Taxation (Business Tax Measures) Bill

Hon SIMON POWER (Associate Minister of Finance) Link to this

I move, That the Taxation (Business Tax Measures) Bill be now read a second time. The main purpose of the bill is to ease the burden of taxes on firms’ cash flows, and to make paying tax easier by reducing tax compliance costs for businesses. It is a clear fact that in the current climate many businesses are experiencing pressure on their cash flows—none more so than the smaller businesses that make up more than 96 percent of New Zealand’s business community.

The Government recognises the impact that the current economic climate is having on these businesses, and has responded with a $480 million suite of compliance-free measures. Many of these measures are contained in this bill. Others, such as reducing the rates of use-of-money interest for underpayments and overpayments of tax, have already been progressed by Orders in Council.

Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this

The Opposition notes with some regret that on the very day that the Taxation (Business Tax Measures) Bill reaches its second reading, the Performance of Manufacturing Index has reached its lowest point ever. Today is also the day when the Reserve Bank has dropped the official cash rate to 3 percent—one of its lowest levels for many, many years—in view of the deepening and worsening recession that will hit small business hard. I know that out there beyond the confines of Parliament many small-business people are worrying about meeting their payroll each week, and people are fearing the loss of their jobs. It might be said that people are taking very little comfort in their small businesses because they are not covered by the 9-day fortnight idea.

Against that background we are here to discuss a tax bill that is good as far as it goes and that we will be supporting. But this bill was largely written by the previous Government in about August last year—before the global recession was really felt and before we had the opportunity to take stock and drive the bill further. I echo the comments made by the Associate Minister of Finance, Simon Power, on behalf of the Minister of Revenue, in thanking all members of the Finance and Expenditure Committee and acknowledging its chair, Craig Foss, and his colleagues. Members of small businesses would be encouraged by the level of cooperation around the House on getting this bill through. We have worked together to identify measures where the bill could be extended, and they are written in the committee’s report.

I give notice today on behalf of the Opposition that in the Committee stage of the bill the Opposition will introduce a series of amendments. All of these amendments are taxpayer-friendly and will take the bill further, as we would have done if confronted by this situation in Government. Further, we formally indicate to the Government that we would be happy to cooperate with the Government in a bipartisan way and see those amendments introduced in a Supplementary Order Paper rather than through an Opposition amendment, should the Government wish to cooperate in the interests of giving small business an even greater tax remission in this way.

In many respects, therefore, this is a good bill, and it largely implements ideas that we worked on earlier. But it is also a missed opportunity. National has come to office and simply lifted ideas that were around or in process, or in Labour’s manifesto. Of the 13 substantive elements of the bill, nine of them fall into the category of matters previously legislated or for which work streams were already under way. National has no broad-based plan to give New Zealand’s public confidence that this Government has taken the action necessary to tackle the gravity of this recession and to protect the most vulnerable, or to prepare New Zealand for the opportunity of taking advantage of the inevitable upturn.

As many international commentators have started to work out—and as, I think, New Zealanders are starting to recognise—this Government is becoming isolated in international terms. It is one of the very few that is committed to a conservative approach although the global recession demands robust action. Even in the best spirit, one could hardly call this small bill robust. Where is the plan? Where is the stimulus? New Zealanders have watched an American President take office and take action, passing a NZ$1.5 trillion stimulus bill. They look across the Tasman, and they see a Government prepared to move heaven and earth with a NZ$67 billion stimulus package.

This is the greatest financial crisis the world has faced since the Great Depression. It is the first time that the whole world economy has gone backwards since World War II. The International Monetary Fund chief economist has advised world Governments to commit whatever it takes to avoid a depression, and, above all, to adopt clear policies and act decisively. It is better to do too much than too little—so says the International Monetary Fund. The US Secretary of the Treasury in the Obama administration, Tim Geithner, has warned that, given the scale of this economic crisis, “the policy response has to be comprehensive and forceful. There is more risk and greater cost in gradualism than in aggressive action”. Not two days ago, the World Bank—no less—revealed that the global economy will shrink this year for the first time since World War II. Only today, President Obama called for other nations to enact similar stimulus packages to that of the US. So where is New Zealand’s National Government? According to the Wall Street Journal, looking from the United States, it is a global outlier taking a fiscally conservative, deregulatory approach to a recession that was caused in the first place by a lack of adequate regulation and supervision over financial markets.

Up to now, the National Party has got by through copying and pasting measures that the outgoing Labour Government already had in the works. That is exactly what this bill represents.

CRAIG FOSS (National—Tukituki) Link to this

Good grief, what a difference an election defeat makes! Suddenly we have members on the other side of the House in favour of tax cuts. The cuts are maybe not big enough, wide enough, or deep enough at the moment, but those members are in favour of giving back—or at least not taking, in the first place—the excess revenue that while they were in charge they did not need to take in the first place. But now that we are in a recession they are actually trying to expand the measures. So I do welcome that road to Damascus experience.

