Taxation (Business Tax Measures) Bill

Hon PETER DUNNE (Minister of Revenue) Link to this

I move, That the Taxation (Business Tax Measures) Bill be now read a third time. This bill was introduced under urgency a few weeks ago as part of the $480 million package of tax assistance measures to help small and medium sized businesses weather the current recessionary climate. As such, the bill covers a range of provisions that will allow businesses to hold tax moneys for longer and lower the costs of doing business by reducing the amount of form-filling, the calculations, and the payments they have to make.

Let me briefly recap the main measures in the bill. The first change is the removal of what is known as the 5 percent standard uplift in the calculation and payment of provisional tax. This is the amount that is added to the previous year’s residual income tax and is based on the assumption that in a normal business cycle a business’s income will increase over the year. Unfortunately, we know these are not normal times. To help relieve some of the pressures that small businesses are facing, the bill allows the uplift of the provisional tax calculation to be reduced in the current and next income years. The aim behind that is to reduce the amount of provisional tax businesses must pay and free up much needed cash flow. A further change in this bill will allow a greater number of individual taxpayers to reduce their exposure to use-of-money interest. This particular measure was previously part of the omnibus taxation bill I introduced last July, but it has been included in this bill to ensure more speedy enactment. Other changes from that previous tax bill have been significantly enhanced in this bill, which also introduces some important new measures.

Overall the aim of these measures is to make lower costs for many businesses by reducing the number of calculations and tax payments they have to make. For example, certain GST thresholds are being raised, giving more businesses greater freedom from the compliance costs currently associated with accounting for GST. Similarly, the PAYE once-a-month filing threshold is being raised to allow more employers to file and pay their PAYE once rather than twice a month. The threshold under which businesses may file fringe benefit returns annually will also rise, as will the value of minor fringe benefits that employers can give their employees without attracting fringe benefit tax. Finally, a new threshold for business-related legal expenditure is being introduced so that businesses will no longer have to identify which amounts relate to non-deductible capital expenditure and which are deductible revenue expenditure.

When these measures are all taken together, they form a package of assistance that will help smaller businesses to save time and money so that they can spend more time doing their business and dealing with the challenges of the recession. In recognising the importance of smaller businesses to New Zealand’s economic well-being, I am heartened by the spirit of cooperation that has been shown in bringing this bill to its third reading. I especially want to thank the Finance and Expenditure Committee for its very constructive and cooperative approach to the consideration of the bill. As the bill stands, it provides some very practical assistance to the small-business sector at a time when it needs it most. I also want to record my thanks to the officials who worked on the policy matters contained in the bill and the drafters who worked on the legal detail, both of which occurred against very tight time constraints.

Finally, I acknowledge the Committee of the whole House for the very constructive and positive way in which it dealt with the bill a couple of days ago. There were a number of useful contributions in that debate that demonstrated a willingness to see progress being made and recognised that there were positive measures contained in this bill. It is with great pleasure that I now commend this bill to the attention of the House.

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

The third reading of the Taxation (Business Tax Measures) Bill provides a welcome opportunity to sum up the various arguments that have been proposed and discussed around the Chamber. The first point that must be made is that this bill is a useful bill. It deserves, and will receive, the support of the whole House, and it does so in recognition of the very real pain that exists in the small and medium sized business sector. Many workers formerly employed in larger businesses have, as we know, been outsourced and now contract back as small-business owners. That can offer them opportunities, which they have taken, but it also means that they personally are bearing much of the risk and the pain of this unprecedented recession.

To that end it is worth recalling that a majority of the measures incorporated into this tax bill have been around for some time. Indeed, they were the work of the previous Labour Government, either embedded in the broader international tax bill currently under consideration by the Finance and Expenditure Committee, in the Inland Revenue Department’s work plan, or proposed through the Labour Party’s pre-election manifesto.

The key issue is that time has moved on. Every week we hear further statistics, as we have again today from the Minister of Finance, that show that our current account deficit is widening. We also hear from the Minister for Social Development and Employment that unemployment is increasing and that the situation facing New Zealand’s small businesses is getting ever more serious.

Once again, the question of what the Government has been doing since it took office in November last year must be reflected on, and where the additional impetus is that should have been included in this bill. Where is the plan to drive further and faster to reduce the complexities of tax compliance for small businesses, which my colleague the outgoing Minister of Commerce, Lianne Dalziel, was busily working on pre-election? Where is the plan to recognise that, in times of recession, providing for and estimating provisional tax is probably the No. 1 problem that many small businesses face?

There are some moves to address those questions in this bill, and we welcome them. But they do not go far enough. Let us take as one example the reduction in the use-of-money interest rate for underpayments. It has been reduced from 10.5 percent to 9.7 percent. That is done as a one-off measure rather than as a rolling change, but at the same time the official cash rate has been reduced by a full 5 percent. The premium the Inland Revenue Department is taking has actually increased during the time since this policy was first mooted.

