman.The CHAIRPERSON (H V Ross Robertson): Wonderful! I call the Hon David Cunliffe.Hon DAVID CUNLIFFE (Labour—New Lynn):Kia ora Mr Chair.Hon Trevor Mallard: You’re meant to be listening for someone to seek the call not looking.Hon DAVID CUNLIFFE: Mr Chair can look and listen Mr Mallard which is a wonderful thing that we have such a—well yes it is too late in the week to think of long “p” words. But anyway congratulations Mr Chairman. Thank you very much.Here we are in the Committee stage of the very famous Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill. I see that the Minister in the chair the Minister of Immigration is smiling. That could be because he is about to be advised by the Hon Trevor Mallard which will be of great assistance to his career no doubt or it may be that it has dawned on him that he is not the Minister of Revenue. That as you will see is very lucky for him because what is so important about Part 1 is not exactly what is in it but what is not in it—what is not in it. What is not in it is the famous car-park tax. It was not long ago Mr Chairman ladies and gentlemen and colleagues that National introduced what has now got to be one of the most infamous tax ideas that this House has ever seen: the idea that you would place fringe benefit tax on the personal use of a company car-park but only if you are in the central businessdistricts not a street away and only if it was in Wellington or Auckland not Hamilton Rotorua Taupō Tauranga or anywhere else around the country.Hon Lianne Dalziel: There aren’t any parking buildings in Christchurch.Hon DAVID CUNLIFFE: And there are no parking buildings left in Christchurch the “Minister for Earthquake Removal” tells me.Hon Lianne Dalziel: Removal?Hon DAVID CUNLIFFE: Well I am just saying that in honour of the Christchurch City Council having knocked down all the buildings that it has attempted to consent over the last year. Well done Bob Parker. That reminds me that we are talking about car-parker tax and this has been withdrawn. It has been withdrawn because it was going to cost according to some independent accounting estimates $2 to collect for every $1 it raised.Dr David Clark: How much?Hon DAVID CUNLIFFE: How did that one—$2 to collect for every $1 it raised—get past the goalie at the Inland Revenue Department quality control centre? That is what I want to know. But even if it got past the goal line in the boffin building what happened in the Minister’s office? What happened in—it was then the Hon Peter Dunne Minister of Revenue; we have had musical chairs in the hot seat since then—his office? Where was the political advice? Minister this is a dog and it barketh. Actually that is a bit tactless. I apologise. We should not be talking about dogs because Todd McClay the Minister of Revenue is also trying to poison them all for psychoactive substances—Hon Trevor Mallard: The drug dealers.Hon DAVID CUNLIFFE: —and to make drug dealers rich but we are not going to go there. That is not a tax matter Mr Mallard. It may be an animal rights outrage but it is not a tax matter. So finally common sense prevailed and the car-park tax was withdrawn under the steely hoofs of an unlikely combination of Matthew Hooton and the Council of Trade Unions. Matthew Hooton and the Council of Trade Unions joined forces to stampede the Minister of Revenue—aided and abetted by the loyal Labour Party trying to stand up for truth justice and the Kiwi way—and bang there goes the car-park tax.What is also not in Part 1 of this bill are three now four other stupid tax proposals of a similar ilk. Last week when we were doing the first reading of the bill I was able to report to the House on three equally idiotic taxes and since then the Government has taken notice of our advice. I am pleased to report that a new one has emerged. In fact the fourth extra-stupid tax other than the car-park tax came out in the public domain in the same week. Fringe benefit tax is now to be applied to—wait for it—the clothing allowance of plain-clothes policemen. Not only that as if it is not bad enough to penalise the hard-working cops risking life and limb it gives new meaning to “the emperor’s got no clothes”—the emperor’s new clothes; the bobby’s new clothes. As if it was not bad enough to impose a punitive tax on the poor near-naked bobby—I mean the phrase “bobby on the street” now has extra meaning does it not—this was done retrospectively. [Bell rung ] Mr Chairman I have to complete this story. This was done—Hon Trevor Mallard: Sounds like the naked truth to me.Hon DAVID CUNLIFFE: The naked truth is that not only has the Government imposed yet another stupid tax on the public but it has done so retrospectively. Why? Was it that if it did it prospectively people would stop it before this outrage got across the line? Why would the Government commit the double sin of stupidity retrospectively? Let us hope that good sense will prevail and that our poor near-naked undercover police will once again be clothed so that if they are not shot to death theywill not freeze to death. I do not want to make light of what is often a high-risk situation and their clothing allowance is there for good reason.Let us recall the three other stupid taxes currently at issue none of which appear in Part 1 of the bill we are discussing today but which are relevant because they are akin to the one that was in Part 1 of this bill. They are the iPad tax where the Government was going to charge everybody fringe benefit tax on the private use of their iPhones iPads and other electronic communications. You are going to have to go through your phone bill and apportion your data charges and work out which calls were work calls and which were private calls and pay tax on the private ones. Does not that sound like a really good idea? Imagine the time spent on that. Imagine the red tape. How did that one get past the goalie?But if it was not bad enough that that got in the Inland Revenue Department’s discussion document the Government at the self-same time gave up on taxing Apple the people who make the iPads that the Government was going to charge you the public extra fringe benefit tax to use. Apple pays only about 1 percent tax on its profits in New Zealand. Why is that? Because apparently it does not make any money because that is part of a bigger problem called—technical term—base erosion and profit-shifting which is a matter that the OECD is looking at but which the Government has done sweet nothing about. Why not? Because it is too busy retrospectively applying a clothing tax on cops and poisoning poodles. It is ridiculous.The Minister is obviously overworked. All right? Hopefully if he does not do too well in this life there may be redemption in the next but it is unlikely because he is also imposing a punitive tax on clergy—grossing up the value of church housing and then imposing fringe benefit tax on an income that is not even earned by clergymen so