I would also just like to note that the previous speaker, David Cunliffe, talked about some mythical place called “the Hawke’s Bay”. It is “Hawke’s Bay”—full stop. It is “Hawke’s Bay”, not “the Hawke’s Bay”.

Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this

The previous speaker, Craig Foss, made an interesting point. He tried to illustrate the difference between the National Party in Government and the Labour Party when it was in Government, but the truth about that is simply this: there was a huge difference. The difference is that when we were in Government we had a plan, as my colleague David Cunliffe has said.

For instance, unlike the National crew, we had announced, had costed, and—had the election had a different result—would have provided New Zealanders who were made redundant with 12 months’ funding. That was to have been given regardless of their collective household income circumstances or those of their spouse, to enable them to retrain and, therefore, redeploy into the workforce, perhaps in a different sector, within 12 months. The biggest idea that has come from the National crew over there is that those people might get, what is it, $62 a fortnight—

KEVIN HAGUE (Green) Link to this

When I spoke in the first reading debate on the Taxation (Business Tax Measures) Bill I offered the Green Party’s support for it. I thank the Finance and Expenditure Committee for its work, which has been expeditious, and I indicate now that the Green Party will continue to support the bill.

I note that the select committee did have to make a number of technical amendments to the bill. In the first reading debate I registered my and the Green Party’s objection to the bill’s introduction under urgency. I expressed our commitment to healthy politics where urgency is used strictly only when it is required. One cannot help but wonder whether the technical errors in this bill could have been avoided if some more time had been taken in the first place.

I agree with my colleague Craig Foss that the Government’s package to deal with the economic crisis needs to be taken as a whole. When one does that, it becomes absolutely clear that the package totally lacks coherence, as I have mentioned in a previous speech on this bill and in speeches on other bills. The Government’s response to the economic crisis is incoherent, but it also fails to understand that the best approach to addressing the economic crisis is to do so concurrently with other crises we are experiencing, both in the environment, particularly in terms of climate change, and in the area of energy.

The example I previously used of the Government’s lack of coherence and policy is the withdrawal of the research and development tax credit. On the one hand the Government is saying “Here’s a hand-up with this tax relief.”, and on the other hand it is pulling out the rug from under small businesses with the withdrawal of this reward for innovation in research and development.

Yesterday the Government, with its package to support workers in large businesses and for a 9-day working fortnight, provided another example of the lack of coherence in its economic package. Some 20,000 to 25,000 people are expected to benefit from the measure. But what about the very much larger number of people working in small businesses? Will the devastation of unemployment be any easier to cope with because a person used to work in a smaller workforce? Of course not. There is no difference in the needs of the workers in smaller and larger businesses and therefore no sound and rational basis for the Government’s distinction.

What is more, the Government’s failure to extend a helping hand to workers in these small to medium sized businesses is a kick in the teeth not only for those working people but also for the businesses that employ them. It is one step forward with this bill but another step back with the failure to support the employment relationships within small businesses that are stressed by the economic situation.

What else has the Government been doing to support small businesses? The Minister of Finance, in his first reading speech on the bill, said the Government would be looking at the recommendations of the Small Business Advisory Group, which I supported at the time. I mentioned a couple of that group’s more recent recommendations. It recommended that “publications be produced that give practical and implementable advice and support for small to medium sized enterprises, to improve their environmental performance and to derive business benefit from the recognised or certified environmental sustainability of their products and services.”

This is something the Government could easily have moved on. It could have funded the Sustainable Business Network, for example, to produce exactly such resources. One month on, there is nothing. The Small Business Advisory Group recommended that “all foodstuffs sold in New Zealand be required to be labelled with the country of origin of the defining component or the most significant component of the foodstuff.” One month on, there is nothing. Small and medium sized businesses must surely have noted that despite all the rhetoric about urgency and pragmatism, nothing besides this modest tax relief has been done to lend them a hand while the rug is being firmly and rapidly pulled out from under the feet of many.

I spoke in the first reading, perhaps a little obscurely, about bees. I likened the Government’s dogged and robotic fixation on continuing to try to run the economy on the same unsustainable basis that caused this economic crisis in the first place to bees trying to find their way home and being trapped by a building lying in their path. The inability to consider other possibilities leads to disastrous consequences, both for the bees and for our nation under this Government.

There are some positive signs, and I take issue with the comments of my colleague Clayton Cosgrove. The national cycleway is a great first step, and I commend the Government for it. It will bring in sustainable tourism dollars, will assist in reducing greenhouse gas emissions by encouraging people in some major urban centres to ride bikes instead of using motor vehicles, and will produce health gains, but it will also create jobs. Yesterday the New Zealand Contractors Federation called the cycleway “a vital boost for small and medium sized contractors.” Those members who have cycled the Otago Central Rail Trail or the Little River Rail Trail, for example, or similar cycle routes overseas, such as the Sustrans network in Britain, will know that this kind of cycling facility provides the lifeblood of many small businesses and indeed whole rural communities.

