Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Bill

Ha, ha! I point out that there are two amendments in my name, to do with Part 2 and Part 4 of this legislation, and they go to the core of the changes announced last week to the racing industry in this country. Those developments are hugely significant for the racing industry, both to create an equitable basis for it to conduct its business and to foster an environment in which the industry can begin to reach its economic potential.

Achieving the changes has been a priority for New Zealand First and for me since becoming the Minister for Racing, in order to ensure that the inherent unfairness of the duty levied on racing, which nearly every political party had to acknowledge by the end of the last election campaign, was rectified. We also wanted to ensure that the racing industry would be put in a position to reach its economic potential, and particularly its export potential.

I thank the people from all three sections of the racing industry who have contributed greatly to the announcements, and particularly those on the New Zealand Racing Board. I also offer my thanks to Cabinet for recognising the need for urgency in making the changes. As members know, the changes were part of the confidence and supply agreement between New Zealand First and the Government, and it is pleasing to be able to deliver them so soon.

The key changes are, first, a reduction in totalisator duty, which is down from a headline rate of 20 percent to 4 percent of gambling profits—that is, amounts bet less amounts paid out—so as to make it just the same as it is for casinos. The second is a decrease in the write-down period for stallions from 4 years to 2 years. Third, there is a decrease in the maximum write-down period for brood mares from 8 years to 5 years, or, if they go into breeding at 2 years, which would be extraordinarily rare, it will be 6 years. Brood mares that commence breeding at age 8 and over will be written off in full in the first year of breeding.

The changes will come into effect at the start of the next racing season, on 1 August 2006. I note that already one of the racing entities in this country has just put back its sale by 2 weeks, so that it can avail itself of the 1 August deadline we have set for this legislation.

They still don’t get the benefit of the write-down until the year of 2008.

The member is quite wrong; he is utterly and totally wrong. A brood mare, at age 3 years, is written off at 20 percent or thereabouts each year until year 8. If it goes into breeding at year 8, it is written off when it reaches year 9. Those are the fundamental facts.

I am not listening to the National Party on this matter. It went to our website in 2005, stole our policy, and had the audacity to go to Te Rapa and try to read it in its name. If anybody doubts that, let me say this: he or she should look at the National Party’s 2002 website. What will people see on racing? A doughnut—a zero; nothing! Imitation is the most sincere form of flattery, but it is a disgrace to go around purloining other parties’ policies and not to have the integrity to say where they came from.

The industry knows where it came from—that’s for sure.

The industry knows where it came from, all right. The member should go and see who the big players were who backed New Zealand First in 2002 and 2005. Did anybody from Fair Tax support National? No, so the member should stop making it up as he goes along. He should stop stealing other people’s policies.

I raise a point of order, Madam Chairperson. I think the member has been in this House long enough to know that the Committee stage of a bill requires the focusing of attention on the detail of particular clauses. The member is meant to sit down while a point of order is being taken. Are you going to apply the Standing Orders of this House, or not?

Hartley The CHAIRPERSON (Ann Hartley) Link to this

The member will continue.

Mark Ron Mark Link to this

The member should know that he should focus on the detail of the clauses. That is what the Committee stage of a bill is all about. I suggest you bring him to that point.

I am sure that you will also know from your knowledge of the Standing Orders that the Hon Lockwood Smith, who has been here a very long time and should know them completely by now, also knows that one can respond to interjections, and that if people want to broaden the debate with their inane interjections, then the person on his or her feet, speaking, has every right to deal with that. I ask you to go one step further and rule that spurious points of order that are not points of order, that are irrelevant, and that are raised only in order to interject on and break up a member’s speech, should be called to order at that point.

Hartley The CHAIRPERSON (Ann Hartley) Link to this

I will respond to the point of order. Certainly, the member Ron Mark does make a point. There was an interjection that did take the member along that line. He was responding to it, so members do interject at their peril to that extent. However, the member now needs to come back to the bill.

Madam Chairperson, you will note again how the interjection illustrated precisely New Zealand First’s point. I was challenged on the detail, and I gave the facts. The Opposition spokesperson on racing, of course, did not know anything about them because he had stolen the policy from us. It is one thing to steal a man’s horse, stumbling outside the saloon; it is much harder to stay on its back as one tries to ride out of town. Mr Tisch has just fallen off.

The changes I have announced are about achieving a fair income for racing and creating a level playing field. It is an exciting development for the racing industry, and I want to pay tribute to the perseverance and hard work of a long-suffering industry that has waited all these years for some fairness to be returned to it.

Hon Member

Where is it?

Why does the member not go and read the reaction from the industry, when it went to the announcement last week and found out the Government’s policy would be that articulated by New Zealand First in the supply and confidence arrangement? Every one of the people concerned came out and applauded that. In fact, I have been dealing with invitations from Ireland, Dubai, all around Australia, Hong Kong, and elsewhere to come and talk about the exciting changes to the New Zealand industry. I can see people coming in from overseas. I can see them relocating their studs to Cambridge. It is all good news.

Tisch LINDSAY TISCH (National—Piako) Link to this

It is interesting to follow the Minister for Racing. National supports his Supplementary Order Paper 15, because this policy mirrors National’s policy of 2002.

Oh, rubbish!

Here we have New Zealand First’s policy of 2002; it is dated 2 July 2002. We had a very comprehensive policy in 2002, which I wrote. [ Interruption] Well, no other policy is mentioned anywhere else; I have done a search of the web and the press releases, and I can show that this is the only mention in 2002 of anything that New Zealand First ever did. In 2005 we released our policy well in advance of what New Zealand First did. Of course, the point is that its policy was just a reiteration of what we said in 2002. Our policy was actually released in 2002.

I say to the industry that National supports the Supplementary Order Paper. As the Minister said, this measure is good for the industry. National would be the first to acknowledge the importance of it to the racing industry. I have been dealing with the industry over the last 6 years. I am not just a johnny-come-lately on this job. I have been around the race meetings and I have met with the industry players in the three codes.

And they’re still laughing.

I say to that Minister that I am still meeting with them. They acknowledge the work that National put in that enabled this measure to be brought to the fore—to where it is now. But I do have some questions of the Minister in the chair, Mr Dunne, because I have a major concern about what the write-offs mean. Of course, a lot of people call it depreciation when in fact it is a specified write-down of the values of brood mares and of stallions. The officials who are here may be able to answer one of our concerns, because I do not think the Minister for Racing, Mr Peters, is right.