That is why the Labour Opposition has taken it upon itself to propose that the Government consider further change. For a start it should adopt the 90-day bill rate from the Reserve Bank as an ongoing benchmark for the use-of-money debit rate. We further propose that the Minister consider reducing the 105 percent uplift basis for a 2-year previous income to a straight 100 percent. This would acknowledge that it is difficult to accurately forecast income and that if one is using historical income in these circumstances then no penalty should be attached.

We further argue that the Minister should consider—and I understand that the Minister and his officials have agreed to this measure, and we welcome that—the deductibility of patents from their 20-year life to a much shorter period, reflecting the fact that New Zealand is an outlier in that regard. Above all, we have asked that the Government continue to strengthen its drive to reduce the red tape on tax compliance for small businesses in areas where the results really are de minimis.

This does bear upon a larger question that is now much on the minds of New Zealanders. Regrettably, there is no apparent broad-based plan that gives the public of New Zealand confidence that this Government understands the gravity of the crisis facing New Zealand and, indeed, the whole world. Examples of this crisis are that Taiwanese exports have been cut by half, Japanese exports have been cut by 45 percent, and world growth estimates are down from 1.5 percent positive to something like 3 percent negative. This is an absolutely unprecedented cut in 6 months. And why does that matter to New Zealand small businesses? It matters for two reasons. Firstly, when we cannot sell our products and services as easily overseas, our exporters suffer, and many of them are small and medium sized enterprises. Secondly, those very same businesses will find it harder and harder to get the credit they need to carry them through this recession, because lending from banks has tightened as a result of global economic conditions.

So there is a double whammy, and this bill is, unfortunately, a little too late and a little too small to make the kind of difference that small businesses need. What has become apparent in recent weeks particularly is that not only does the Government not have a comprehensive plan for dealing with this situation but that it has described itself as a global outlier. I think the Wall Street Journal thought it was doing Mr Key a favour when it praised him for being the only leader in the Western World who is trying to deregulate and cut his way out of this recession. But there is a real problem with that approach, which is that this recession has occurred largely because of the problems of deregulation itself.

An under-regulated American real estate market and a woefully under-regulated American financial system—under the Bush administration—have resulted in a terrific bubble that has now burst, and we are all, around the world, paying the price for that lack of regulatory oversight. Against that background Mr Key thinks it is appropriate to take a deregulatory stance to solve the problem. One wonders why.

CRAIG FOSS (National—Tukituki) Link to this

It is with great pleasure that I stand to speak in the third reading of the Taxation (Business Tax Measures) Bill. If one looks at the record, one will find that in every speech I have made on this bill I have registered thanks, and I will continue to do so here. I wish to record in Hansard my thanks to the Minister of Revenue for helping to push this bill through with speed, to fellow members and colleagues on the Finance and Expenditure Committee, to the officials who assisted us with getting the bill to this point, and to those who sat in the background drafting—thanks very much. I would also like to thank the submitters who participated in the thought process in and around this bill.

The previous speaker, Hon David Cunliffe, said that he thought this bill was too late, and I think he is quite right. It is 9 years to late. After 4 months this National Government has progressed to the third reading of a bill that should have been put in place in good economic times, when there were strong surpluses and the books were looking somewhat rosier than they are at the moment. A natural progression—to make our economy more efficient, more productive, and more focused on the things that matter—would have been to put these measures in place quite some time ago. On that note I agree with the Labour Party finance spokesman that these measures are much too late, but it is not too bad for a National Government after 4-odd months in power having been elected by New Zealand, as opposed to the 9 years it took the previous administration to even get a few discussion papers around these matters.

I also note—and I am quite proud of the fact—that this is the first bill from the new National Government that has been introduced to the House, has gone through the select committee process, and now arrives here for its third reading. It is notable that this first bill is a tax-reducing bill. It is a compliance-reducing bill, and it is a cost-reducing bill. It sits with a suite of measures that the National Party announced prior to the election that it intended to do, and it is continuing to do so post-election with the 100-day plan.

The previous speaker noted that these measures were too late. Then he went on to talk about compliance measures and to say how tough compliance is on small businesses. He is quite right. Compliance is very tough on, and awkward for, small businesses. But the time spent on compliance and red tape has grown exponentially and compounded in the duration of the previous administration. On the one hand, under Labour there were more and more rules and regulations that made it harder to get on with making widgets, or whatever the businesses were doing. On the other hand, small business policy groups and so on would come out with papers, but Labour never actually put things into place. It would talk about them forever but never put them into place. Not one part was put into place.