I remember on one of the occasions when I rode the Otago Central Rail Trail, another group of riders staying in the Lauder Hotel with us—a business that probably would have closed by now, if it had not been for the trail—consisted of the Minister of Finance, Mr English, and a large family group. He will certainly have seen the profound impact the cycleway has had on the local economy. I hope he may begin to agree that it is possible to deal with more than one crisis at a time.

That is an example of how it is possible to address the twin crises in environment and economy by taking action to transform the economy to one that has a sustainable basis—what the Green Party and many world leaders have dubbed the Green New Deal. Early Green jobs visionary Van Jones has just been appointed a special adviser for green jobs enterprise and innovation at the White House Council on Environmental Quality. When the Green Party has asked in this Chamber about the Government’s intention to create green-collar jobs, the Prime Minister has indicated that he neither knew nor cared. I guess that is another way John Key is not like Barack Obama. I am starting to keep a list. There is another list on ways John Key is not like Nelson Mandela.

The new American President absolutely seems to get it. We are facing multiple crises right now. It simply is not possible to say we are going to choose just one. If it is possible to create jobs and help to move the economy towards long-term sustainability at the same time, then why on earth would we not do that? If it is possible to create jobs and help protect or, better still, restore the environment, then why on earth would we not do so? If it is possible to create jobs and ensure the entitlement of New Zealanders to the fundamentals of life, such as affordable healthy food, warm and safe housing, and effective and efficient public transport, then why on earth would we not do so?

Let us see the jobs in insulating homes, retrofitting homes and offices for energy efficiency, installing solar water heating on every State house, riparian planting, native reforestation, cleaning up toxic sites, enhanced public transport services, communities growing food locally, and distributed electricity generation. Out of the teeth of these multiple crises it is possible to snatch the opportunity to shift New Zealand on to a new path that will ensure a future worth having for our children and grandchildren.

We urge the Government not to blow it, and we offer our support and assistance. The nature of the Green New Deal incorporates an inclusive society moving towards this positive common purpose. I will close by quoting Van Jones in this book The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems.“And now we stand at our own crossroads, looking out upon two futures: one with rising temperatures, rising oceans, and rising violence on a hot and strip-mined planet and another with expanding organic harvests, growing solar arrays, and deepening global partnerships on a green and thriving Earth. Given those choices, we know in our hearts what our parents’ generation—and our grandparents’ generation—would have done for us. Come, then, let us go forward together with our united strength—and win that better future for the generations to come.” Thank you.

JOHN BOSCAWEN (ACT) Link to this

I rise in support of this Taxation (Business Tax Measures) Bill. The ACT Party will be voting for this bill.

I will start by saying that this is the first experience I have had of sitting on a select committee—the Finance and Expenditure Committee—and speaking following its deliberations. I congratulate the chairmanship of Craig Foss and I also congratulate the bipartisan support that this bill has received from the Labour members on that committee, including the deputy chairman, David Cunliffe. I also acknowledge the support of the officials and, in particular, the submitters.

We received only six submissions, but one was a detailed submission from the Institute of Chartered Accountants of New Zealand. Members of the institute made an oral submission and, as a new member of Parliament, I noted that it reflected on the amount of work that these groups do for the good of the people of New Zealand. Only yesterday we heard submissions from a number of legal and accounting firms on the new international tax bill. Two of those submissions totalled 150 pages each. So a huge amount of work is done freely for the benefit of New Zealanders.

This bill makes a number of changes. It is designed to support small to medium sized businesses by easing the pressure of taxes on their cash flow and compliance costs. When the Minister of Justice was speaking on behalf of the Minister of Revenue, he outlined some of those changes, so I do not propose to go into them in a great deal of detail. But I will say that they lift the thresholds for a number of issues to do with GST and fringe benefit tax. For example, the threshold for having to register for GST is lifted from $40,000 to $60,000, which enables a number of smaller enterprises that might otherwise have had to register for GST and be subject to those compliance costs to be exempt. Similarly, larger organisations with a turnover in excess of $200,000 that might have had to file 2-monthly GST returns can now file their returns every 6 months, under the provisions of this bill, as long as their turnover is less than $500,000.

It was also interesting that we received during the course of the select committee submission process a very detailed submission on the taxation of patents. I think it is fair to say that it was not an issue that many members of the committee had given a great deal of thought to. Once again, that was a benefit of being involved in the process of hearing submissions.