I know that if we were to look at what happens today, we would see that most breeders have a balance date of 31 July for their business. There are a few who do not, but the majority do. I have talked to accountants today about the actual balance dates for their clients, and 98 percent—probably even more than that—have a balance date of 31 July. There are a couple who have balance dates later than that. I am told that one has a balance date at the end of August, and one has a balance date in September. We need to look at what this legislation means with its write-offs—and they are generous write-offs; once again, they are in line with what we have advocated, so we have no difficulty with that. If someone were to buy a horse today—be it a brood mare or a stallion—that person would not get any benefits, if his or her balance date is 31 July, until the 2006-07 year, but he or she would not get any benefit in monetary terms until March or April of 2008. So anybody who thinks he or she is on a win because of what we will pass today will be sadly disillusioned.

Wrong. Don’t know accountancy, either.

I am asking the Minister in the chair to respond, as the advisers are here. The accountants whom I have talked to today say there will be a delayed benefit for those people who have a 31 March balance date. I have it here that New Zealand Bloodstock will shift its national brood mare sale, set down for 23 and 24 July, back to the first week in August, but people who have a 31 July balance date still will not benefit. That is the issue. The accountants are saying those people will not get any tax benefit until 2008.

This is a huge question. As the advisers are here, I would like to think we could have a rational response to the questions I am raising, because the industry as a whole does not understand the issue. The accountants who have to deal with the books understand it, and they have told me in no uncertain terms that in essence the provision is great but it does not actually—

Peters Rt Hon WINSTON PETERS (Minister for Racing) Link to this

The first thing one has to know, when one is involved in the racing industry, is that in the southern hemisphere the critical date is 1 August. That is the first thing every moron knows, around the racetrack. But that is not the case for the National Party guys.

I raise a point of order, Madam Chairperson. The member implied that I was a moron.

Hon Member

He didn’t.

He did. He said that every moron knows that. That is unacceptable, and I take offence at that comment.

Speaking to the point of order, Madam Chairperson. I said that everyone knows that the southern hemisphere breeding year is from 1 August. Every moron around the racetrack knows that, except for the National Party spokesperson. Those were my words, almost to a word.

Hartley The CHAIRPERSON (Ann Hartley) Link to this

However, the member has taken offence at being included in the words. I ask the member to withdraw that remark.

I withdraw and apologise. National members are very sensitive, are they not? Let me put it this way: every moron who has anything to do with racing, except the National Party spokesperson, knows that the breeding year is from 1 August.

The second thing—[Interruption] Probably, I have more of an interest in horses than he has.

I’ve got a horse.

What is its name? Does the member remember what it is called? It is probably by “Banality”, out of “I’m Looking After Myself.” Those will be its breeding lines. The second thing is that people can change their accountancy year. In business, they can change their accountancy year.

The third thing is that one would not believe what happened in 2005. There was to be a big meeting about the racing industry at Te Rapa in the Waikato, to be attended by 600 people. The day before it happened, can members guess what happened? The National Party members jacked up a meeting at Trentham and got themselves in the Dominion Post, except that anybody who knew anything about racing knew that no race meeting was to be held at Trentham on that day. People wondered what was going on. What was happening was a jack-up in order to try to jump the announcement of every other party’s policy. I got up at the meeting at Te Rapa and asked: “Which one of you guys tried to jack up the meeting with the National Party, with Mr Tisch and Don Brash?”. Those members, I might add, would not know one end of a horse from the other—and it shows.

I raise a point of order, Madam Chairperson. National is treating this debate very seriously. We want to support the racing industry. The Minister for Racing is making a farce out of it, by talking about things he has no knowledge of. He is degrading the debate. We want to get down to the issues, because we want to be able to support the racing industry for what it adds to the value of our economy and to New Zealand as a whole. But here, in the Committee stage, the Minister is talking about something that he could talk about in the third reading debate, if he wants to—

Hartley The CHAIRPERSON (Ann Hartley) Link to this

The member needs to come to the point of order. He has not made a point of order yet.

The point of order, quite clearly, is that we should confine our comments to the clauses affected by Supplementary Order Paper 15 in the name of the Rt Hon Winston Peters, which the Minister is referring to. Talking about other issues is not relevant. I have asked you to bring him back to the point, so we can talk about the things that are important to racing.

Hartley The CHAIRPERSON (Ann Hartley) Link to this

The member is quite right. However, there has been a continual stream of interjections, which the member has responded to.

Let me make it very clear—

I raise a point of order, Madam Chairperson—

This is deliberate.

Hartley The CHAIRPERSON (Ann Hartley) Link to this

A point of order has been sought. The member will please be seated.

Hughes Darren Hughes Link to this

I raise a point of order, Madam Chairperson. It is totally out of order, when I have raised a point of order, to have the Minister on his feet, saying: “This is deliberate.” You know that members must immediately resume their seats in silence when a member raises a point of order. The Minister cannot make those kinds of accusations. This Committee must see the Standing Orders being applied.

I want you to rule on the relevance of what the Minister is talking about. You are correct that there have been interjections. When the Minister trails off from the bill and talks about what the National Party may or may not have done at some race meeting, then of course there will be interjections. You have allowed the Minister to get miles away from the bill, and I call on you to bring the Minister back to the clauses of the bill.

The National members are deliberately breaking up the speech being made by the Minister for Racing. First of all, in both the contributions the Minister has made, the National Party interjected to ask him about the extent of the clauses that are being debated. Then, when the Minister replied to that, he was met with a barrage of interjections, including interjections from the cross-benchers of the National Party, in spite of an understanding that Ministers who speak from the cross benches are not to be interjected on by back-bench members who sit on the cross benches. A member over there shakes his head, but if he looks the matter up he will find that is the case. Then, when the Minister more than adequately replied to the points being made by the Opposition members, they took a point of order and complained that he was not talking about the sorts of things they wanted him to talk about. I think it was a deliberate attempt to break up the Minister for Racing’s speech, and I think those members should be called to order.