As I noted, this is part of a suite of solutions. I acknowledge other speakers and the parts of the original taxation bill that have been brought forward. In these trying economic times, we have now expanded many of the parameters and changed the various thresholds to the benefit of the taxpayer.

But it does go with a suite of solutions. I have noted the 100-day plan. The ongoing personal tax reductions that were put before the electorate were roundly endorsed by the electorate and placed before the House and voted on—and for—prior to Christmas, alongside issues such as Resource Management Act reforms and improvement to the commerce legislation that has recently been announced by the Hon Simon Power.

Many New Zealanders and New Zealand businesses will benefit from these measures. This financial year the quantum of assistance, or freeing up of cash flow, for those core New Zealand businesses is along the lines of $450 million to $500 million. I would like to touch on some estimates of how many New Zealanders will enjoy the benefits of this bill. It has been estimated that an additional 19,000 New Zealand employers will benefit from the changes to the PAYE monthly threshold, which makes 98 percent of all employers in New Zealand eligible. It is estimated, in regard to the increased fringe benefit tax (FBT) filing thresholds, that an additional 4,800 employers will benefit. This again means that 98 percent of all employers across New Zealand will be eligible to benefit from the measures in this bill. An additional 47,000 GST-registered entities will be able to deregister if they wish to do so because of the changes in the GST registration threshold. That is huge. That change in the compliance rules will free up the time and resources of New Zealand businesses and enable them to focus on what matters and, hopefully, to grow their productivity to help keep people employed. Also, 223,000 individuals and 45,000 companies will benefit from the reduction in the provisional tax uplift. That is huge and it is of massive benefit to New Zealand, particularly as we go through this recessionary trough. As I noted, in my own little way that is my favourite part of this bill. An additional 5,700 entities will benefit from the increase in the GST payment threshold, which means that about 96 percent of all registered entities will now be eligible to choose to use the payment basis. All in all, these are very beneficial measures, not only to the cash flow itself but also to the time taken to comply with various rules around taxation and Government compliance requirements.

After only 4 months this National Government, with, I freely admit, the cooperation of parties across the House, has voted to bring this bill to this point today. Hopefully after a few more speakers on this third reading it will move from this House. I will not go over the detail of the various parts, as other speakers have already done so and others probably will. I again note that I am proud to have helped to get this bill to this point, and I am very proud that after only 4 months a National-led Government, in cooperation with its coalition partners, has been able to get the bill to this point to benefit so many New Zealand businesses. Thank you.

Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this

As my colleague the Hon David Cunliffe has said, Labour, of course, will support this bill, because we authored much of it—three-quarters of it, in fact. But I do also acknowledge the Hon Peter Dunne, who was also the Minister of Revenue then, despite the criticism from Mr Foss about delays. I do not believe that either the previous Government or Mr Dunne, in his capacity as the then Minister of Revenue, did anything to delay this bill. I think we wanted to get it right, as we all did, so Mr Foss’s uncharitable comments about Mr Dunne and the previous Government can stand as they do for people to scrutinise.

This is good legislation. I acknowledge it will help a whole host of small businesses that Mr Dunne and others have been passionate about for many, many years. I also note, though, that Labour has urged the Government to go further and undertake additional work, as we mentioned in respect of a further reduction in the use-of-money interest, the tax deductibility of patent costs, and the uplift basis. But I also make the point that although this is good legislation, it does not acknowledge, as part of the Government’s so-called overall programme, the seriousness of the recession that we face. Therese Arseneau summed it up, I think, when she said on Q+A: “We need to hear very clearly that National has a plan.” She also said: “This is not just any ordinary recession.” I offer members opposite the opportunity to note that. This is probably the biggest recession or economic crisis, globally and for New Zealand, that we will see, certainly in our lifetime. Ms Arseneau went on to say: “I hear no action plan in terms of what he”—I presume that is the Prime Minister—”is going to do to maximise our competitive advantage.”

The problem we have here is that this is piecemeal. This is good legislation—Labour has supported it, and we will support it—but if one looks at it in the overall fabric, or the overall jigsaw that is supposed to be a plan that the Government is charged with implementing to get New Zealand out of, minimise, and contract the recession, and make the landing softer and save as many jobs as possible, then we see that this is only a very, very small component. When we look at what the plan is, we see that the problem is that we have not heard one, we do not know whether one exists, nor do the New Zealand people. The only thing we have really heard is a couple of absurd examples that were mentioned in speeches as we went through this bill in the second reading debate and the Committee stage, where the biggest thing to come out of the Job Summit, and the most spectacular answer to the biggest global economic crisis in our history, is a cycleway. The Prime Minister told us that the cycleway costings would be around $50 million, although we now know from experts that it will be close to, if not exceeding, $300 million, and it will create—the Prime Minister tells us—4,000 jobs. It will create 4,000 jobs when we are losing 1,000 jobs per week! Treasury, the Government’s own adviser, tells us that in the last 3 months we have lost 30,000 jobs. Apparently, the major plank to come out of the Job Summit was a cycleway.