In rising to speak on this bill, the deputy chairman of the select committee, the Hon David Cunliffe, talked about the deepening and worsening financial crisis that this country faces and about the fact that people fear the loss of their jobs. He noted that the Governor of the Reserve Bank reduced the official cash rate by 0.5 percent today, and he also said that the world was going backwards. The issues that David Cunliffe raised are all very true.

But I would comment that although this bill is aimed at small to medium sized businesses—and we heard earlier that the relief available under the 9-day working fortnight is available only to employers with more than 100 employees—another group in society is also very much affected by the recession the country is in. This group does not get a lot of air time in this country. This group is what I call the people who save. They are the people who save, who go out to do their work, and who, rather than spend $1.10 or $1.15 for every $1 they earn, spend 95c and put something away for saving. The issue of saving is very, very important. Although we always look to the lowering of the official cash rate, which has been good for those of us with mortgages, the reality is that it actually reduces the income of our savers. They are mainly, but not exclusively, elderly people. It is very easy to ignore the effect of a reduction in interest rates on those savers.

I stood in this House yesterday and said that I would raise at the Commerce Committee this morning the issue of an inquiry into the activities of various finance companies and into the issues associated with the failure of finance companies. I was very heartened to have the support of the chair of that committee, the Hon Lianne Dalziel, who said she has a very open mind on this issue. She has offered her assistance to me in drawing up a draft terms of reference for that inquiry, and I shall be very pleased to have her help. I should also say that I have the full support of the ACT caucus in calling for that inquiry.

My inquiry is made even more relevant by the submission given to the Commerce Committee this morning by Jane Diplock, the chairperson of the Securities Commission. Jane Diplock appeared before the committee during the course of the committee’s annual review of the commission’s activities, and she raised a number of issues of public policy. These are very serious issues, and I do not believe that they can be swept under the carpet. It is very easy to look at what will benefit small to medium sized businesses and at what will affect big business, but we cannot afford to forget the ordinary New Zealanders—the savers in society.

I will start by looking at the issue of trustees. For the benefit of members of the House, I inform them that a trust is a commercial relationship, if you like, between a trustee company or a trustee organisation and the directors or owners of a finance company. Jane Diplock pointed out that it is competitive; it is a business. We have seen over the last 3 or 4 years that trustee companies have been bidding against each other to get business. They have brought down their fees, they have offered to do the work for a lower and lower price to gain the business, and this has probably resulted in a lower quality of supervision of management. Jane Diplock pointed out that the trustees are not entitled to demand under the trust deed a number of things that they might like to do. Lianne Dalziel said that it was an issue of their own making because, when they enter into a contract with a finance company to provide a trustee relationship, they are negotiating a fee to do a certain package of duties, and that, therefore, they have brought this issue upon themselves.

Jane Diplock raised a number of issues of conflict of interest, which I thought were very interesting. If a finance company is likely to fail, or looks like it is close to failing, one option is for the trustee to appoint a receiver. If a receiver is appointed to the finance company, the receiver will go into that company and may find some failure on the part of the trustee. One of the receiver’s options is to bring a civil action against the trustee, because until recently no criminal proceedings could be brought against a trustee. There is a conflict of interest, because the receivers get their business from the trustees. Which receiver will dob in—to use Lianne Dalziel’s words—the trustee that is likely to give it its work?

We also have the issue of moratoria. Under a moratoria the company—

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

The Taxation (Business Tax Measures) Bill represents one of the more unusual moments in this House, whereby the rapid passage of legislation is acceptable. Indeed, I would go so far as to say that this bill should earn the unqualified support of the entire House, because it is very much a product of the unique set of circumstances of the time. The Taxation (Business Tax Measures) Bill aims to improve the business environment for small and medium sized enterprises by easing the pressure of taxes on business cash flows and reducing business tax compliance costs. It responds to a call that was heard by a new Government with an eye to smoothing the inevitable rough journey ahead in the impending recession.

We know, from the expert advice of organisations such as the Federation of Māori Authorities, that the arena of tax laws and business compliance costs for small and medium sized businesses is an area full of challenge. The federation has consistently promoted the view that the whole area of business tax needs urgent review. Its view is that tax laws need to be adjusted to allow businesses to grow and develop wealth for the whole nation. If the business tax laws are amended to support the growth of small and medium sized businesses, the logical flow-on effects will be seen in employment, higher wages, investment, research development, and innovation. We know that Māori small businesses would particularly benefit from early intervention and the opportunity to undertake a process of being managed through difficulties. The advice, again of those in the field, is that such support would assist many to either stay afloat or, if need be, finish up with the minimum of administration and expenses.

I said earlier that this bill is a product of its time, and to persuade the House just how timely it is I bring attention to the initiative established by my colleague the hard-working Minister of Māori Affairs, the Hon Dr Pita Sharples. My colleague is an action man. Dr Sharples moved fast, hosting a very successful Māori economic workshop on 28 January 2009—a mere 7 parliamentary sitting days after he was appointed the Minister. I have it on very good authority that the world was created in 7 days. My colleague Dr Sharples was clearly setting out to follow that precedent.