Carter Hon David Carter Link to this

I cannot let that point go by without pointing out to you, Madam Chairperson, that in fact questions have been raised of the Minister. The Minister in the chair is the Hon Peter Dunne, and he has not taken the opportunity, as yet, to respond to them. The questions that are raised are addressed to the Minister who is in the chair during the Committee stage, not to any other Minister who happens to be in the Chamber.

Hartley The CHAIRPERSON (Ann Hartley) Link to this

On that point the member is absolutely right. Obviously, the Minister in the chair is the Hon Peter Dunne. However, the constant interjections have taken this debate down that track. I ask the Minister to continue and to speak to the amendments.

Carter Hon David Carter Link to this

There is an old saying that when the cat is away, the mice will play. Well, the cat is back. What is happening here is that those members can dish it out, but they cannot take it. They just will not take it.

First of all, Mr Tisch claimed that what was being announced last week and during the election campaign was National Party policy. That is demonstrably false. Let me ask this question: who did Sir Frank Hogan advertise for in the 2002 campaign in the Waikato? The National Party?

Who’s that?

Carter Hon David Carter Link to this

Oh, listen to that! The member asks who Frank Hogan is. That man must be one of the most recognised, esteemed racing personalities worldwide, and the National Party asks who he is. Can members believe that?

I raise a point of order, Madam Chairperson. It may help the knowledgable Minister for Racing if I point out that it is not Frank Hogan; it is actually Sir Patrick Hogan.

Hartley The CHAIRPERSON (Ann Hartley) Link to this

That is not a point of order, either.

Gosche Hon Mark Gosche Link to this

Well, we all make mistakes, but only temporary ones. The real point is this: who did Sir Patrick Hogan place those advertisements for in 2002 in the Waikato? The National Party? No. New Zealand First? Yes. In 2005 was it the National Party? No. Was it New Zealand First? Yes—as did Fair Tax.

It is one thing to be able to con the ignorant, but it is a somewhat harder thing to con people who have been in the industry for 20, 30, or 40 years. They regard the National Party’s tutelage of the racing industry, all the way back to John Falloon and beyond, as an absolute betrayal of the industry. Those are the facts. The ignorant, like Mr Carter from down in the South Island, who probably has a couple of donkeys as well, can laugh, but those are the facts. Come 1 August the policy that I have referred to will be the law in this country. In practicality, come the end of this week it will be the law in the legislative sense, and we should not deny that.

I want to say to those who are listening on drive time radio as they drive home tonight that if they are interested in the racing industry, then they should hang on, because help is on its way.

Tisch LINDSAY TISCH (National—Piako) Link to this

I want to make very clear what we are debating here in terms of the balance dates for businesses involved in the bloodstock industry. Those in the industry who have a balance date of 31 July cannot change the date. Although the Minister for Racing says that they can do this and they can do that, the racing industry is one industry where they cannot do that.

How big is the member’s horse?

It is actually a very good horse, and when it wins, the member will know about it. I want to reiterate the points I made earlier, so that the matter is very clear. If I buy a horse, whether it is a stallion or a brood mare, today or before 1 August, I have to use the old rates. They will apply regardless. One cannot change an old rate to the new rate. That is the first thing. But if I buy after 1 August, which the Minister said will be possible because New Zealand Bloodstock will change their brood mare sales—

Hartley The CHAIRPERSON (Ann Hartley) Link to this

I am sorry to interrupt the member, but the time has come for the dinner break.

Sitting suspended from 6 p.m. to 7.30 p.m.

I reiterate the points I made about the balance date for those involved in the bloodstock industry. Ninety-nine percent of those involved in racing—be they breeders or investors—have a balance date of 31 July. In terms of the changes in Supplementary Order Paper 15 that we are looking at tonight—which National supports—people with a balance date of 31 July, if they were to buy a horse, would not accrue a benefit until March or April of 2008. The very small number of those in the bloodstock industry who have a balance date later than 31 July—for example, 31 August or 30 September—will get a benefit 12 months earlier. I made the point that although the provision sounds very good—and that is the reason why National is supporting it—not everybody will benefit immediately from those changes.

One way to rectify that would have been to change the date. People cannot change the balance date of their accounts, even though the Minister for Racing said they could. [Interruption] He would not know. But what could be done, and what we could advocate, is that the date, rather than being in August, could be moved forward to, say, April or May. Then everybody in the industry would benefit from those changes. I hope the Minister in the chair, Peter Dunne, who has advisers here, will be able to give me an answer. This is not only my interpretation of the situation; I have spoken today to a number of accountants who specialise in the bloodstock industry, and this is their interpretation of the meaning.

I canvass another major point relating to Supplementary Order Paper 15. Subsection 7 of new section EZ4B, inserted by proposed new clause 76BA, relates to “Definition of item in formula”. The small print states: “Defined in this Act: bloodstock, broodmare, …”, etc. The question I have is what is a brood mare. A brood mare, in common terms, is a horse that has been put to stud. But many horses are still racing when they are mated, so they are not necessarily called brood mares. I ask the Minister whether all females from age 2 are covered by this definition of brood mare. If they are not, then the owners are no better off than they are under the current provision. The current provision is quite clear, but nothing I have read or have been told by the accountants I have been speaking to today tells me whether, in essence, the term “brood mare” applies to all female stock. Let us take as an example the horse that won the New Zealand Oaks race at Trentham last Saturday. It was a 3-year-old filly by the name of Legs—a great name for a horse. It comes from Matamata—the heart of racing—which is why I am so familiar with it and take such an interest in it. If I own this 3-year-old filly, am I able to write it down as a brood mare? It is only 3 years old and could well be put to stud.

Those questions that I would like clarified are important for the industry and for investment in the industry. Racing is an iconic industry, and National’s policy back in 2002, and again at this last election, was to give support and recognition to this very important industry.

The second issue goes back to breeding statistics and why New Zealand is being left behind. Australia does not analyse reports or whatever; it takes action. If we analyse the results of breeding over a number of years, we see that the number of registered brood mares has dropped from 9,700 in 1999-2000 way down to, now, fewer than 8,500. The number of stallions has dropped from 268 to 199, of which about 15 are shuttle stallions. Part of the taxation regime that National has advocated, and it is included here, is that if investment is made attractive by people being able to write-down breeding stock much more quickly—over a 2-year period, rather than 4 years, with stallions—we will have better investment in the industry. That will be good, because it will create a climate for confidence and make it worthwhile for people to invest in the industry. At this time New Zealand is being sorely left behind.