The other point that has been trumpeted in conjunction with this bill, as part of the economic plan, has been the 9-day working fortnight. The problem there, as part of the so-called plan that the Government has, is that it is underfunded, it targets the wrong areas, and, critically, it lacks the training component.

JOHN BOSCAWEN (ACT) Link to this

It has been interesting to listen in this debate to the to-ing and fro-ing between the National Party and the Labour Party. The Labour Party members say that a lot of the work on the Taxation (Business Tax Measures) Bill was their own work—and good on them. Clearly they believe that, and it is the case. I sat in the Finance and Expenditure Committee, and I heard that argument being raised constantly. We have just heard from the Labour Party that the National Government is not doing enough. National’s point of view is that this is the first bill that it has introduced and taken through the select committee process, that it provides for a reduction in tax rates and a reduction in red tape, and that those are good things to achieve. I do not want to take a particularly partisan approach—I do not want to make it a them-and-us situation—because I would like to try to put a positive spin on my part of the debate. What I am trying to achieve requires the support of both of the major parties in this Parliament. It requires that support. The reality is that I could look to the support of just one of those parties, but I am trying to get the support of both of them.

As I said, this bill is designed to reduce rates on use-of-money interest, to take away the red tape, and to make it easier for small to medium sized businesses to comply with the law and meet their obligations. As members have heard, this legislation is one of the consequences of the recession. The Government is looking to make this change to the law as a consequence of the recession. We are all very aware of the reasons that have led up to the recession, but many things relate to and contribute to it. I have said before that I believe that one of the issues that are resulting in the poor forecast for growth in retail sales in our country is the massive loss that has been incurred through finance companies in the last 2 to 3 years. It is massive. What is worse is that it particularly affects the retired and the elderly—the people who have lost some or all of their savings in finance company collapses. Without a doubt, that is one of the things that have contributed to the recession, contributed to the state this country finds itself in right now, and contributed to the need for this bill.

I talked about bipartisan support. I stood to speak on the second reading of this bill just 2 weeks ago. At that time I made a call for an inquiry at the Commerce Committee on the failure of finance companies and the reasons leading up to the failure of those companies. I was able to say to the House that earlier that day I had received tentative support from the Hon Lianne Dalziel, the previous Minister of Commerce and now the chair of the Commerce Committee. She said that subject to agreeing the terms of reference, it was something that she could recommend that the Labour members on that committee support. I was very, very pleased to hear last night from Simon Power that earlier in the day he had issued his own press release and made his own announcement that he, as Minister of Commerce, would also welcome an inquiry into the collapse of finance companies and the reasons that led to that. I should stress that it is not Mr Simon Power’s decision as to whether the Commerce Committee has an inquiry, but nevertheless from my point of view it is still very welcome that he is prepared to say that if the Commerce Committee members decide to vote for an inquiry, he would support it.

I would be very keen to have the support of both the Labour and National members on that committee, because if we have a unanimous vote we will be looking at the issues that have contributed in part to this recession, but, more important, have affected significantly—in some cases very, very significantly—the lives of some of our elderly citizens. I say that because in the intervening 2 weeks the Commerce Committee has released publicly a report that it received from Mr Harris, the Registrar of Companies, as an attachment to its report on the annual review of the Ministry of Economic Development. Mr Harris’ report is a 4-page report that looks at the supervisory framework that currently applies in respect of our finance companies, and it makes damning reading. As I stand here and think about it, I may decide to send a copy of that report to every one of the other 121 MPs in this House, because I think that everyone should read it. I see Mr Hughes nodding, and I thank him for that support, because the report is damning reading. I am very grateful for the support I believe I had from Lianne Dalziel a fortnight ago, when she said that the Labour members would consider supporting an inquiry.

I will touch on some of the issues that Mr Harris raised in his report. He talked about the level of corporate governance and said the quality of corporate governance is a key factor to be considered in our attempt to understand the reasons for the failure of finance companies. He detailed a number of issues, one of which was the calibre of the directors and how the directors of some of those companies operated. He said, for example, that too often directors were not adequately informed. They were misled or failed to take sufficient interest in the affairs of the company. Members should think about that. Directors were misled, ill-informed, and failed to take sufficient interest in the affairs of the company, to the extent that directors have contributed to the failure of finance companies through their actions. There are many thousands upon thousands of elderly people who have lost their money in those collapses over the last 2 years. The report is a damning indictment.