At the Māori economic workshop held in January there was considerable interest in this whole area of the nature of the assistance that would be useful to support small and medium sized enterprises facing difficulties in the current economic climate. Participants at the hui thought it was important to look at ways of reducing both the amount of regulation affecting business and the costs of complying with regulations. Specific concerns raised at the forum were to do with tax legislation, and some of the suggestions proposed included tax relief for small and medium sized enterprises. Another proposal mooted at the Māori economic workshop was the deferral of provisional tax to small and medium sized enterprises over the next 3 years. A range of initiatives to support small and medium sized enterprises were proposed, including developing an overarching organisation and investment fund, to assist such enterprises to access finance. The thinking was that this could act as a clearing house to pool small and medium sized enterprise investment opportunities.

Māori small and medium sized enterprises need to be positioned, through advice and other support, to take advantage of opportunities presented by the recession and future economic trends. I share some of these good points—OK, brilliant ideas—with the House to make the point that Māori are investing in creative enterprise and applying their full entrepreneurial talents to create workable solutions to address the current economic climate. This therefore provides a very fertile ground for receiving the number of measures proposed in this bill. In fact, when I consider that only six submissions were received, and just 1 day was dedicated to hearing from interested groups and individuals, I think the House should be very appreciative of the feedback I have been able to provide from these key stakeholders—the movers and shakers of the Māori business world. Indeed, it is very good news for the Māori business community to be able to look over the host of amendments to current and proposed tax laws that are included in this bill.

The aims of the bill are to reduce business compliance costs for small and medium sized businesses by raising reporting thresholds on PAYE, fringe benefit tax, and GST, and by introducing simplified rules for deducting legal expenditure. These are, in fact, initiatives that reflect much of the kōrero that was laid down at the Māori economic hui. There was unreserved support from all participants at the hui to invest in job and business retention and stabilisation as the key short-term priorities. Change to reduce the tax liability faced by small and medium sized businesses was seen as a targeted measure to achieve the aspiration for job security and stabilisation.

One of the particular strategies proposed by the small to medium enterprises cluster group was that tax relief should be provided for small and medium enterprises, such as goods and services tax and pay-as-you-earn tax. Another proposal was grouped around the relaxation of penalties for late payment, or staggered payment of compliances such as those related to Accident Compensation Corporation levies or GST.We believe that the Government could play a useful role in this period of transition, through the means of tax relief and investment to maintain small and medium enterprise employment and cash flow.

Another aspect of this taxation bill is related to instalments. Like Mr Boscawen, I am a new member of the Finance and Expenditure Committee. The committee’s view on instalments, in the context of difficult times, was that it would be useful if taxpayers were able to enter into instalment arrangements with the Inland Revenue Department regarding tax payments This thoroughly good idea was shared with officials from the Inland Revenue Department, and we were told that some new initiatives are being investigated to do exactly that. We in the Maori Party believe this initiative could be thoroughly relevant for providing assistance against the sharp edge of recession, so we will be keenly looking forward to any updates from the Inland Revenue Department to this effect.

We will be supporting this bill, because we support any initiatives and interventions that allow businesses to grow. We support the reduction in business compliance costs; we support changes to reduce the tax liability faced by small and medium sized businesses; and we most particularly support the great initiatives taken by the Minister of Māori Affairs in bringing to the debate the perspectives of Māori in business, of whānau, hapū, and iwi, and of the greater Māori population about how to achieve growth and well-being while at the same time facing the current economic climate. I say to members that they should watch this space, because very soon there will be more announcements to come regarding opportunities for Māori economic development. Kia ora.

CHRIS TREMAIN (National—Napier) Link to this

It is a pleasure to rise to speak after my Māori Party colleague Rahui Katene. She finished her speech by saying that the Māori Party supports any initiative that allows small businesses to grow. I could not agree more. It is absolutely fantastic that this evening we are introducing yet another key piece of National’s plan to blunt the edges of this recession and prepare our country to be in the best space to grow as a nation as we go forward.

It was interesting that a couple of the leading acolytes in the race for the Labour Party leadership took the first calls on the bill for Labour tonight.

STUART NASH (Labour) Link to this

Members who wanted to know about the Taxation (Business Tax Measures) Bill would have had no idea what Mr Tremain was talking about, because I think he mentioned it only once.

I stand in support of the Taxation (Business Tax Measures) Bill, because the Labour Party supports small businesses. In fact, Labour supports all New Zealand businesses in a positive and proactive way, as no other political party does. First of all, let me say that I think all parties need to work together in this time of economic crisis to do what is best for the country. That is why I support this bill. Does it go far enough? No, and Labour would have taken it further.