that the Government can charge fringe benefit tax on clergy housing. This is ridiculous. What is systemically wrong at the Inland Revenue Department that it keeps coming up with these stupid stupid crazy ideas? I am hopeful that the Minister will stop that one.But in honour of the Hon Lianne Dalziel the Opposition spokesperson on earthquake recovery and we hope soon to be the Mayor of Christchurch—I just want to say that again; soon to be the Mayor of Christchurch because poor old Bob Parker is not having a good week down there—I say that she has brought to my attention the problem of the accommodation tax. This is the fringe benefit tax being applied on temporary accommodation used for over a year. Christchurch is full of temporary accommodation and it is expensive enough to live there now or stay there if you are part of the rebuild but the Inland Revenue Department wants to impose personal fringe benefit tax on anyone lucky enough to live in a shipping container in Bexley. This is madness. What is going on at the Inland Revenue Department? What is going on in the Minister’s offices? Where do these crazy ideas come from and how did they get into Part 1 of this bill?The only good thing one can say about this bill is that David Bennett has had a road to Damascus experience. David Bennett the member for Waikato-something thinks Damascus is between Tīrau and Pūtāruru but it is not.Tim Macindoe: No it’s between Parnell and Herne Bay.Hon DAVID CUNLIFFE: Touché. He has had a road to Damascus experience. After 55 years of helping farmers rort their taxes he has now recanted and decided that he is going to find absolution by ratting on his former clients and he has dobbed them in by putting some livestock valuation rules in this bill. Thank you.Dr DAVID CLARK (Labour—Dunedin North):It is a pleasure to rise to speak to this bill the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill. I think the honourable member David Cunliffe raised a very good point at the beginning of his speech. This bill is not so noteworthy for what is in it but for what is not in it. He raised immediately the issue of the car-park tax which has been ditchedsince the first reading as this Government fled for cover recognising the foolishness of imposing these petty taxes. It is a shame that the Government did not see this earlier that it did not look to avoid the paper girl and paper boy tax that it imposed in the previous Budget that it looked to not impose additional burdens on businesses that now have to collect child support and that it did not look to not impose further red tape on businesses to deal with those child support changes. This bill is full of these mild tinkering measures. It is typical of a tax bill put through under this Government. Some of them cannot be disputed as kind of sensible step-by-step little measures patching up tiny holes here and there rearranging the deckchairs on theTitanic perhaps and who can say that you would not get a little bit of sun if you put the deckchairs over here rather than here on theTitanic and make the most of the time you have available. But that is not a long-term strategy—that is not a long-term strategy.This is a Government with no plan. That is what it comes back to. This Government has been muddling along making tinkering little tax changes here and there taking the time of the House in order to rearrange the chairs on the “Tax-Titanic ”. What it ought to do—Hon Member: Worst economic performance in 50 years.Dr DAVID CLARK: The member over there quite rightly points out that this is the Government with the worst economic record of any Government in this country in the last 50 years.Andrew Williams: How long?Dr DAVID CLARK: In the last 50 years Mr Williams—quite right. It is shocking. But in some ways it is no surprise. If you do not have a plan to change things things will carry on as they are. Things will continue to get worse. The gap between rich and poor will continue to grow and the studies coming out say that it is. The gap between the rich and the poor in New Zealand has never been as great as it is now. This Government is shrinking median wages—they have gone down since it took over—and the people in the street know that. Ordinary Kiwis know when they go out to make their extraordinary contributions that they are less well off than they used to be because this Government is acting in the interests of the wealthiest.We as citizens know that something is not right when people in this country who have over $50 million are not on the top tax rate—when people earning over $50 million are not declaring income of $70000 or more. What we also know is that 75 percent of New Zealanders who fall into that category are not paying the top tax rate. That cannot be right. Are there any members opposite who think that is right?Hon Member: No not one.Dr DAVID CLARK: Not one. Not one member opposite thinks that those top tax earners should not be on the top tax rate and I am not surprised. But will they do anything about it? Will they do anything about it? They will not. Is there anything in this bill to do anything about it? No there is not. This is a bill that is all about the status quo that is all about ensuring that those wealthiest New Zealanders are protected and that those who cannot avoid paying tax are clamped down upon more and more and more.If this bill was accompanied by pro-growth tax reform we would be able to support it more enthusiastically. We will be supporting this bill because the measures in it are the little stitches that need to be made here and there to make things mildly better but making sure that the deckchair is placed in the sunny spot on theTitanic is not enough—it is not enough. We think that theTitanic should also be repaired. We think it should be done up and we think it should be sailing a course for a brighter future. There used to be another party that said that but it does not say that any more. It has given up that slogan because it knows it is not delivering on it. It has just shifted away from itsgoal of closing the wage gap with Australia. It has given it away. We know that 200000 Kiwis have moved permanently to Australia under this Government’s watch. This is a Government that is not improving the lot of New Zealanders.In this bill we also see nothing that reverses the tax changes made in 2010 that saw the wealthiest 10 percent of earners in New Zealand get 40 percent of the value and the bottom 20 percent of earners in New Zealand saw just 2 percent of the value of those tax cuts. That is why the gap between rich and poor is growing in this country. This bill does seek to make amendments to several Acts including the Income Tax Act 2007 the Tax Administration Act 1994 the Goods and Services Tax Act 1985 and the Income Tax Act 2004 in order to improve fairness. That stuff we cannot disagree with. What we see there is an attempt to tighten up the rules for deducting expenditure on assets