Mr Harris then went on to mention some directors who have previously been involved in collapses over the last 20 years. He looked also at the treatment of non-performing loans. A non-performing loan is a loan where a company has lent some money to a client and that client has not been able to pay that money back. Normally, there is a disclosure requirement, so that the finance company has to disclose to its potential investors that it has some outstanding loans and have not been paid back. Mr Harris referred to the practice where a finance company, rather than disclose the fact that a loan was outstanding and was delinquent, issued a new loan. They would issue the borrower a new loan to repay the old loan, so they could say “Well, whoop-de-do! There is no outstanding loan. This new loan is current, and we do not have to disclose that.” The way that some of the finance companies treated non-performing loans gave the impression that the finance company, in particular—the company that was soliciting funds from the public—was more solvent and stronger than it really was.

Mr Harris also talked about the lending practices of finance companies. He talked about the fact that in a lot of cases, a lot of money was lent on individual projects. I am personally aware of half a dozen projects where in excess of $50 million was lent against, in some cases, just bare land—albeit bare land that was proposed for subdivision. He talked about the lending practices of concentrating a lot of money into a very few small projects in the case of some finance companies, and in some cases of money being lent to projects that the directors of those finance companies were involved in themselves. The directors were borrowing money from companies that they were directing, and Mr Harris said that in some cases those projects would not otherwise have got funding.

Mr Harris also went on to look at the trustee supervisory model, and pointed out a number of defects in terms of the way finance companies are currently supervised, and in the management for looking after the supervisory model. I note also in Mr Simon Power’s press release yesterday that he says that is something he wants the Securities Commission to give urgent attention to and to review. I congratulate Mr Power again on that.

Mr Harris then looked at the question of the auditors, and quoted a particular auditor who has appeared before the New Zealand Institute of Chartered Accountants and been ordered to pay $130,000. He was presumably found guilty and ordered to pay $130,000 for the cost of the hearing. When I read that, I asked myself what other action has been taken. Does the receiver have the money to bring a civil action against that auditor? Clearly, that auditor is being fined $130,000 for the cost of the hearing by the New Zealand Institute of Chartered Accountants. Is there the ability to recover some further funds from the auditor or the auditor’s professional indemnity insurance company? I have no idea what the particular finance firm that the auditor was auditing actually lost.

There are a number of issues here. This is not a simple issue; it is an extremely complex issue. I stress again that a number of finance companies fail simply because of market forces. Directors may have lent money against projects they thought would be successful and a good business proposition, and, through no fault of the people borrowing the money or of the directors of the finance companies, we have had a change in the market and gone into recession, and those loans cannot be paid back.

I am very grateful for the support of both Mr Power and Lianne Dalziel, and of the members of the Labour Party.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Tēnā koe, Mr Speaker. Kia ora tātou i te Whare.

CHRIS TREMAIN (National—Napier) Link to this

I rise to support the third reading of the Taxation (Business Tax Measures) Bill. I start by congratulating the Minister of Revenue, Peter Dunne, the chair of the Finance and Expenditure Committee, Craig Foss—my colleague from the Hawke’s Bay—and acknowledging the rest of the select committee who took part in the process. I also acknowledge the officials for the work that has gone on in bringing this bill to fruition in such short order. I thank them all very much.

The National Government has a plan to blunt the edges of this recession and to enable New Zealand, New Zealand businesses, and hard-working Kiwis to prosper once we have come out of the bottom of the current recession. This small-business bill, which is being implemented today in the House, and which is effective from 1 April 2009—just 6 short days away—is a key part of that plan. It will deliver $450 million of additional stimulus and compliance-saving measures to the small-business sector. Let us not forget how important that sector is to the New Zealand economy. Small businesses make up 97 percent of all businesses that employ 19 or fewer people. That sector employs 31 percent of our workforce, and, importantly, the sector contributes 38 percent of New Zealand’s output. Make no mistake: those people are a big contributor to our economy, yet, so often, they are overlooked. But not today!

I want the House to understand that the people behind small businesses, in my opinion, are the real drivers of this economy. It is not the Government, not the big corporates; small businesses risk everything to provide jobs, create products, provide services, and to grow their businesses. The health of the small-business sector plays a significant role in the health of the corporate sector. The entrepreneurs who start small—the Sam Morgans, the Bill Days, the Rob Darrochs, the Rod Drurys, the Jan Camerons, and the Sally Synnotts of this world—are the entrepreneurs who risk everything and ultimately provide the renewal of our corporate sector. The big corporates play a part too, but the difference is that the chief executive officers of those businesses risk only their reputation when things go wrong. They do not risk the shirt off their own back or the house where they live.