We really have only one stallion. It is Zabeel, which is 20 years old. There is a promising one in Matamata by the name of Pins—a horse owned by Waikato Stud. That horse is 10 years old now, and it is proving its worth and is going to be very, very good. New Zealand is competing with Australia, which has about 26,000 in-foal mares compared with the number we have. Out of that, the Australians will get about 17,500 foals, of which they will sell 7,000. I ask why Australians and people from Hong Kong, Singapore, Ireland, the United States, and the UK would want to come to New Zealand, when our industry is in decline.

Dubai.

Foss Craig Foss Link to this

Yes, Dubai, as my colleague mentions, is another very important area where New Zealand horses are doing extremely well. But we need to ask why, although we have had quality bloodstock here, we are losing out to other countries. The incentives that are put in place by the Supplementary Order Paper are certainly to be encouraged.

The diminishing value concept of valuing livestock is very good. I note that at the moment the percentage is going from 37.5 percent to 75 percent. That means that someone buying a horse will be able to write off its value very quickly. For a stallion of $4 million, $3 million can be written off in the first year—that is great. In the second year, it will be 75 percent of the remaining $1 million. That initiative is certainly very encouraging.

These are some questions that I hope will be answered. I look forward to the Minister of Revenue’s contribution. National has allowed the Supplementary Order Paper to come in without it going to a select committee. Bearing that in mind, National members are supportive of it. We have questions for the Minister that we think need to be answered so that we can give certainty to the industry as a whole.

Dunne Hon PETER DUNNE (Minister of Revenue) Link to this

I take a quick call to answer the two points that have been raised by Lindsay Tisch, the member who preceded me. Firstly, in respect of the definition of brood mare: in short, a brood mare is bloodstock that is used for breeding. So the issue of whether it is 3 years old, 4 years old, or any other age is not really relevant in that consideration. So that deals with the member’s point reasonably succinctly.

As far as the first set of questions he raised regarding balance dates and purchase dates is concerned, it is important to note that Supplementary Order Paper 15 will come into effect on 1 August 2006. So if one takes his example, the person who makes the purchase on 31 July will not be caught by the new regime. Flippantly, my advice would be to delay the purchase until after the start of the new year. In terms of when the regime is paid to the recipient, that is not part of the regime per se; that is for the way in which the recipient organises his or her own affairs. So the Supplementary Order Paper takes effect from 1 August this year, and the taxpayer gains the benefit from that time. How the taxpayer’s affairs are organised in terms of his or her balance date will be what determines when the payment is made. So the issue of whether it is 2008 or some other time is to do with the way in which the taxpayer organises his or her own affairs, it is not to do with the provisions of the regime that is being introduced.

So that should give some clarity in respect of the people whom the member was talking about, and, hopefully, the earlier answer addresses his point, as well.

Foss CRAIG FOSS (National—Tukituki) Link to this

I would like to take members out of the TAB and back to the more mundane parts of the bill, particularly Part 2. The bill is very technical in parts. First of all, again, I acknowledge the input of the various officials who assisted in its formulation and their assistance to the Finance and Expenditure Committee as we considered the bill.

National will support the bill. It is very business-friendly, but it is only a step—or perhaps a big toe—in the right direction. I pick up on what my colleague the Hon Dr Lockwood Smith was speaking about earlier, particularly around the returning migrant issue, tax holidays, etc. We should ask whether the bill—the 346-odd pages that it is—will pass the threshold in terms of attracting New Zealanders back to New Zealand, and whether it will stop them from leaving in the first place. Will it help us go up the OECD rankings? Will it help New Zealand’s productivity? Will it even address some of those issues?

Regarding migrants, etc., my colleague Dr Lockwood Smith proposes two amendments that we will obviously support, particularly the amendment to clause 77D, which deals with changing the time spent away from New Zealand, by looking at a period of 5 years rather than the proposed 10 years. We also propose to move the concession. One way of looking at the concession is that it currently offers a zero percent tax break for 4 years. We are looking to take that tax break to 5 years, again, in order to attract New Zealanders back to New Zealand. That is based on their overseas income to bring them back and to build up the capital base of New Zealand. Again, that is great in theory, but in practice we need to be bolder and to do a lot more on that. We have to address why those people are leaving New Zealand. In respect of the 10-year threshold, I quote Steve Camage of PricewaterhouseCoopers: “Ten years is too long … Kiwis who’ve been abroad for 10 years or more are probably well established in their new life and less likely to return home just for a tax break.” He is quite right—why would they do so?

We can also address the issue of why on earth they left in the first place. One of the points here is that the discussion around the returning migrant does not seem to be bold or new; it merely seems to copy what is happening in Australia at the moment. We never like to be beaten by the Australians in any way, shape, or form—they are still not eating our apples; we will get there in the end. We need to go further than Australia, because if we do not, we will cement where we are right now—be it in respect of per capita income, New Zealand’s tax structures, or the continued flow of good New Zealanders who are essentially funding the growth in Australia at the expense of growth in New Zealand.

One may think that is just a debating point in the House, but I would like to put a real-world touch on the issue. An article in this morning’s New Zealand addresses whether New Zealanders should stay or go. The headline states: “it’s all down to money”, and the article goes on to say: “The average income across the Ditch is 32pc higher and the middle-aged are valued for their skill and experience”. Those are exactly the people whom we need to stay here; we should not have to offer some tax package—it is almost a tax bribe—to bring them back in the first place. In another real-world example from the same article, a 54-year-old electrician—I will not mention the gentleman’s name—has moved to Australia and doubled his after-tax pay. If the construction of the New Zealand tax system provided incentives for that gentleman to stay here in the first place, he would not have left. Because all those New Zealanders are leaving for Australia, the same article refers to New Zealand incomes being about 78 percent of Australian incomes. That is why they are leaving in the first place.

So let us concentrate not just on putting on a Band-Aid to try to wave some white flag and bring them back. Let us really address the core and hard issues of why they leave in the first place. Another graph in this article shows that 22,000 New Zealanders net have left for Australia in the past year. Members should look at the logic of the bill, because we are trying to bring those people back to us.