such as holiday homes boats and aircraft that the user uses both privately and to earn income. I would be interested to hear the Minister in the chair take a call to explain why the approach taken in this bill has been adopted rather than one similar to that used for company cars where a fringe benefit tax applies. It seems logical that the same could be done here. If it could be enforced properly—it works perfectly well for company cars—why was that approach not taken here? I see the Minister in the chair looking confused. He looks very confused and I am wondering whether he will take a call to explain—Hon Trevor Mallard: No no that’s not confused. That’s a normal state.Dr DAVID CLARK: The member in front of me Trevor Mallard assures me that that is what he normally looks like. I give the member more credit than that and I am sure he will take a call to explain why this present policy has been adopted this present approach rather than the one that is similar to that used for company cars which would be more straightforward. That would be less burdensome to administer and it would be potentially a better use of taxpayer resource—unless the Minister does not care. But I suspect he does so I will look forward to his contribution.This bill also changes the time periods for claiming refunds. It changes the GST rules for business-to-business cross-border transactions and there are several other GST-related amendments. Let us not forget that this is a party that likes to tinker with GST. It might not tell you that. It might go into an election saying “We won’t put up GST.” I think John Key said that did he not?Hon Damien O’Connor: It was a lie.Dr DAVID CLARK: Oh my colleague says it was a lie.The CHAIRPERSON (H V Ross Robertson): Order!Dr DAVID CLARK: I could not say that—The CHAIRPERSON (H V Ross Robertson): Order! And the member will not say that.Dr DAVID CLARK: I did not say that Mr Chairperson. Other members may have a view. But Mr Key in my view did say he would not put GST up and then he did—and then he did. We can call that what we will. He said one thing and then he did another thing. He said “We will not put up GST.” and then he put up GST. The members opposite might want to tell me what that is called over the other side of the Chamber. It might just be what happens. It might be that we live in a dynamic environment that things change with time and that we can change our principles when it suits. That might be the approach that Government takes but we on this side of the Chamber believe in higher principles. We believe everyone should pay their fair share when it comes to tax not just those who cannot get through the loopholes.Facebook in 2010 paid just $5000 in tax in New Zealand—$5000. It has 2.2 million users but it paid just $5000 of tax. The next year that went up to $15000 worth of tax with 2.2 million users. It says that it is doing nothing illegal and that is true but just because it is not doing anything illegal does not make it right. But this Governmentcontinues to allow multinationals to avoid paying their fair share. It is doing nothing to sort out that problem just as it is doing nothing to stop those wealthiest New Zealanders avoiding paying the top tax rates. This is a Government that is protecting the big interests those at the big end of town. This Government will bring in this kind of tax bill that will tinker that will try to “base broaden” and that will try to make sure that it tapes up little loopholes here and there that cannot be avoided by people from lower backgrounds and some middle-income earners. As long as it is fair we will support that aspect of it.But what we really want to see on this side of the Chamber is an overall fair tax policy that makes sure every New Zealander pays their fair share and that makes sure we can afford the schools and hospitals that our future generations will rely on in order to enjoy the prosperity that we are enjoying now. Those who are wealthy have benefited from those institutions in our society and they like everyone else ought to pay their fair share. Most New Zealanders do. Most New Zealanders do not quibble with that. But it is those who are the very wealthiest who are avoiding this and this Government is on their side and not on the side of ordinary New Zealanders who go about their day-to-day business working hard trying to save but experiencing a New Zealand where the Kiwi dream of owning your own house is getting further and further and further away.Labour policies will change that. We will bring in 10000 affordable homes every year for 10 years to make sure that there are affordable homes. We will introduce a power policy that will ensure that power prices drop for ordinary New Zealanders. We care about those ordinary New Zealanders who are struggling. Mr Key says that ordinary New Zealanders are paying about the right amount for electricity. We disagree. But I will come back to the tax issue and that is that this bill is a tinkering bill. We will support the tinkering for the meantime but we think rearranging the deckchairs on theTitanic is not enough.ANDREW WILLIAMS (NZ First):Thank you Mr Chairperson—a wise choice. The Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill—I was just very interested in the comments from the previous speaker Dr David Clark because I actually thought at one stage that he had read some of the notes I had for my speech because he made some excellent points.The first point which I think we all have to be reminded of and which most New Zealanders do remember is the fact that 2 years ago this Government gave something like close to $2 billion in tax cuts to the wealthiest of New Zealanders at the expense of the rest of New Zealand. As a result of giving those tax deductions to the likes of the Prime Minister who got another $1000 a week in his pay packet; to the likes of Paul Reynolds the Chief Executive of Telecom who got another $5000 a week rebate on his tax—$5000 a week can you believe it—and to the likes of many other National Party - supporting high rollers who got a lot of money back we end up with the Hon Peter Dunne the Minister of Revenue at the time who is now very much the “done Minister” rather than Minister Dunne who brought forward this bill 167 pages long to tinker around with the tax to basically find the rats and mice to find the little nickel and dimes to do what he could to try to claw back some money to help offset the couple of billion dollars that the Government gave to the likes of John Key and Paul Reynolds.We were very sceptical about this legislation in the first place because we could see that it was very much just tinkering around the edges. However we have come round to the viewpoint that we will support it in that it does state that it is “in order to improve the fairness of existing tax law and regulations protect the tax base and minimise the burden on businesses.” These are very much in line with principles