That is why I become so angry when I hear Opposition members talk about the owners of small businesses with such disdain. They cry that those people are out to rip off employees, to fire them at will in 89 days—

STUART NASH (Labour) Link to this

I rise to speak in support of the Taxation (Business Tax Measures) Bill—

DAVID BENNETT (National—Hamilton East) Link to this

According to the previous speaker, Stuart Nash, this Taxation (Business Tax Measures) Bill is a Labour bill. Any bill that has taxation in it must be a Labour bill, is that not right? That is what the small-business community has learnt about Labour over the past 9 years—Labour was not there to help them, but was there only to take money from them and spend it on Labour’s promises. That is what Labour did.

We have had a new member come to this House, and, in such a bright-eyed fashion—I do not know whether he really fits into that party at the moment; he is saying the wrong things about what the Labour Party talks about—he has given us a history lesson. It was a history lesson that Michael Cullen would have been proud to give, I am sure. Dr Cullen is one of the great historians in this House, but he was not a great Minister of Finance. In this case we have a new history teacher coming along to show us the history of finance—it is “Nashonomics”. Mr Nash told us about the way the world operates and about the great things Labour could do for small business. But I think it is important that we look at the words “could do”, because Labour had 9 years in office, and I ask what it did for small business.

If we want to talk about history, I say that Labour has a history of hurting, and of not helping, small business. But it is now saying in this House, after it has lost an election, that it would have done all of these things, anyway. It is saying that the Labour members had these plans, they had these agendas, but they just had not got around to it. Is that the problem? Did those members not get around to it? Or is it as Mr Nash said: they had the money in the bank? They just put the money in the bank for a rainy day.

It is very hard to find that money in the bank now, is it not? I do not know what bank he is talking about. Maybe it is the “Labour Bank”. But there is no money in the bank, because that previous Government gave us a decade of deficits. That is what it left New Zealand with—a decade of deficits.

Labour left us with some of the worst balance of payments figures in the OECD and with year on year of deficit after deficit projected for this economy. That is what that Labour Government left small business. That is what it actually did for small business. It did not pass any business tax measures bills, as the National Government is doing. Bills like one that we are debating are not rocket science. They are basically about threshold changes, the use of money interest, and other initiatives, but they are not rocket science. It does not take a Government 9 years to work out how to do these things. It took National only a couple of months. In fact, but for Christmas, the country would have got these bills before then, under our Government.

The Labour Government had talked long and hard about what it wanted to do for small businesses, but it could not actually deliver for them. It could not go out there and deliver for small business. There is a reason behind that, which is that Labour will not support people who go out and make the most of their opportunities. National is quite different. National wants to send the right signals and incentives for people to go out there. We want to create an environment that will grow this economy. We want to create an environment that keeps people in jobs. National is worried about keeping people in jobs; we are not thinking about what could have been, what we could have done, or merely what is possible. We are looking at the realities of action and delivery—[Interruption]—and that is the difference between the two political parties, if Mr Nash wants to know what the difference is. National is the party of action, of delivery, of ideas, and of vision; Labour is the party of looking across the fence and saying: “We wish we could do that.” The whole political mantra of Labour members is based on jealousy. They look across and say: “These people have got too much. They have done too well. Let’s take it off them.” It is the same in their policy. Labour members do not actually have any policy; they look at our policy and want to take it off us. That is what Labour is about. It does not have initiative, it does not have direction, and it does not have delivery. Labour is all about what somebody else has done, and about what it can do to make it look as if that were Labour’s idea. That is Labour.

Then, we look at this bill. It is about delivery for New Zealanders so that we can help keep people in jobs. This bill is part of that stimulus package to help New Zealand get through this terrible, terrible time. We need a recessionary package that is practical, simple, effective, and that we can action quite quickly. These are actions that we can do now. Measures like the GST registration threshold will make a huge difference. The increase from $40,000 to $60,000 is a big thing for small businesses, especially when small businesses are struggling now to get a lot of sales. That $60,000 is worth more than it would have been worth a year ago, essentially, in real terms, because to get $60,000 in sales now is a lot harder than it was a year ago. These measures that we have put forward are actually more than what the market demands, in a sense. We are going out there to deliver the best possible circumstances for New Zealanders in order to keep our small-business community strong and viable, and to provide those crucial jobs for our communities throughout this country.

I think we need to take great pride in a Government that makes those decisions, and makes those actions a reality. We can take great pride in a Government that is not afraid to do things. We do not wait for elections, to do something. We do not wait for policy groups to tell us what we need to do; we go out there and do what is the best thing for our country at the right time. That is the big difference between the two main political parties. Our motivation comes from what is best for New Zealand and best for our people. National is not motivated by what is best for our political party, which is what motivates Labour. Labour members have not talked about this bill. If anything, those members have tried to say that these ideas were their own, and that this was their bill and they were going to do these things, anyway—that does not count in the real world.