Smith Dr the Hon LOCKWOOD SMITH (National—Rodney) Link to this

I will take over from where my good colleague Craig Foss stopped and focus particularly on the measure in Part 2 to try to make New Zealand more attractive to highly skilled, mobile, international employees. Often New Zealanders have been working offshore, and the whole idea of clause 77 is to try to make New Zealand more attractive in order to bring those people home, and more attractive to highly skilled potential migrants. National commends what the Government is trying to do. I say to the Minister in the chair, the Hon Peter Dunne, that we agree with what the Government is trying to do, but we are focusing tonight on whether it is doing this as well as it needs to be doing it.

Our immediate competitor in this part of the world is Australia. Australia has also recently announced measures to make the Australian tax regime more attractive both to temporary residents in Australia and to people with international occupations coming back to Australia. We have to recognise that if we do not match Australia in this area, then the measure will not be successful, and Parliament is wasting its time in passing legislation if it will not be successful.

As I see it, three elements are quite crucial to this. The first is in respect of residents—and this is where Australia has gone further than New Zealand—who might have come to New Zealand in the last 12 months on a temporary arrangement. At the moment this legislation does not cover them. These are very mobile people. They may have the chance to extend their contract in New Zealand, or they may go. If our legislation provides no relief for them on their foreign income, then we do not match Australia and we are not competitive. That is the first issue—temporary, high-value residents who are already in New Zealand.

The second issue relates to New Zealanders living offshore whom we want to bring back to New Zealand. We are saying in this bill that those people must have been offshore for 10 years before we will give them the tax concession on their foreign-earned income—on investment, or whatever, income that has been earned offshore. The top tax specialists of not only PricewaterhouseCoopers but also KPMG have said that that incentive is too tough, and that if we want the measure to work, the time period for someone to have been offshore should be no more than 5 years. Dr Cullen, when he spoke in the second reading on this bill, admitted that there is nothing magic about a period of 10 years. We need to find the right time period. Maybe 5 years is too short, but I think 10 years is too long, because by the time a Kiwi has been offshore for 10 years, he or she is well settled offshore. If we want to attract our really skilled people back to New Zealand with this tax concession measure, then we have to think about trying to attract back those people who have not become totally settled and involved in their new home environments. So I urge the Minister to give some thought as to whether 10 years is too long. Senior partners in both KPMG and PricewaterhouseCoopers have suggested that in their experience it is too long, and they are the kind of people who are involved in trying to bring those high-value New Zealanders back home to New Zealand.

The third key issue that we want to debate more this evening is the concession, or exemption, we are giving, which the legislation, after being amended by the Finance and Expenditure Committee, now proposes should be a 4-year exemption from tax on offshore income. People are not exempt on the income they earn in New Zealand, of course—that is taxed like the income of any other New Zealander. The exemption is only on certain aspects of offshore income. The exemption in the bill is now 48 months. Again, we are not matching Australia, because Australia is saying that for the period of time that a person is a temporary resident, the State will provide the exemption for that time.

I have not heard the full debate over whether 4 years is sufficient to match the Australian provision. I have suggested an amendment, which is on the Table, to extend that time from 48 months to 60 months to make sure that we are competitive with Australia, because that is what this measure is about. Australia has recently introduced legislation. It has changed what it said it would do. Australia originally had that 10-year provision and those time constraints, and it has freed it up.

I would like to focus now on the amendments that National is proposing, because I know that the Minister in the chair will take these issues seriously and will comment on them. I will deal with my first amendment—it is to new section FC 23, which clause 77D proposes to insert into the Income Tax Act 2004. I propose to replace the phrase “at least 10 years” with the phrase “at least 5 years”. This amendment would have the effect of reducing the time that New Zealanders would have to be resident outside New Zealand before coming back to New Zealand to qualify for that tax exemption on certain aspects of their offshore income. At the moment the bill states that New Zealanders have to be resident offshore for a minimum of 10 years. National members, and a lot of senior tax experts in New Zealand, are saying that 10 years is too long because we will not get those New Zealanders back. So with this amendment we are saying that we should make the period at least 5 years. I would appreciate hearing the Minister’s argument, if he does believe that we should stick with 10 years, as to why he disagrees with those top tax specialists. They were quite strong in their advocacy. Although they supported the idea of the measure and they have no argument with what the Government is trying to do, they are saying that the Government is very severely limiting the value of this measure by having that 10-year limit. At least one of those senior tax partners suggested the 5-year substitute, which is why we have proposed that amendment. That is the first amendment National is proposing.

The second amendment relates, again, to clause 77D, which also proposes to insert new section FC 24 into the Income Tax Act 2004. The amendment would substitute, in paragraph (b)(ii), the phrase “the last day of the 48th month” with the phrase “the last day of the 60th month”. That is intended to extend to 5 years the tax exemption on offshore income. I stress that the reason is that Australia has removed time limits. Australia originally suggested and proposed 4 years, which is why I think New Zealand initially matched that 4-year period. Australia has now removed that 4-year limit. If we want to match Australia, I suggest we extend the exemption to 5 years, because Australia originally said 4 years but, in the bill introduced there in February of this year, that time limit was removed. I would like the Minister to think about it, consult with his officials, and advise us whether we are matching Australia adequately, because Australia is our big competitor for those high-value, internationally mobile employees.

My third amendment is, again, to clause 77D. It proposes to make a change in clause 77D(3) to the dates in respect of a person’s residence in New Zealand for which the tax exemption would apply. The intention of that amendment—and only officials could tell us whether it will adequately deliver what we want it to do—is to make sure that high-value employees who are temporarily employed in New Zealand at the moment, who do not have access to this tax exemption, and who, once Australia enacts its new law, could be attracted offshore to Australia very easily, are captured in this measure. The provision should be designed not only to attract high-value people to New Zealand but also to keep in this country high-value residents who are already here in New Zealand on a temporary basis. Again, those senior tax partners, who are major tax specialists in New Zealand, have been very strong on this point. Although they support what the Government is trying to do here, they say the Government is ignoring the reality of high-value people who are temporarily resident in New Zealand, and that once Australia enacts its legislation, those people could shoot off to Australia—and we would lose them. We would lose their skills and their value to our economy. Keeping high-value people who are already in New Zealand is just as important, if not more important, than trying to attract people who are currently offshore back to New Zealand.