DAVID BENNETT (National—Hamilton East) Link to this

How the Labour Party’s spots have changed. This is a Labour Party that now says it is there for small business. Nobody in his or her right mind would believe that. People know that the Labour Party is not there for small business; the Labour Party is there only for itself. All those Labour members want is to get back into power. All those members were doing before the election was trying to get back into power. That is all the Labour Party has ever thought about. Those members do not think about their supporters, the workers of New Zealand. They do not think about small business. They do not do that. The Labour Party has one goal, and that is self preservation and power. That is the Labour Party’s mantra.

I say to the new member Stuart Nash, so bright-eyed, innocent, and fresh, who came into this House and said that the Labour Party is all about small business: “Take a history lesson.” Let us look through the history of the Labour Party. What did the Labour Government do for small business in the last 9 years? Year after year after year it kicked small business in the guts. At the Finance and Expenditure Committee, David Cunliffe made it quite clear that his whole line of questioning was about Labour Party policy. For everything that comes out of the select committee now, Labour members have to say: “This is what Labour thought of many years ago.” It is all right to say that Labour members thought about it, but why did they not actually do it? Why cannot Labour do something for small business? Why do Labour members just think about doing something for small business, instead of actually doing something for small business?

The reality is that those members do not care about small business. At this point in time, the Labour Party is trying to backtrack—big time. Labour members are trying to go back through any little document from the last 10 years and say that it was their idea, when it was not their idea. The reality is that the ideas being passed here are National ideas, because the National Government is passing them. If they were Labour ideas, they would have been passed by the Labour Party during its 9 years in Government. It did not pass those ideas. It is pretty rich of Labour members to come into this House and say that they are their ideas, that they have ownership of them, and that they should take credit for them. The reality is that they do not have ownership of them, they cannot take the credit for them, and the public and especially the small-business community of New Zealand know that. They are very sure that the Labour Party is not there for small business.

BRENDON BURNS (Labour—Christchurch Central) Link to this

I am very pleased to speak on the Taxation (Business Tax Measures) Bill, and to follow the preceding speaker, David Bennett, whose rather screwball analysis suggested that National supports small business. Actually, National was the party that voted against business tax cuts and axed the research and development tax cut, which would have been very helpful to businesses, particularly small and medium-scale ones.

The Labour Opposition supports this bill. Indeed, despite the previous speaker’s claims, most of the measures contained within it were proposed by Labour. The bill eases tax pressures and compliance costs on business. Although we are supportive of this bill and what it does to assist business, particularly small to medium sized enterprises, it is simply not enough. That applies most especially at this time. I have to say, as a new member of the Finance and Expenditure Committee, that I was surprised and concerned that this is, in fact, the first bill that the committee has reported back to the House. Given the scope and scale of the world recession, I had imagined that we would deal with some legislation and Government actions that were representative of big and bold ideas—a mini-Budget or a pre-Christmas economic summit and the major ideas and stimulus packages flowing from it. Instead we are at the second reading of a technical and modest bill that, although we welcome it and acknowledge that it will be helpful to business, is hardly a new deal.

The adhockery of the Government is illustrated by this bill, and it is also illustrated by some of the Government members’ responses—such as they have made. I note, for instance, in housing that the first commentary was that there would be no new State houses. That changed overnight after a TVNZ report showed people in South Auckland living in garages. Suddenly we were going to get new State houses. Then we learnt that the total number of new State houses was 69. On that basis, I will be lucky to see one new State house in my electorate of Christchurch Central.

So, really, this bill, and the Government’s response in toto, indicates that it is business as usual despite the world’s worst economic forecast in our lifetimes—in just about anybody’s lifetime. We are seeing another missed opportunity at a time when this country needs real leadership and a real response. What we are getting is a rolling maul, and contained within it are Labour’s ideas repackaged and re-presented to the New Zealand public as a stimulus plan. The relief for small to medium sized enterprises is ours, the tax cuts are ours, and the proposals for infrastructure are a rehash of our proposals. There is, regrettably, no broad-based plan that gives New Zealand’s public confidence that this Government understands—really understands—the scale of the crisis, and that it is taking the action that is truly necessary, particularly to help vulnerable New Zealanders, and also to reposition New Zealand so we are ready to take advantage of the upturn, whenever it comes.

Today the Governor of the Reserve Bank appeared before the Finance and Expenditure Committee. He recognises the scale of the issues that he faces. He today reduced the official cash rate to 3 percent. None of us in this House can remember when the official cash rate was last at that level. He recognises the scale of the issues. He also recognises that inflation is no longer public enemy No. 1 as far as the economy is concerned. Yet, at the same time as the Governor of the Reserve Bank is saying that to the Reserve Bank and to the nation through the Monetary Policy Statement, we learn that the Prime Minister is telling the Wall Street Journal that his biggest fear is rising inflation on the back of rising money supplies. That fear is not shared by the Governor of the Reserve Bank, nor by anybody else. The expectation in today’s Monetary Policy Statement is that inflation through to 2010 and beyond will be well contained within the targets as outlined by the Governor of the Reserve Bank.