People want to see action, and they want to see delivery, and they are able to see those things now under the National Government. They will get more, because this will not be the end of it. No, we will work hard to look at what the next level of reforms could be, and to deliver more for our small-business community and for those people who rely on that community for their jobs. We will deliver more for those who rely on that community of business people to keep this country ticking over. That is how a strong country is built. We have to look at what is going on out there and, time and time again, try to deliver what will refine it and make it better. National is not afraid to do that. We are not afraid to go out and deliver the best possible environment in which small business can progress. That is something that defines us and makes us different from Labour—an Opposition that is jealous and that looks across from the other side of the House to try to steal ideas. Over its 9 years in Government Labour never had the guts to go out there and do what it could have done to set up New Zealand for a better situation. But the National Government will deliver that vision. We will deliver those concrete changes. We are doing it now, and there is more to come. We commend this bill to this House.

BRENDON BURNS (Labour—Christchurch Central) Link to this

The previous speaker made much of a focus on the deficit; he is the one with the deficit. He may have done fifth-form maths, but he cannot recall much of it. He should remember—because he was a member of this House at the time—that National voted against the previous Labour Government’s move to cut business tax rates to 30 percent. Does he remember that? Does he remember that National was in favour of cutting the research and development tax incentives that the past Government had put in place, and has in fact cut them? Does he remember that this National Government has made cuts to KiwiSaver, and that it is axing three-quarters of a billion dollars of tax cuts that would have favoured those most in need of that sort of assistance during this very difficult economic time?

[Interruption] That is right. Give it to the rich. Let them pay it back to the poor by way of a charity, if they are lucky. That is the philosophy of members opposite.

We are on the third reading of the Taxation (Business Tax Measures) Bill, and I note that the chair of the Finance and Expenditure Committee, Craig Foss, did a good job of taking the bill through the select committee. But he also said before that this is the first piece of legislation that has been passed through all its stages in this Parliament without urgency and by going through the select committee process. Although it is an important bill, it is nevertheless a very small bill and a very small part of what needs to happen in this nation in order to meet the demands of the international situation. Speakers opposite have been making much of the fact that this bill is part of the Government’s rolling maul of measures to deal with this one-in-100-year turn round in economic circumstances. Although this bill is an important step forward to assist New Zealand businesses, it still remains a relatively small step.

Rather than this bill being something that this Government can trumpet as having done in response to the world’s worst economic outlook in living memory, I say this bill was originated by the previous Government. The Minister yesterday suggested that a lot of new measures are now included in the bill that the Government inherited. That is true, but the Inland Revenue Department provided the Finance and Expenditure Committee with a 1-page summary of the bill’s new measures, the enhancements of measures inherited from Labour, and the inherited measures that remain unchanged in the bill. There are four new measures, three enhanced measures, and five original measures remain unchanged. So there are four new measures within the bill, and eight enhanced or existing measures inherited from the previous Labour Government. The House can see the substantial contribution that Labour made to this bill from the previous Government’s measures.

The new administration can barely claim the credit for this legislation being part of the rolling maul, as some members opposite continue to suggest. It is barely another pair of boots added to a rolling maul. But whatever the bill does provide it is not, and cannot be described as, a deliberate, focused, planned, and prioritised response to the global meltdown. Not only has Labour provided the basis of the bill but we also saw some amendments in the name of the Hon David Cunliffe to further improve this Labour-initiated bill.

Let us go through the bill as it was inherited by National, and the enhanced or new measures it now includes. The new measures include a reduction in the provisional tax uplift rate from 105 and 110 percent to 100 and 105 percent, to apply from 1 April this year. The increase in the GST payments basis threshold from $1.3 million to $2 million is also to apply from 1 April. The introduction of a new threshold of $10,000, below which all business-related legal expenditure is fully deductible, is also to apply in the next income year. There is an increase in the thresholds under which the fringe benefit tax is not required to be accounted for, regarding minor benefits provided to employees. Those are the new measures within this legislation.

The existing measures with some enhancement include the increased pay-as-you-earn once a month filing and payment threshold. That has gone up considerably, as from 1 April of this year. There is an increase in the fringe benefit annual filing threshold from $100,000 to $500,000 and that also applies from next month. There is an increase in the GST registration threshold.

The existing measures that were kept in toto from the Labour Government’s legislation include the increase in the low-value trading stock threshold, an existing measure relating to accounting financial arrangements, the extension to the fringe benefit tax annual filing, the increase in the provisional tax use of money, the use-of-money interest safe harbour threshold, and the increase in the GST 6-monthly filing threshold.