So those are the three amendments we are making. They are totally consistent with the principle that the Government is pursuing with this legislation, but they address the issue of whether we are adequately competing with Australia, pointing out that Australia changed in its legislation what it said it would do. I suspect, from looking at the nature of our legislation and at what Australia said it would do, that our legislation is very consistent with what Australia said it would do. But Australia changed its legislation when it was introduced in February—16 February, I think—and we should look at it very hard to make sure we remain competitive.

Dunne Hon PETER DUNNE (Minister of Revenue) Link to this

I want to respond to the matters the previous speaker has just raised. The starting point has to be: what is actually being offered in Australia, and how does that compare with what is being promoted in New Zealand? There are some key differences, and I think those differences go some way towards explaining the different regimes that are being proposed for the two countries.

For a start, New Zealand’s proposed regime applies to New Zealand citizens who return to this country, as well as to people of high net worth from elsewhere. But the Australian regime does not apply to returning Australians. Returning Australians are not caught by the Australian regime. The New Zealand regime basically applies to any person coming back to this country, regardless of whether he or she intends to stay here long term. The Australians have the concept of a temporary resident’s visa; we do not: one is either a permanent resident or one is not. One may be here either on a short-term work visa or on a visitor’s visa, but the temporary visa notion that the Australians have does not apply here. So someone coming to Australia in the circumstances the member describes would have the exemption for the duration of his or her visa. In New Zealand, because such persons would be either permanent residents or returning citizens, they would have the duration for the length of time they were in the country. That is their call, not the term of their visa.

As far as the issue of whether the duration is 5 years, 10 years, or whatever is concerned, I note that the Finance and Expenditure Committee in its consideration made a move away from what we had originally—I think it was 3 years and 5 years, and it drew the line down the middle at 4 years for everyone. As the Minister of Finance said at the second reading, there is no magic about this, and I concede that. We took the 10-year figure because we thought initially that the 10-year limitation was a safe period to address. I am not persuaded that we should seek to shorten that at this stage. I am quite happy to see how the regime works in practice, then to see whether we ought to adjust it.

What’s that review time?

Dunne Hon PETER DUNNE Link to this

I do not have a specific review time in mind, but I think that the impacts will become fairly obvious very quickly.

My next point may help answer the member’s question. Dr Smith rightly draws attention to the fact that Australia is our major market and that in this area, as in just about everything, competitiveness with Australia is important. Incidentally, this is one of the issues we are facing with the business tax review—where do we pitch ourselves vis-à-vis Australia, bearing in mind that a move we make today may be overtaken by a move Australia makes tomorrow? To some extent there will always be an element of this. So although the Australians have made some adjustments to what they originally proposed, I think we need to be careful not to get trapped into thinking that every time they move we have to move. We need to strike a regime that is fair and effective as far as we are concerned and gives us the benefits we want. I made the point earlier that this regime as it applies to those people coming to New Zealand is, in fact, more broadly based than the Australian one. It gives us an advantage, and I do not think that is widely appreciated.

So at this stage, although I appreciate the tenor and the spirit of the amendments the Opposition has put forward, I am not persuaded that we should support them this evening. But this is an area where we will need to keep on our game as the situation unfolds. I make the observation—and I do so not in any churlish sense; I do not want to be misinterpreted—that because these amendments have financial implications and were not lodged within the 24-hour period, we could apply a veto. We will not do that, because I think it would be counter to the spirit in which the amendments have been put forward. I say that to the member in good faith. We will not support the amendments at this time, but the issues he has brought forward will be among those we will want to continue to work our way through as this whole process unfolds. That is something we may well return to at a later date. I do not have much more to say on that point.

Tremain CHRIS TREMAIN (National—Napier) Link to this

Firstly, I acknowledge our friends from the Inland Revenue Department. It is great to see Robin Oliver and his team here.

Secondly, I go back to the point made by the Rt Hon Sir Winston Peters—

You’re almost there!

That is where we got confused in the first place, over Sir Patrick Hogan. I had to check during the break who the heck Frank Hogan was. I got confused as to whether he was Frank Hogan the car salesman, Frank Hogan the broadcast pioneer, or Frank Hogan the playwright. Obviously it was none of them, and it was indeed Sir Patrick Hogan whom we were dealing with. So I apologise to Sir Patrick Hogan, who is up there with the greats like Colin Meads, Sir Brian Lochore, and Sir Ed Hillary. I apologise on behalf of Parliament to Sir Patrick and Lady Justine Hogan.

I rise tonight to speak on the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Bill, and particularly on Part 2. This is the first legislation we have seen in this House for some time that goes some way to improving business conditions in this country. From that point of view, I am extremely in favour of this bill. If we look at the current statistics, just from our library, we see economic growth in 2004-05 down from 4.3 percent to 2.7 percent, inflation up from 2.7 percent to 3.2 percent, the current account deficit up from $8.7 billion to $12.9 billion, and interest rates up from 6.83 percent to 7.53 percent. So it is great to see legislation like this coming into the House—legislation that will actually have a positive impact on business and will help to turn round some of the factors that are affecting the country right now.

I will talk about Part 2 and particularly about clause 56. I want to focus on the tax depreciation rules that the Minister has brought into this bill. The bill, in clauses 53 to 80, including Supplementary Order Paper 382, introduces a number of changes to the tax depreciation rules, intended to align depreciation rates more closely with the commercial reality of an asset’s economic life. Now that, to me, is sensible legislation. For people out there in the business community investing in assets, it is only sensible to set depreciation rates that match the commercial and realistic life of those assets.

In addition, an increase of the low-value asset threshold is proposed, which will allow taxpayers to write off the value of an asset immediately, by lifting the level from $200 to $500. Submitters to the Finance and Expenditure Committee generally supported the changes to increase tax depreciation rates, but they criticised the changes seeking to reduce depreciation rates, and considered that changes to the low-value asset thresholds did not go far enough. That was interesting.