that New Zealand First has to support streamlining the tax system to support the reduction in cost tobusiness to help the New Zealand economy to help grow the New Zealand economy and to help make our people basically a more prosperous people and nation as a result.We do note that there are some areas in this bill that are worthy of note and they are that there have been some changes to the GST laws which remove the inequitable situation of non-resident versus resident businesses. That is fair enough.There have also been some changes to the livestock valuation rules around the whole livestock valuation area. It also provides—and we think this is an important aspect in this bill—Hon Clayton Cosgrove: Speaking of livestock.ANDREW WILLIAMS: Speaking of livestock? Oh speaking of livestock—really? It also provides tax deductibility for expenditure on trees and plantings for erosion shelter and water protection purposes and we think that is a good thing. With the increasingly erratic climate that we are suffering and with what we saw as recently as last week with storm damage in different parts of New Zealand it is increasingly important that we do have increased planting of trees and other such planting to reduce erosion to provide more shelter and to help with protection of our important waterways around New Zealand.Similarly this bill has a part in it that provides donee status to three charity organisations that operate internationally. Again we feel that that is fair and it recognises those particular three organisations in order to treat them in a fairer manner. It also eliminates tax treatment mismatches to certain foreign currency hedges. Again it helps our currency markets to perhaps operate in a fairer manner. It does in the end withdraw what was going to be a silly tax the car-park tax on Auckland’s central business district and Wellington’s central business district. Again we are pleased that that was withdrawn from this bill because that would have been a complete nonsense. We have heard from so many people who said that you could literally be across the street from your biggest major competitor and on one side of the street you would be paying for your staff to be parking and on the other side of the street your major competitor could be getting off scot-free. What a total nonsense. How the Minister and how this Government allowed that sort of thing to get into this legislation is beyond us. [Bell rung ] Mr Chair—The CHAIRPERSON (H V Ross Robertson): The honourable member Andrew Williams.ANDREW WILLIAMS: Thank you. Another wise decision Mr Chair—another wise decision.We also remind New Zealand that in terms of the tinkering around the edges this Government does have to face up to the fact that all New Zealanders need a fair go when it comes to tax. What we are seeing increasingly is that the Government is getting behind and doing backroom deals with those who can take advantage of situations and who can do very well out of the system while others—the general everyday good solid Kiwi hard workers—are not being treated in the same manner. It is not right. We certainly hope in this House that every politician would be aiming to get a fair tax system for everyone. Aspects of this bill go some way to address that but there is still a long way to go and there is still a lot to be done to streamline our tax system in order to make it simpler to make it fairer to reduce taxes in this country to make this economy more affordable and more competitive and to put us on a stronger level pegging with many other economies that are moving forward at a much greater rate with lower company taxes and lower taxes for the likes of the export sector. Again New Zealand First is very strong on the fact that we are not doing enough to support our export sector. If we do not make more money offshore and if we do not bring more overseas funds into this country we as a nation will suffer. The Inland Revenue Department isalso going after some silly areas in taxation instead of looking at the much bigger picture of how to reform the taxation system for the benefit of all.Just in closing we hear that the Inland Revenue Department is about to spend $1.5 billion on a new computer system to oversee its revenue and tax collection. That is a vast amount of money by anyone’s standards—by any country’s standards—to spend $1.5 billion on a new computer system. One would hope that if New Zealand is spending that sort of money we would get hand in hand with that new computer system a lot more of a streamlined system that would make this country really tick over a lot faster. We would hope we are not going to get another Novopay another INCIS and another debacle and that we will not look back in years to come on the Inland Revenue Department in terms of having some disastrousTitanic of a computer system strung around our necks. New Zealand First will be supporting this bill but we do so with some reservations.The CHAIRPERSON (H V Ross Robertson): I call the Hon Damien O’Connor.Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman):Thank you Mr Chairman. Your wisdom shone through if a little slowly.The CHAIRPERSON (H V Ross Robertson): Oh I might take that call back actually.Hon DAMIEN O’CONNOR: Mr Chairman—[Interruption ] That is right. That is right; I apologise. If there was any offence taken I am prepared to withdraw.I know that some people may think that my colleagues have strayed off track but I am going to stay in the part of the bill the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill that we are discussing here. I refer to a part of it that I am unclear of. The “Minister for Prison Riots”—Minister Anne Tolley—is the Minister in the chair. Maybe she could explain clause 5 which is around “Premiums from issue of rights to subscribe for shares”. It seems reasonably—Hon Trevor Mallard: No no it wouldn’t have “premium”. It’d have to be “premia”.Hon DAMIEN O’CONNOR: Well premiums premia premiums—no no well I am not quite sure. But do you know what sprang to mind—and maybe the Finance and Expenditure Committee chair or members could answer the question—was has this been changed to give more benefit to those people who can afford to buy Mighty River Power shares?What we have had of course with the sell-off of State-owned enterprise shares are premiums and incentives for so-called New Zealand investors. I am sure some of my colleagues here who are a little more knowledgable in this area of taxation may be able to answer it but I would appreciate the Minister getting up and answering my question about the premiums from issue of rights to subscribe for shares. If I go here in the bill it says: “A distribution by a company to a shareholder is not a dividend if—(a) the company issues to the shareholder a right (the ‘shareholder right’) to subscribe for or dispose of to the company a share in the company at a given price (the ‘shareholder price’);”.The point is that we have