Labour, of course, is also urging that we make some further changes to the bill around further reductions in the use-of-money interest rates and in the tax deductibility of patent costs—a good submission in that respect came from the Manufacturers and Exporters Association—and around reducing the uplift basis for provisional tax. Even if those measures were included, this bill would still effectively represent business as usual. It is a good bill, but it does present a missed opportunity in the face of the global meltdown. The economic conditions have deteriorated rapidly. Most commentators are predicting considerable drops in GDP, and we have to ask why the Prime Minister remains the only person who has a sunny day forecast in the face of what really needs a considerable response and plan. The plan that we have seen so far includes the cycleway to nowhere. It started with a costing of $50 million, and now looks more likely to cost $300 million if it proceeds. The 9-day fortnight, which is now going to assist employers, is welcome assistance, but 60 jobs at Fisher and Paykel Appliances are a long way short of the 100,000 jobs that were suggested.

The Government has some other byplays going on. On the new Q+A programme on Television New Zealand on Sunday, Therese Arseneau, a fine political scientist from Christchurch, said that very clearly there was not much of a plan—that this is not an ordinary recession, and there is no action plan to maximise our competitive advantage. Of course, the Q+A programme itself may not survive much longer, now that the Government is axing the Television New Zealand charter. The National Government, of course, has also scrapped the research and development tax credit, gutted KiwiSaver, and discarded the Fast Forward fund, and in the meantime we are getting this modest tax-amending bill.

We as a party urge the Government to give some serious reconsideration, in the face of the economic crisis that we are facing—and those words are not too strong—to retargeting the tax cuts. They simply are not the best way to stimulate our faltering economy. We must make the very best of tax cuts that are focused on those truly in need. People at the bottom end of the spectrum are the ones who spend every dollar they get. People who have discretionary income have a choice: they may save, they may spend off debt, they may take a holiday, and they may purchase goods. Those at the bottom end of the spectrum have no such choice. It was shameful to see that the tax cuts provided under the Labour Government’s programme, where three-quarters of a billion dollars were to have gone to the New Zealanders who are most in need, have been forgone in the interests of providing tax cuts, which the Prime Minister now suggests may be given back in charity payments to the poor of this country. This is going back to Dickensian times, in the thinking of the Prime Minister.

National, in its approach to the economic recession, is uniquely seen on the international environment as tinkering with our economy while the rest of the world does some real things.

The International Monetary Fund is in town at the moment, and it is telling the Government not to take a knife to spending at this time. It is counter-cyclical to what the Government needs to achieve. Any New Zealander who looks across the Tasman to Australia can see that there is a NZ$67 billion stimulus package in Australia. So where is the National Government’s package for New Zealand? We have this bill progressing through Parliament.

This is a small, important, and modest piece of legislation, and it is welcome. It will provide a small measure of relief to small to medium sized enterprises, which provide 90 percent of the jobs in our nation. Labour supports the passage of this bill, but we do so while suggesting the bill needs some amendments, and we have indicated those amendments to the House. We would like to see reductions in the use-of-money interest rate. We would like to see further work done around the issue of patent costs. We would like to see reductions in the uplift basis. If this bill had the Labour amendments added, it would be more useful. But it remains a modest bill. It is no answer to the scale of the recession that this nation and this world face.

AMY ADAMS (National—Selwyn) Link to this

I am rising to take what I believe is the final call in the third reading of the Taxation (Business Tax Measures) Bill. As a relatively new member of the House I imagine that speaking last on the third reading of a bill, particularly one that has passed through the House in reasonably quick time as this one has, might not be an enviable task on the grounds that a lot of what one could say about the bill has been said. A lot of it has been said by me, I must admit, in previous speeches. But far from being put off, I am in fact delighted and proud to be speaking on this bill.

I am delighted to see that we will pass this bill through its third reading today, because this bill, despite the bleating from the other side of the House, will look after the engine room of our economy. When we talk about business, we need to remember that far and away the vast majority of business in this country is not carried out by the big, top-end-of-town companies. It is carried out by the mum selling clothes from home over the Internet, and by the guys working in the garage fixing cars. It is carried out by the businesses struggling to stay alive and keep going, employing few staff, putting everything they have into the business, and working 60, 70, or 80 hours a week. Those are the businesses we need to be supporting. Those are the businesses that will get us through the recession, and those are the sorts of businesses that this bill targets.

This bill cuts right to where the National Government needs to be focusing when we talk about looking after our economy. The National Government is looking at the whole of the economy. This bill, though, goes straight to those small enterprises. As I have said before as the representative from Selwyn, where most of our businesses are in that category, I am absolutely delighted to play a part in getting this bill through the House.

I do want to acknowledge, and I think it is fair to do so, the whakapapa of the bill, and its genesis under the previous Government—well, certainly many parts of the bill had their genesis under the previous Government. I do think it is fair to acknowledge that, and I know the point has been made before.