So we come back to the question of where the plan is. What stimulus from this Government can New Zealanders look towards? We look, by way of contrast, to the United States, which has a NZ$1.5 trillion stimulus package. I look across the Tasman to our friends in Australia, who have a NZ$67 billion stimulus package. Those responses are taking place because the Australians and the Americans acknowledge and recognise that we are facing the most severe financial crisis since the Great Depression. The International Monetary Fund chief economist is advising Governments around the world to commit to taking whatever steps they can to avoid a depression. The advice is to be bold and decisive; we are ignoring it. Today US President Barack Obama called for other nations to enact stimulus packages such as the one the United States has enacted. He obviously wants to see the world attempt to deal with these issues. We are an interdependent world yet New Zealand stands aside, as indicated by the interview the Prime Minister gave this week to the Wall Street Journal.

What is the National Government’s plan? Well, it goes back to such things as scrapping the research and development tax credit, to gutting KiwiSaver, and to trashing the Fast Forward Fund, which would have created $2 billion of expenditure for our primary sector, as has now been represented by the Minister of Agriculture. We are seeing cuts to the contribution to the Superannuation Fund that will endanger future superannuation entitlements. We are seeing a crisis manufactured around the Accident Compensation Corporation so that a board can be sacked, other people can be lined up, and New Zealanders can be told that they can no longer have the accident compensation entitlements that they once relied on. In the area of broadcasting, for which I have Opposition responsibilities, the Minister of Broadcasting is demanding a dividend from Television New Zealand (TVNZ) at the very time that TVNZ is saying that it may need to shed as many as 150 staff. Within 1 week of the Job Summit, TVNZ is being told to go ahead and cut the staff, and to pay the dividend.

Then we have a tax cut programme that simply will not deliver as it should to those most in need—to those who would have spent every last cent of their tax cuts if they had been implemented as they were to have been under Labour’s programme. We urge the Government to retarget those tax cuts. They are essential for New Zealand. We need to make sure tax cuts are focused on those who need them and that discretionary spenders get them. It is not just Labour that is advocating that; Air New Zealand’s chief executive, Rob Fyfe, got it right when he said that this crisis is so big that “all the bets are off … We need to stimulate this economy and there are more effective ways than broad-brushed tax cuts.” That is the big picture; that is the kind of approach we need. I say good on Rob Fyfe for those comments.

Labour has been very clear to the select committee and to this Government that we are quite prepared to support this bill. It will provide some small measure of assistance to business. It will be supported by this Opposition party, but we want to make sure that some changes are made, and we will be recommending some amendments as the bill proceeds. The report from the select committee acknowledges that, as a result of earlier initiatives, some changes were taking place in the Inland Revenue Department that will assist. We will be proposing some technical amendments, which my colleagues have already outlined in part.

One thing I will touch on is the whole issue of tax deductibility of patent costs. A submission was made to the select committee by the Manufacturers and Exporters Association. At the moment New Zealand takes 20 years to wipe out the costs incurred in building a patent to protect intellectual property against world challenge. We would like to see that moved back to the world average of 10 years. It makes much more sense.

In conclusion, Labour will support the Taxation (Business Tax Measures) Bill. It was largely a Labour bill that was inherited by the new Government; it is not a key measure in National’s package. It is a modest technical bill that will take some of the pressure off businesses, particularly small to medium sized enterprises. However, as recently as this afternoon the Governor of the Reserve Bank appeared and it was clear that he was outlining at least a tough year ahead for this nation. His forecast for the period beyond next year was an optimistic one. He suggests that we could be out of the decline by about this time next year. We in Labour hope that Dr Bollard is right; we note that there are some gloomier prognoses. Dr Bollard correctly notes that stimulating the economy is the key factor in the United States, Europe, and New Zealand. I think that he is as mystified as anybody else as to why the Prime Minister continues to identify inflation as being of major concern. He should tell that to the thousands of New Zealanders a week who are losing their jobs, because inflation is not an issue for them. Holding on to their jobs is what is important. They need a stimulus package. This bill is a very small step, but it ain’t a stimulus package in any sense, at all. Thank you.

HEKIA PARATA (National) Link to this

Tēnā koe e te Mana Whakahaere huri noa i tō tātou Whare tēnā koutou katoa.

[Greetings to you, Mr Deputy Speaker, and to you throughout our House, greetings to you all.]

