Woodhouse Michael: Budget DebateText is incorporated into the Bound VolumeWoodhouse Michael: Budget Debate[Sitting date: 07 June 2016. Volume:714;Page:11714. Text is incorporated into the Bound Volume.]Hon MICHAEL WOODHOUSE (Minister of Immigration): I can certainly give that member a reassurance that this Government will never win the prize for most spending. Indeed Dr Woods has just reconfirmed the fact that what a Labour Government does better than any other is spend other people’s money. Why should we be surprised at that when in the last 5 years of the previous Labour Government public spending went up by 50 percent? If this Government had kept the spending trajectory as Treasury had predicted when it came to office this country and its young would be $100 billion more deeply in debt than they presently are. That is the irony of the gloating: that members of the previous Government say “Well we had nearly zero net debt.” while the legacy they left was a spending programme that were it not reined in would have our young inheriting $100 billion more debt than we are presently experiencing.And actually Dr Woods is right: we would not have spent as much in Vote Health as a Labour Government would have—or at least what Labour says it would do. It says it is one thing in Opposition and it is another thing in Government. There is $2.2 billion appropriated over the next 4 years for funding pressures and growth in services in Vote Health and Labour says that is $1.7 billion less than it would have spent. Well fair enough. Add that to the $100 billion and the tertiary education promises and everything else that it promises to spend were it the Government.But here are the numbers that really matter to New Zealanders. It is the number of elective surgeries undertaken—that is tens of thousands more than when we came into office. It is the number of New Zealand patients flying to Australia for cancer treatment—that is zero. It is the number of patients who are having to wait more than 6 hours in an emergency department. It is the proportion of our young who are vaccinated and immunised against some of this country’s worst diseases. It is the money that we have invested in rheumatic fever and now in colon cancer screening and in extra drugs. They are drugs that are incredibly expensive and therefore we need to be very careful to ensure that decisions about their funding are evidence-based not emotion-based and that they are drugs that will make a difference. It is really important that Pharmac continue the excellent work that it does in order to make sure that it is appropriately targeted because we cannot spend unlimited amounts of money on every single medicine that is available—that it is well-targeted money. Those are the numbers that I think that New Zealanders are interested in.I am very proud of this Government’s record on health and I will stand by it strongly. But there are a few other numbers too. I think that $17 billion spent by this Government in the Canterbury rebuild was dismissed as somehow smoke and mirrors. Well that is not what the people of Canterbury are telling us. That is a very very meaningful investment in what I know when that rebuild is complete will be one of the great small cities of the world—modern sustainable with good transport infrastructure with safe buildings and with really good amenities that the people of Canterbury can enjoy for a very long period of time. I think we should be pleased and proud of the effort that has gone in under Ministers Brownlee and Wagner to ensure that that is achieved.As Minister of Immigration and Minister for Workplace Relations and Safety it is very important to me that that city is rebuilt on the back of a very strong and safe workforce that is paid well is skilled and understands its obligations and rights. I am very very pleased to note the progress in the reduction in harm that is occurring against a very strong prediction of death and serious injury in the rebuild because of the scale of the work that is going on in that city and in that province. So far we are not seeing those sorts of predictions come to pass and there is a very good reason for that. Again I think it was very strongly led by the parties to the Stronger Christchurch Infrastructure Rebuild Team and the other people who signed up to the Canterbury Rebuild Safety Charter. Of course we had a very important piece of reforming legislation which went through the House last year and has come into effect this year that I think will go a long way to supporting ensuring that everybody who goes to work comes home again safe and well.I want to touch on another part of the very large investment that the Government has made in targeting our revenue base. One of the largest appropriations was of more than $800 million—$324 million in capital and over $0.5 billion in operational funding—to lead the business transformation that the Inland Revenue Department (IRD) is embarking on right now. It is an eye-watering amount of money. A significant proportion of that is going on an IT system but indeed it is much much more than that. It is a transformation in the way that IRD interacts with the millions of stakeholders and taxpayers that it deals with around the country and in particular the small-business community.There are two quite significant changes in the way that the Inland Revenue Department is being asked to consider the work that it does and that is firstly that it should tailor its systems around business systems not expect businesses to tailor their systems to the IRD’s. Secondly and this is the one that I think IRD is having the most trouble getting its head around frankly and I can say this as a chartered accountant and as someone who is fairly money- and quantitatively-minded is the concept of near enough being good enough—that we can spend 80 percent of our time effort and cost arguing about the last 5 percent of taxpayer obligations. Actually I think it is a really really important change in emphasis that we make sure that when it comes to taxpayer compliance we do not spend an awful lot of money nickel-and-diming because that is a paradox.But I think the biggest part of Budget 2016’s tax announcements came in the $187 million small-business tax package—this is what small businesses have been telling us for years that they want. It is in particular around changes—in fact potentially the dispensing of provisional tax—enabling a small business to pay tax as it earns it by using the accounting income calculated by their small-business accounting software and then paying tax as it goes. The IRD is going out and consulting on that significant change right now but the plan is to have that process in place by 1 April 2018.So from that tax year small businesses will be able to pay tax or claim a tax refund if indeed during the month accounting losses and tax losses are sustained rather than try to guess how much income they might be scheduled to make and then being punished for doing better than that or for being surprised on the upside that they might have been more profitable—the seasonal harvest could have gone better the milkfat price could have gone up other innovations reduced the cost base—which then leads them to be punished with use of money interest and potentially penalty taxes as well. So I think that that is one of the significant developments and milestones of Budget 2016. It has been very well-received by the business community. We are consulting on it now and I think that this will be very well-received.But of course it comes back to that first part of transformation: in order to be able to deliver that Budget announcement we need to have the IT system in place—by 2018 in that case. The transformative process has its stage one changes to GST from 1 April next year and I am very confident that both of those phases are well on track despite the significant risks that exist in an IT project of this scale.I just want to finish by talking about international tax obligations because usually with revenue things are a bit dry and the media is not really dominated by matters tax. Over the last few months there has been quite a bit of discussion around multinational tax avoidance foreign trusts and so on. Most members of the public find it incredibly difficult to understand but it goes to their inherent sense of fairness that if they are required to meet their tax obligations to the New Zealand Inland Revenue Department so too should multinational companies as well. That is a sentiment that the Government agrees with. Indeed to the degree that there is multinational tax avoidance there are 15 separate actions going on to ensure that those loopholes are closed.But this is a global problem. If global companies are not paying their taxes here the chances are that they are not paying them anywhere. It is really important as we get behind the emotional response of “This doesn’t feel fair.” that we do not come to a knee-jerk reaction and put in place policies that in the long run could be bad for New Zealand. This would erode the Budget base the tax base. If we go out and try to tax a multinational company that does not have a permanent establishment here the retaliatory response could be that companies like Fonterra and Silver Fern Farms which transact business offshore but have their presence in New Zealand could be taxed in those offshore jurisdictions much to the detriment of New Zealand’s tax base. So I applaud this Budget. I think there is a lot in here to be positive for even in the dry area of revenue.