a loyalty bonus share scheme. That is the way that John Key promoted the retention of ownership in New Zealand hands of the sell-off of half of our State-owned enterprises starting with the electricity sector. What was effectively a lie—and I will say “a lie” because it has been an untruth—was that these companies will be sold off to New Zealand investors. It is an untruth because they have not been—Hon Tau Henare: Call it a lie.Hon DAMIEN O’CONNOR: I will call it a lie if you would like. In fact of all the hype around the sell-off of Mighty River Power shares I go back to the reality that there were 113000 investors who took up the share offer and I am guessing that all of thosepeople were then entitled to a loyalty bonus share scheme. That might on the face of it seem like a good deal for Kiwi mum and dad investors because that was what we heard from the Prime Minister and all the idiots over there on the other side. We heard that this was an opportunity for mums and dads to go and buy shares in a company that they already owned. Well let us look at what actually happened. Those 113000 so-called Kiwi investors included trusts companies and investment institutions—hardly mum and dad investors I would say to you. In fact half of those shares went to a mere 13000 investors—Hon Anne Tolley: I raise a point of order Mr Chairperson. I am sorry. I have been listening to the member—sort of—for quite some time. I fail to see what the sale of State assets has to do with the bill in front of us.The CHAIRPERSON (H V Ross Robertson): We are actually speaking to Part 1 but—Hon Clayton Cosgrove: I raise a point of order Mr Chairperson. Like the Minister I was also listening intently to a large number of these speeches. They have been wide-ranging covering all sorts of issues and you quite rightly have used your discretion not to pull people up. So it may be that the truth hurts but she cannot have it both ways.The CHAIRPERSON (H V Ross Robertson): Order! The member was doing very well—Hon Clayton Cosgrove: Thank you.The CHAIRPERSON (H V Ross Robertson): —was—but can I just say that I ask the member to continue in the vein of his speech. Relevancy is my discretion.Hon DAMIEN O’CONNOR: I appreciate that Mr Chairman and I do appreciate your wisdom as I said at the start. Can I say that if the Minister of Police is not on top of her game if she does not know what we are debating here she should go to clause 5 of the bill and then get up and explain to me whether the bonus offer loyalty scheme for the sale of the State-owned enterprises will apply to new section CD 29B(3) in clause 5 which states: “A distribution by a company to a shareholder is not a dividend if—(a) the company issues to the shareholder a right (the ‘shareholder right’) to subscribe for or dispose of to the company a share in the company at a given price …”. What are the rights attributed to the loyalty bonus share scheme shares offered to the so-called Kiwis—[Bell rung ]The CHAIRPERSON (H V Ross Robertson): I call the honourable member but focus on Part 1.Hon DAMIEN O’CONNOR: Absolutely. Well I read it out Mr Chairman. I can read it out again if you like.The questions I ask about the loyalty bonus share scheme in relation to the sell-off and the sell-down of our State-owned enterprises apply to this taxation bill. I would like some answers. The lie that we are referring to was that this company would be sold to Kiwis. They would be offered a bonus scheme a loyalty share offer and I wondered whether this legislation in any way undermines the benefit that will come with that loyalty bonus share scheme. It is a relevant question and I think there are a whole lot of Kiwis who currently own this State-owned enterprise who have been conned. They thought that the 49 percent might actually go to Kiwis. The reality is quite different. The question will be: do these institutional investors have the right to the loyalty bonus share scheme and do they have the right to the provisions or are they affected by the provisions in this piece of legislation? Meridian Energy we are told is going to be next off the block so it is only fair that we clarify for mum and dad investors—that is to quote the Prime Minister and Mr Bennett who is up there trying to sell it to all the people in Hamilton—what they might get.We have seen a slide in the share price. In fact many of those mum and dad investors have lost money at this point in time. I do not know what the share price is today. Maybe someone could let me know.Hon Clayton Cosgrove: Oh they’re pretty low.Andrew Little: Not good.Hon DAMIEN O’CONNOR: Are they still on the negative side? [Interruption ] Less than $2.50. So indeed the promise by all the share traders by the Minister and in fact by the trader who is the Prime Minister—you cannot believe most of what a trader will tell you because they are basically a glorified salesperson who clips the ticket on the share price or the derivative price going up and down. That is exactly what John Key is doing. He is clipping the ticket. I have to say that it is a really sad thing to admit that it is a popularity ticket. He is clipping it and meanwhile the dividends are going down for most New Zealanders across the board. It is harder for them to live they are working longer hours and the share trader clips the ticket on the way up and down.I come back to the bill; I have not strayed too far from it. The other danger in relation to the sell-off of our State-owned enterprises and the need for us to clarify in this legislation how the distributions and how the loyalty bonus share scheme will work for people so that the Kiwis who might who can afford to—and I would have to say that 10 percent of the shares of Mighty River Power went to 400 people which is an average investment of $250000. Was that your average mum and dad? I doubt it—I doubt it.To come back to the reality and the hype around the next sale—that is of Meridian—we need to know what might happen to any bonus scheme that will be offered there. I would suggest that the Prime Minister is going to have to offer a sweeter deal another deal or some other kind of twisted arrangement that looks good on the face of it. But as many of the investors the mums and dads who have invested in Mighty River Power will be finding it is not all beer and skittles. In fact that share price has gone down. I am not sure whether they will get their dividend. It has not been terribly positive for anyone really other than the Minister of Finance who has got a bit more money to play with and he is spending it about 10 times over.I will come back to the bill and ask: can the Minister of Energy and Resources who is now the Minister in the chair hop up and answer the questions as to whether the distribution through a loyalty bonus share scheme will be affected by this piece of legislation. I have many things to comment on in the livestock part of this legislation but I will just start in this