I am pleased to stand in support of this Taxation (Business Tax Measures) Bill. I am delighted that it has cross-party support, despite the Opposition damning it with faint praise. That seems to suggest little understanding of how meaningful, how practical, and how responsive this suite of measures is to people who are engaged in small to medium sized enterprises. Nevertheless, I am pleased to know that the bill enjoys cross-party support, because the sooner that we can get it passed and apply it, the sooner that small to medium sized enterprises will be able to experience the relief intended by this legislation.

The bill has specific measures to assist small to medium sized enterprises, which are the bulk of business participants across the New Zealand economy. These people invest their own money, their own time, and their own creativity into making a success of their particular enterprise. These people lie awake at night and decide whether they can afford to upgrade their information and communications technology. These people have to decide whether they can continue to employ the people they have on their payroll. These people have to decide whether they need to downgrade the amount of space of the business area they occupy. These people have to make courageous decisions every day about whether to continue to invest for their future. These are the people for whom this technical, albeit modest, suite of measures will go a significant way towards lifting the burden of compliance, and allowing a greater cash flow to remain within their businesses. Having been a small-business owner myself, and having wrestled with these very issues, I stand in support of this bill so that others who are engaged in this type of business can feel this relief.

The bill contributes to National’s overall jobs and growth plan. It is not to be read in isolation, although, as I have said, within and of itself it offers significant assistance to small and medium sized businesses. It is but one part of an overall, comprehensive approach that this National-led Government is taking to the challenges that face us. In meeting these challenges we have two main objectives. The first is to soften the edges of the recession, and the way that New Zealanders are experiencing it, and the second is to prepare our economy for recovery. Although we have inherited the legacy of being the first in the developed world to go into a recession, we would like to work very hard to be the first in the Western World to go into a recovery. This bill is part of the measures that we think will assist, across the economy, to restore confidence, to give greater certainty, and to assist small to medium sized business owners to continue with their plans confidently, to retain their employees, and to continue with their everyday operational realities.

This bill is about achieving balance, as is so much of what this National-led Government is focused on. It is about achieving balance between leaving as much cash flow as possible in businesses, and simplifying the compliance regime they must attend to, while at the same time maintaining the tax base that we rely on to continue to offer the services that this National-led Government is committed to offering.

So what are these measures? I do not propose to rehearse all of them, but I do wish to speak about one in particular, which, as a previous small-business owner, I was constantly alert to providing for—that is, the 5 percent uplift rate that businesses pay on provisional tax instalments. As we all know, in a successive year business people base their tax provisions on what they paid the previous year, and add 5 percent. The supposition, of course, is that they are improving their business growth each year. But we are in a recession. We know that there are many challenges to our economy, and we know that it is very unlikely that many businesses will be looking forward to a 5 percent increase on what they earned in the previous year. So the bill provides the ability to remove that provision for the 2008-2009 and the 2009-2010 tax years, which means that there will be better tax cash flows for the next 2 years for small to medium sized enterprises.

We also see within this bill the provision that business-related legal expenditure of $10,000 or less will be able to be fully deducted. That is a very great leap forward for a number of small businesses, because when they retain legal advice they fully understand that those giving the legal advice are also in business and need to meet their expenses. But legal expenditure has been a particularly onerous expense for small to medium sized enterprises, and the opportunity for it to be deductible will be greeted with great relief by many small businesses around the country. Similarly, the PAYE requirements—whereby payments will be filed once a month instead of twice a month, and the payment threshold will move from $100,000 to $500,000—will allow more employers to file fewer PAYE returns. Again, these requirements have been very onerous but necessary for small to medium sized enterprises, and the changes are ones that will be, and are being, greeted by many businesses around the country with great relief.

National is committed to making it easier for small and medium sized companies to operate their businesses effectively; this package of relief measures is aimed at doing that. It recognises that there are no silver bullets to all the challenges that face us in this time of economic recession, but that it is one way of contributing to those businesses that form the bulk of the New Zealand economy, in order to simplify their tax compliance regimes while also leaving cash flow within their businesses. I have had significant feedback from business people around the country who do not minimise the contributions that these measures will make to their businesses. The Opposition has described the measures as modest and technical, but it has nevertheless said that it will support them. However, others around the country who are engaged every day in these businesses, see these measures as opportunities to get their heads above water, to conduct their business in a much more simplified way, and to have that cash flow available to them so that with greater confidence and certainty they can continue to operate those businesses.

This package of measures is what the National-led Government is committed to; it is part of an overall jobs and growth plan. It meets our dual objectives of softening the hard edges of the recession while also contributing to preparing our economy for recovery. I am delighted to support this bill, and I commend it to the House.

Heoi anō rā e te Mana Whakahaere o tēnei Whare tēnā koe, otirā, ki a tātou katoa, ngā mihi nui.

[So greetings to you once again, Mr Deputy Speaker of this House, and much greeting to us all.]