Prasad Rajen: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
Prasad Rajen: Taxation (Tax Administration and Remedial Matters) Bill — In Committee Third Reading 
[Volume:675;Page:20793] 
Dr RAJEN PRASAD (Labour) 
: 
 I also am pleased to take a call on the Taxation (Tax Administration and Remedial Matters) Bill. It has been interesting listening today to the Committee stage and the third reading of this bill. I want to reflect on some of the comments that have been made. I was interested in Trevor Mallard’s comments late in the afternoon when he said that there are some provisions that come before the House that reflect the essential differences we have with members opposite and this is certainly one of them. When we begin to look at fairness and equity then we can see why we strongly oppose some of the provisions in this bill. Mr Gilmore argued that we have spent all of our time talking about what is effectively the last substantial clause in the bill—much of our time has been spent on that. He seemed to be saying that no matter the size of a bill if there is an important clause in it that we do not agree with we must still pass the bill. That was the kind of shallow thinking that Aaron Gilmore had and he was advising this side of the House to take that view. 
We heard also from Mr Bennett. I wonder whether he had read the bill fully or what point he was trying to make. He really did believe that this side of the House does not have the best interests of the community at heart. He actually believes that. That is the kind of amazing contribution that we heard on this bill. 
Then we had a contribution from the ACT Party. The ACT member began to make a non-existent link between taxation in Britain the unrest in the Middle East and the development of the Asia-Pacific region. His argument went something along the lines that Britain’s troubles are caused by high taxation and the differences that creates. Then he referred to the Middle East and talked about the unrest there. He talked about the kind of society there and blamed it on the kinds of things we are debating here. Then he came amazingly to the two Asian giants I guess he was referring to that are producing amazing growth rates at the moment. That member should reflect on the fact that those two countries put together probably have a billion people in poverty. [ 
Interruption 
] The member has been to those countries and that is a fact. But when members on this side of the House talk in the New Zealand context about fairness and equity then those things become important. 
My colleague Su’a William Sio talked about a hospital pass—that the nature of this bill was a hospital pass. There is quite a lot of truth in that comment about what this legislation does and how the last clause of this bill has introduced a major change which is fundamental in a bill of this kind. Debates on remedial matters bills of this kind—and this point has also been made—generally are non-controversial and generally there is broad agreement across the House. But this was not a bill like that. A major controversial element has been introduced in the bill. Minister Dunne tried to make light of that but we cannot make light of that when it is a serious provision that needs to be debated fully. It is quite sad really when this side of the House supports all of the other provisions in the bill—everything but one clause. Tax secrecy the privacy framework tax pooling and changes to donee status: we support all of those things but what we have been reduced to doing is to debate this particular provision. 
It is interesting to follow the argument from the other side. The Government justifies the abolition of gift duty because of these elements: gift duty raises only $1.5 million a year costs half that amount to administer and has a $70 million compliance cost. The Government says that therefore it does not work; therefore it has to go. But that is being deliberately disingenuous because gift duty exists to prevent tax avoidance and structuring. That is what it is there for. Scrapping gift duty opens the way to tax avoidance and structuring. If we take those characteristics the measure has been quite successful. It was never about how much tax was going to be taken or how much it would cost to administer. It was an important pillar to avoid tax avoidance and structuring. 
That point was made very strongly by the New Zealand Institute of Chartered Accountants. I know that Minister Williamson believes that of course it would say that because of self-interest. Well I give the institute quite a bit more credit than the Minister does. The Minister himself supports that group in terms of the quality of its submissions before select committees so I take its submission seriously. The institute identifies major tax-avoidance opportunities that this provision will give. The House has heard them all but the final statement is still worth repeating: “ability to split incomes with people on lower incomes”. That is very interesting because Minister Dunne is interested in income splitting although his National colleagues are not. Maybe this is a back-door way of bringing in income splitting or maybe there is a lovely Freudian kind of explanation for why the Minister supports it. But “ability to transfer income to loss-making entities”—everyone has talked about that but it still is a problem. Simply taking it away in this way does not solve those problems. The “ability to transfer assets in order to meet minimum thresholds for the financial arrangement rules and the foreign investment fund rules” and “ability for someone with a tax liability to divest themselves of the means to pay and then to claim hardship”—those kinds of points have been well made. 
I liken the measure to putting a fence at the top of a hill of unstable ground so that people will not play there and fall in so that that fence does its work. But because nobody has fallen over and died we think we should take that fence away. That is what I liken this provision in this bill to and that is why we cannot support it. 
Other important contributions were made. I was fascinated by Lianne Dalziel’s passionate interrogation—and she spent about four or five calls on this—concerning the regulatory impact statement. It told us a lot about those whose job it is to tell this House what those impacts are. She went through it in some detail and made an important contribution. But there is a question in my mind now. I know that Aaron Gilmore does not accept this but the $70 million that is projected is probably a figment of somebody’s imagination. It is a very rough way of doing it but it has become a driving force for this Government in bringing this clause into this bill at this time. Therefore it stretches credibility—certainly mine—and it is in the regulatory impact statement. 
In the end one has to wonder why the Government is doing it. Is the Government now simply taking another step in advantaging those who are well off and making sure they get another tax break? They have had several already and this is another one that will make that ability available to them. I thought Stuart Nash was very astute in saying that one of the perverse effects of this could be seen in those who will now transfer huge sums of their resources into trusts etc. It will heighten avoidance behaviour—behaviour of a type we have not seen. 
It is a rushed decision and for all of those kinds of reasons despite the fact that we support every other clause in this bill this has been the pivotal clause for us. The Government is not prepared to wait for the report on all of this to be ready so that a more considered decision can be made. I wish it would listen to what Warren Buffett said yesterday: “Do charge me tax fairly.” Members on that side might need to think about that. Thank you.