first part of the legislation. I know the Minister of Energy and Resources he is a smart Minister—he says so all the time. Can he get up and answer these questions? That is the least that an up-and-coming knowledgable Minister could do in the Chamber this afternoon.BRENDAN HORAN (Independent):I greatly appreciate the opportunity to participate in the democratic process. Being an Independent member of this Parliament I note an anomaly in that seven MPs of the Parliament do not get the opportunity to fully participate in democracy in that we are denied the opportunity to speak in the first second and third readings of a bill. I look forward to these opportunities these rare opportunities that I get to participate in the Committee stage and I thank you very much for this opportunity to rise to take a call on Part 1 of the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill.I would say that much courtesy matters. A little bit of courtesy at the beginning of the week would therefore see a lot of courtesy at the end of the week. I started off this week flying in from that beautiful place called Tauranga where there is plenty of livestock. I arrived in Wellington and drove straight away to Foxton. As I was doing that I was having my caucus meeting. I was able to get to Foxton and sort out some problems that some of the local people there had with a couple of dairies. I came backbut whilst I was doing all of this I had no idea that the Parliament would be going into urgency. I had no idea of some of the bills that were being rushed through and placed in front of the Parliament. The Hon Gerry Brownlee did not feel it necessary to inform me at all. I would stress that courtesy at the beginning of the week means a lot at the end of the week. To that end I would say that it is very important that at the Committee of the whole House stage we do thoroughly examine the legislation that is before us. I look forward to hearing after the dinner break contributions from members like David Bennett.Taxation bills appear regularly from the policy advice division of the Inland Revenue Department as regularly as the passing seasons. They are some of the most complex that we consider and they are thoroughly deserving of debate.The CHAIRPERSON (H V Ross Robertson): Order! Could I ask the member to talk to Part 1 of the bill because the member has had half of his time. Otherwise there will be an issue of relevancy.BRENDAN HORAN: Thank you very much. I am going to miss you. Part 1 of the bill in clauses 3 to 61 comprises amendments to the Income Tax Act 2007. I would like to address several aspects of some of the provisions in these clauses. We are told for instance that in the category of remedial adjustments there are provisions affecting us—that is affecting all members of Parliament—and that is why I brought up the issue of members of Parliament earlier. One provision is “Correcting an unintended minor change to the tax treatment of allowances for members of Parliament.” Another provision at clause 12 and elsewhere is to “correct an anomaly arising from changes to fringe benefit tax provisions to ensure that the tax applied only to the private element of any payment or service provided to members of Parliament under the Civil List Act 1979. This would accord with the original policy intent.” I am sure that is a relief. We are all heartened to know that the original policy intent will apply. I can see the Hon Tau Henare is breathing a sigh of relief.I am equally sure equally certain that this will be the talk in the cowsheds throughout the Waikato where the honourable member David Bennett resides and also in Southland and in every dairying region throughout New Zealand. The talk in the cosmopolitan clubs and the RSAs throughout town and country will be of nothing else but the original policy intent that will apply to members of Parliament.Equally I am sure that the press gallery will be riveted by this news. Patrick Gower and Corin Dann will no doubt be ready in their reports for the first stories in their 6 p.m. bulletins and then later on with all the other content they will be able to fill up their late news bulletins from all the contributions after dinner. They will no doubt be including the changes also included in this part changing the rules for livestock valuation. That will be important to the men and women in the cowsheds. I would note that rules for livestock valuation were introduced just 12 months ago in that riveting Budget 2012. If you think this speech is boring check out that Budget. So this Government—Hon CLAYTON COSGROVE (Labour):All I can say about that previous contribution by Brendan Horan is that I was chloroformed by that speech absolutely. The Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill does a number of things—Brendan Horan: I raise a point of order Mr Chair. I do not mean to interrupt that member’s speech because I love his speeches but I was just wondering whether my microphone was working because earlier today I noticed that the Chair found it difficult to hear me and I was wondering whether we had that same problem.The CHAIRPERSON (H V Ross Robertson): You can rest assured Mr Horan that I heard you.Hon CLAYTON COSGROVE: This bill makes a number of adjustments but I have got to say this is not the big tax bill. This is not a major set of reforms that we were promised by this Government. The major set of reforms that it embarked upon of course was what it called in its sort of spin-like way a tax switch which saw the top 10 percent of New Zealanders get 40 percent of the tax cuts—40 percent of the tax cuts.Hon Anne Tolley: Don’t tell lies.Hon CLAYTON COSGROVE: Pardon? What was that? What was that? Somebody said: “Don’t tell lies.” Well that is really interesting because we have made a couple of speeches on this and I have challenged members opposite at every stage through this debate to get up take a call and tell us whether they think the so-called tax switch where the top 10 percent got 40 percent of the tax cuts is equitable. So I ask them again—in fact I will yield to one if they would like if they are prepared to get up and say that that is an equitable tax switch.Hon Anne Tolley: Don’t tell untruths.Hon CLAYTON COSGROVE: Hang on there is a noise. There is a squeak from the middle row. Was that an admission of guilt? Oh no. Of course they will not. What New Zealanders want—[Interruption ] Pardon?Andrew Little: Her head’s gone down again.Hon CLAYTON COSGROVE: Oh yes—Hon Anne Tolley: Talk to the bill.Hon CLAYTON COSGROVE: Talk to the bill? Well part of any bill I say to that Minister over there when we are talking about tax is that people want equitable and fair tax. They want confidence in their tax system and they want a simple and transparent tax system. There is no equity in this.There are a couple of issues. For instance in Part 1 there is an item that deals with Learjets or private jets whereby the scheme of arrangement