I want to focus on the lower depreciation rates for buildings. This is something that the Minister might like to comment on. On one hand we are taking assets, such as computers and other investment assets of a business, and applying depreciation rates that are more closely aligned with how those assets will be written off over the period of their useful life in the business, yet on the other hand we are changing depreciation rates for buildings in the other direction.

The reality is that most submitters to the select committee—in fact, just about everyone who submitted on this particular matter—supported a reduction in depreciation rates for buildings. They reasoned that the pace of change, and particularly in technology in terms of consumers’ preferences, means that the useful life of some buildings is shorter than the 50 years proposed in the legislation. I think that if we are aiming to use this bill to help improve the productivity of the nation and to allow better investment in capital assets, then we should make sure depreciation of buildings, in particular, closely reflects the exact duration of their useful life. Lifting the rate is the wrong way to go.

The next thing I want to focus on is the changes in clause 56 to low-value asset thresholds. The bill proposes to change the low-value asset thresholds, with an immediate deduction for capital expenditure of less than $500. This is indeed a sensible solution. It certainly does not go as far as many submitters to the select committee wanted—they would have liked to see the threshold up around the $1,000 or $1,500 level—but it is certainly a big improvement.

Peters Rt Hon WINSTON PETERS (Leader—NZ First) Link to this

I rise to correct a few misrepresentations that were made to the House before the tea break. For example, New Zealand First’s racing policy was not on the website in 2002, as Mr Tisch told the House, but on 18 July 2001. If one is going to steal someone else’s policy—

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

Is this a point of order?

No, no—this gets to the substance of what this legislation is all about.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

OK. I thought the member was making a point of order on misrepresentation.

In particular, it goes to the two Supplementary Order Papers that stand in our name.

The second thing I want to say to Mr Tisch is that if we look at the various divisions of racing we see that on 16 March, shortly after the announcement of the policy, New Zealand Bloodstock announced a date change for national brood mare sales.

We’re not arguing about that.

Actually, you were.

No I wasn’t. I’m talking about the—

Do you think that the people in the racing industry—

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

Order!

Does the member not think the members of the racing industry, and the thoroughbred industry in particular, are people with some serious discretionary cash, because they are successful businessmen and women? That is why they are in racing—because they know a bit about it. Those people deal in the hundreds of millions, as opposed to that member and his party. New Zealand Thoroughbred Racing Inc. put out on 10 March a statement that it was thrilled with the announcement on tax—nothing so miserly and mean as National sought to state in the House this afternoon.

We’re actually supporting this.

Well, the member should support it with generosity, not with the pretence that it is actually the policy of the member’s party, when he knows full well that that ain’t true. One headline read: “landmark package to racing & breeding industry”. Another press release—and I could go on; this is only a sort of montage—announced that Harness Racing New Zealand, which is a pretty big division of racing in this country, was “delighted” by the tax equity decision. There is nothing about what Mr Tisch talked about. But, of course, they might know a bit about racing, and the member does not. Even the Southland Times—way down in the far reaches of the deep south, which is a very forgotten territory, but no more when it comes to racing—states: “Duty reduction pleases industry”, and on and on it goes. The is hardly known as being a fan of New Zealand First—and even less a fan of Winston Peters, the Minister for Racing—but it states: “Peters onto a racing winner”. I say to the gentleman that sometimes, as Ronald Reagan used to say: “You can’t argue against success.”

Winston ran out of puff.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

The member may not refer to members by their first name. It is either their full name, their title, or their portfolio.

Tremain CHRIS TREMAIN (National—Napier) Link to this

I will just finish where I got to prior to the call on the serious issues of changes to the low-value asset threshold.

I raise a point of order, Mr Chairperson. I know that in recent years National has got pretty lax on the issues of protocol and the Standing Orders, but to make sure that the new member does not fall into the same mistake, he should be asked to address the person he is talking about properly, not just carry on.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

The member had a throw-away line and I drew it to his attention that it was improper to refer to a person by just his or her first name. The member must address the member by his full name if calling him.

I raise a point of order, Mr Chairperson. I must not allow my colleague to carry the rap for a breach that I made. I apologise to the House, but it was me who called out that Winston had run out of puff; it was not my colleague. I apologise for that.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

Thank you, Dr Smith. I am sorry.

I will address a couple of closing remarks to the Minister, particularly in terms of the changes to the low-value thresholds, which are addressed in clause 56. The bill proposes an immediate deduction for capital expenditure up to $500. I previously said I was in favour of that, even though many submitters to the select committee proposed that it be higher than $500. But, in saying that, it is good legislation and it gives businesses the ability to write off assets at that lower level, and I think that is excellent.

The last thing I will address tonight is assets that reduce below the $500 threshold. What I am talking about here are assets that initially come into the books at, say, $2,000. A good example may be a computer. With a 40 percent depreciation rate, that will very quickly be down below the $500 level. The ability to write off that asset once it gets below a $500 value is an issue we raised a number of times in the select committee. Under a diminishing value system, there is a situation where the value of the asset goes on and on and remains in the fixed asset register for many years.

We initially proposed that that fixed asset would be able to be written off once it had dropped below the $500 level, but it was very clear from Robin Oliver and his team that that would have a huge fiscal implication if it was immediately written off when it got under the $500 level. In saying that, National believes that there needs to be a threshold at which assets can be written off. Tonight, Dr Lockwood Smith is proposing a level—and I will speak to that in a minute—that is significantly below that.

I speak as a businessperson who has had businesses throughout his life—

Like what?

I will tell the member exactly what I will talk about. There are a number of businesses that I own—

He is asking about the threshold of $10.

The threshold that we will propose is $10, which is significantly down below $500.

When one owns a business, year after year the assets on the fixed asset register continue to depreciate to the point where one does not have a clue where many of them remain in one’s business. The compliance cost of checking to see whether those assets remain in one’s business is huge. It can take many hours to go around and check whether assets remain on the register, particularly for small businesses.

So we are proposing tonight that there be a threshold put in place that would allow assets, once they got down below that bottom level, to be able to be written off immediately so that we do not continue to carry along assets in the register at $2, $4, and $6—ridiculous levels. In fact, I would prefer it to be higher, but we are trying to be practical with the recommendation. So members will see that in new clause 56B to insert after clause 56: “Assets with very low tax values … (1C) This section applies when a person in an income year has an item of depreciable property that has an adjusted tax value at the start of the income year of $10 or less.” We believe that would reduce compliance cost, get it off the asset register, and move it on.