is tightened as I understand it. If you buy a Learjet say as Sir Peter Jackson has done for about $80 million and you use it a couple of days a year and you try to claim that it is a major commercial expense for say 50 percent as I understand it those rules are tightened. Well I have got to say that is a good thing because otherwise that is a swindle. But I have got to say compared with substantial reform in the tax area that does nothing for Joe or Joanne Public in the street in terms of the other 90 percent of New Zealanders who got very little if anything and get very little if anything out of the so-called tax switch.Hon Anne Tolley: That’s not true.Hon CLAYTON COSGROVE: Well if it is not true Ms Tolley get on your feet and take a call in the debate. Get on your feet and actually justify it.Paul Goldsmith: I am happy to take one. We will.Hon CLAYTON COSGROVE: Oh “Goldfinger” at the back. He is going to justify it. Good stuff! Well I wait for that speech and I wait for that member to tell us whether the top 10 percent getting 40 percent of the cuts is equitable. Just like of course what the Prime Minister said about power prices which is that nobody is paying too much for power as did—Hon Simon Bridges: That’s right.Hon CLAYTON COSGROVE: That is right says the Minister in the chair the Minister of Energy and Resources—old “Jed Clampett”. “That’s right.” he says. “That’s right.” Let us get it on the record again: no one is paying too much for power according to the National Government. But I asked that Minister in the Finance and Expenditure Committee. I said: “Can you tell us at what point you believe if power prices go up they would be paying too much for power?” Oh absolute silence. To quote him out of the transcript: “I can’t give you a dollar figure.” That is what he said. So theGovernment cannot justify its position now. No one believes the Government as people get their first set of power bills in the cold and dreary weather not to mention the tax reductions and the tax breaks that they are not getting because of the inequity of the so-called tax switch.So OK it has done a couple of things for the owners of private jets. That would be Kim Dotcom I presume. That would be Sir Peter Jackson and a couple of other people. I do not know how many people in the gallery or listening to this own their own private jet and will be shaking in their boots tonight as they feel they may have to pay a little more tax if they go out and purchase a Learjet. But I will tell you that the other great tax reforms that this crew embarked upon of course are being mean to paper boys and girls and the car-park tax which it stuffed up completely—absolutely stuffed up. The old worker in his or her car-park the old paper boy or paper girl trying to get a few bob a bit of pocket money—oh there is “Uncle Scrooge” the National Government round the back pocket grabs the wallet and pilfers it. But if they own a Learjet and this legislation goes through then as we said today they might have to pay a bit more tax—a great groundbreaking reform from this mob.Of course the problem that this crew have when they are looking at the revenue side is what we found out today. Referring to clause 5(3) in Part 1 that is the point that Damien O’Connor raises. If you look at the State-owned assets sale what we know about the revenue side of this Government’s Budget is that it says it is going to get $5 billion to $7 billion from State-owned enterprise sales. It stuffed up the first one Mighty River Power and now Meridian Energy. As proof of that the Government now says it is going to have to do Meridian Energy in blocks or slices or whatever. It said it was going to get two or three away earlier this year. It cannot even get that right. But it says even though it has got an under-investment in Mighty River Power that it is going to still get $5 billion to $7 billion of revenue out of those sales. What is it going to spend it on? Well the list is long: KiwiRail schools irrigation hospitals—all these things that actually by the way do not generate any revenue. Last time I checked a school or a hospital does not. A hospital is there to make patients healthy. So the Government sells a revenue-generating asset which brings in ongoing dividends to the taxpayer to spend on those things. It purchases non - revenue-generating assets and it can do that only once because the money runs out.But it gets better colleagues because $5 billion to $7 billion apparently is going to pay for the Christchurch rebuild and a whole set of other things and that total bill adds up to $84 billion—billion with a B—worth of expenditure out of $5 billion to $7 billion revenue of sale proceeds if the Government gets all those assets away. So to quote the Prime Minister’s favourite phrase I say to those opposite show us the money because there is a big gap and a big hole in the fiscals that this Government puts forward. That is why you would think it would actually make some substantive reform not just the odd Learjet or private jet as it is doing here—not just clause 5(3) of the bill of course in here in respect of the dividends from the sale. I ask the Minister the same question that Damien O’Connor asked.I see Gerry Brownlee is here. He is the third most powerful man in New Zealand according to the ChristchurchPress . He will know the answer to this: is clause 5(3) of the bill going to affect the bonus shares the loyalty bonus from the Mighty River Power sale? Any takers? Gerry have a crack—all of your fingers and toes? No. No of course. No the Government will not answer that. It does not know.Hon Gerry Brownlee: I’ve got all of my fingers and toes.Hon CLAYTON COSGROVE: All your fingers and toes Gerry. Try that. Count up. You know I am sure he bought some shares. He may get part of the loyalty scheme. He may be able to tell us whether clause 5(3) of the bill actually impacts on that.Then of course finally we have the tinkering with GST and some adjustments. What we do not have here is the Prime Minister or Gerry Brownlee or the Minister in the chair getting up and apologising to the people of New Zealand for National lying to them—and it did—when it went back on its word in respect of the increase in GST. This is not the brave new world that we were promised by National or the brighter future. This is fiscal piffle.PAUL GOLDSMITH (National):I was very interested to hear from the previous speaker Clayton Cosgrove about his concerns about equity in the tax system. He was terribly worried that Joe Public in the street is having a hard time and that all the tax cuts are going to the wealthy. So I thought I would just remind him of a couple of statistics. At the moment 6 percent of income tax payers pay 37 percent of the income tax. So the higher-income earners pay a lot. But that does not anywhere near explain the actual extent of massive redistribution that we have in the system. When you take into account Working for Families at the same time—and I am trying to focus here on the first part that we are talking about—take for example Joe Average on the street whom Mr Cosgrove referred to. If you were on the minimum wage and effectively earning $30000 a year and you happened to have three children it would be interesting to know how much tax you would expect that person to pay under this iniquitous arrangement which the Labour Party thinks is a terrible one. Do they pay any tax—someone on the minimum wage with three children? No they actually get given $10000 extra so that their after-tax income is $40000. Rather than paying any tax under this massively redistributive system they are actually paid $10000 extra so that their after-tax income goes from $30000 to $40000.I am responding to the issue that Part 1 it has been suggested is not doing enough to reform the tax system. Actually that person having been given an extra $10000 would pay maybe $2000 or $3000 in GST but for that of course you get free health-care free superannuation free education at the point of delivery and all the sorts of things that the Government provides.I will just use one final example before I step up. What happens if there are two income earners in the family and the household income is $50000? What tax would you expect them to be paying if they had two children—two income earners with $50000 in household income. If they had two children well they would not be paying any income tax at all; they would actually be given $1600 on top of that. So their actual after-tax income is higher than their pre-tax income. Again it is hardly the most inequitable system unless of course you are suggesting that maybe there is too much redistribution and I think that is an issue that we need to resolve.If there are three children in that household with $50000 of income in fact the tax is not zero; they are given an extra $5000. So their after-tax income goes from $50000 to $55000. I just thought I would put those figures down on the table so that the people in the Parliament can realise that when we hear all this nonsense about the Government letting off the wealthier people from paying tax and making Joe Public struggle we—Hon Trevor Mallard: Do you want to speak again this year?PAUL GOLDSMITH: Sorry? I think I have probably said enough on this issue so thank you very much.BRENDAN HORAN (Independent):I look forward to being able to participate in democracy. I note that the rules for livestock valuation were introduced just 12 months ago in Budget 2012 so this Government is having to make changes almost before the ink is dry on the original legislation. We saw a parallel of this around about 6 weeks ago in this Chamber. Simon Bridges rushed through the Crown Minerals Amendment Act in April and it had so many flaws that this House under Budget urgency was asked to debate the “Crown Minerals Amendment to the Amendment to the Amendment Bill”.When the House is put into urgency as I said earlier a little bit of courtesy at the beginning of the week would go a long way. Members such as me have to cancel or rearrange constituent appointments so it has a great effect.But anyway this taxation bill with “Livestock” in its name the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill is another fixer-upper bill. But to return to members of Parliament and the way the taxation law applies to us in clause 12 the final wording after many changes and revisions provides that in respect of services for members of Parliament: “An amount is exempt income of a person to the extent to which it is income of the person and is not exempt income under another provision of subpart CW if the amount is travel accommodation attendance and communication services as defined in section 20A(7) of the Civil List Act 1979 and—(a) the amount is—(i) referred to in section 20A of that Act: (ii) paid under section 25 of that Act; and (b) the amount is—(i) provided to a person to whom any of section 25 (1)(b) to (e) of that Act applies:”. Honestly it is a relief to know that the original policy intent applies and I suspect that none of us would have been able to divine that from reading clause 12 as it was written.I welcome the opportunity to thoroughly examine to scrutinise and to debate the important business the Government puts before us today. There are another 17 parts and provisions of several bills to debate and I look forward to the debate and contributions of members after the dinner break. Thank you.The question was put that the amendments set out on Supplementary Order Paper 266 in the name of the Hon Todd McClay to Part 1 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes118New Zealand National 59; New Zealand Labour 33; Green Party 14; New Zealand First 7; Māori Party 2; ACT New Zealand 1; Independents: Dunne Horan.Noes1Mana 1.Amendments agreed to.Part 1 as amended agreed to.Part 2 Amendments to other ActsThe question was put that the amendments set out on Supplementary Order Paper 266 in the name of the Hon Todd McClay and the amendments set out on Supplementary Order Paper 272 in his name to Part 2 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes103New Zealand National 59; New Zealand Labour 33; New Zealand First 7; Māori Party 2; ACT New Zealand 1; Independent: Dunne.Noes 16Green Party 14; Mana 1; Independent: Horan.Amendments agreed to.Part 2 as amended agreed to.ScheduleThe question was put that the amendments set out on Supplementary Order Paper 266 in the name of the Hon Todd McClay to the schedule be agreed to.Amendments agreed to.Schedule as amended agreed to.Clauses 1 and 2Clause 1agreed to.The question was put that the amendments set out on Supplementary Order Paper 266 in the name of the Hon Todd McClay to clause 2 be agreed to.Amendments agreed to.Clause 2 as amended agreed to.Bill to be reported with amendment presently.Hon GERRY BROWNLEE (Leader of the House):I moveThat the Chairperson report progress.Progress to be reported presently.House resumed.The Chairperson reported the Legal Assistance Amendment Bill with amendment and that the Committee had divided it into six bills; the State Sector and Public Finance Reform Bill with amendment and that the Committee had divided it into three bills; the Plumbers Gasfitters and Drainlayers Amendment Bill without amendment; the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill with amendment; no progress on the Airports (Cost Recovery for Processing of International Travellers) Bill; no progress on the Administration of Community Sentences and Orders Bill; no progress on the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill; and no progress on the Medicines Amendment Bill.Report adopted.The ASSISTANT SPEAKER (Lindsay Tisch): Members the Government has indicated to me that it no longer wishes to progress the business for which urgency was accorded. Therefore the House stands adjourned until 2 p.m. on Tuesday 9 July 2013. Good evening members.