Dunne Hon PETER DUNNE (Leader—United Future) Link to this

I am happy to yield to the member if he will be brief, and then we will wrap it up.

Smith Dr the Hon LOCKWOOD SMITH (National—Rodney) Link to this

I would like to pick up from my good colleague, Chris Tremain, who was speaking just now. It is interesting that on this side of the House, there are a number of people who have been, and still are, involved in running small businesses. I have some experience in this issue—practical, down-to-earth experience, not textbook stuff or theory stuff. Chris Tremain has run a number of businesses. I continue to run a small business. The issue of the asset register has been something that strikes us all as being crazy, because, at the moment, it is impossible to get an asset off one’s register if the depreciation rate on that asset is a percentage depreciation. It is mathematically impossible to get it off one’s asset register. So long as the asset exists there somewhere in the business, one cannot expense it, because it still depreciates. It might be down to $5, and if it is depreciating at 20 percent, then take another 20 percent off, so it keeps going down. It results in an asset register a mile long.

Smith Dr the Hon LOCKWOOD SMITH Link to this

Write down it was stolen.

The Rt Hon Winston Peters suggests that we should write it down as having been stolen. It is that kind of improper behaviour that has seen a Cabinet Minister resign today. That is the kind of thing where a return to the Companies Office was not strictly correct. We have seen a Cabinet Minister resign over it. The Rt Hon Winston Peters has suggested it to the House—and some people probably do that—but honest members on this side of the House try to make sure that their asset registers are correctly administered.

I appeal to the Minister on this. If one is serious about complying with the law, one does not write those things off as being stolen if they are still there. Yet the problem for busy small-business owners is that it does take quite a lot of time to go round and check on all those assets on the asset register. There are heaps of them, and one thinks: “Good God. Where the hell’s that one now?”.

So the $10 threshold that we propose is a very simple, practical measure. I realise it has a fiscal implication and I realise the Minister can therefore outlaw it. We have put the smallest possible threshold we could devise of any relevance to make sure the fiscal cost was so low that it would not cause the Government a problem fiscally, yet would establish the principle of a threshold for expensing assets when their value becomes so low they can be written off the schedule.

It kind of makes sense that the Government is recognising that there should be a threshold for the purchase of new assets. In fact, I think we learnt at the select committee that the Inland Revenue Department does not capitalise assets unless they are over $2,000 purchase price, for some reason or other. I am not sure, but my notes from the select committee meeting suggested that. So it is recognised that there should be a threshold for purchasing new assets. What we are saying here is that this is a chance to establish a threshold—albeit a very low one—for assets as they depreciate on a percentage basis so that one can get them off the asset register so that it can become a more meaningful document that is of value to a business in managing its asset base. So, technically, I accept that my amendment may not be within the Standing Orders, because it has fiscal implications and was not submitted 24 hours in advance, but it is a simple, practical measure with very low fiscal cost that could have real meaning for smaller businesses.

Dunne Hon PETER DUNNE (Minister of Revenue) Link to this

Very quickly in response I shall point out that the key point here is that the raft of changes being introduced by way of changes to depreciation rules are hugely significant and financially substantial. This package has an all up value of around $1 billion over the 4-year forecast period. So there is a huge shift and, frankly, a line has to be drawn at some point.

The member made a comment about the appropriate use of asset registers. The issue that then arises is what the best form of depreciation is to get those low-value items expensed quickly. With straight line depreciation, for instance, we do not need to have the item added to the register, and that has some attraction.

In conclusion, I make the point that I respect what the member is trying to do. The Minister of Finance and I have already had a brief discussion about that issue in a broader context. We will not move on the amendment this evening, but the points the member has raised are ones we are certainly happy to keep under review as the ongoing review of depreciation policy unfolds.

The point I want to stress is that there is a fiscal cost. The Crown is giving away a billion dollars over a 4-year period in these changes. The Crown is happy to concede that very significant, beneficial cost in the interests of this package—

Dunne Hon PETER DUNNE Link to this

It’s a very big tax cut.

The member is absolutely right, but the point is that at some point the line has to be drawn. Now the line has been drawn where it is at this stage, and is something that we will keep under active review. At some point in the future, if circumstances permit, then it can be addressed.

Foss CRAIG FOSS (National—Tukituki) Link to this

I would like to address a few more points, particularly in Part 2. First, I congratulate my colleague Mr Tisch on the awesome racing policy he formulated, which the National Party took into the election that resulted in our party’s vote going to 48 seats from 27 seats. Obviously, real New Zealanders out there appreciated that policy big time. Well done, I say to Mr Tisch.

I have a couple of points to make. One of the comments that has been made—and I guess I was guilty of this myself earlier—was we talked about the thrust of the bill being slightly business-friendly, as I have stated. Yes, that is true, but again, like so much of the Government’s nice intentions, etc., the implication and execution of this legislation has been absolutely lousy. I make an example of the change of commencement date for one of the most business-friendly parts that was publicised with this bill—that is, the combination of GST and provisional tax payments—from what was to be 1 April 2006 to 1 April 2007.

Someone from Deloitte Touche Tohmatsu made a comment in one of its tax news releases—and it is interesting that this House is now busy discussing this bill, which may well get through tonight, I suppose, on tenterhooks—to ask why, if the Government is business-friendly, businesses are having to suffer for 1 more year. The Minister of Revenue has announced the provision was to be delayed until 1 April 2007, but, in contrast, the Government was able to introduce the urgent measures bill on 8 November 2005 and have that legislation enacted before Christmas. That Act made good on election promises such as interest-free loans for student borrowers, amnesties, working families, etc. OK, those were election promises, bribes, or pledges—whatever one likes to call them—but the point is that the Government’s prioritisation is round the wrong way.

We are trying to grow New Zealand and add value, yet we can rush through zero percent interest on student loans. Yet another 365—

Foss CRAIG FOSS Link to this

I raise a point of order, Mr Chairperson. I know that those members have been here about 5 minutes, but they cannot talk about bribes. Members cannot get up in this House and accuse other parties of bribes. It might be a familiar conversation amongst themselves, but it is not with the rest of the House.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

I thank the member. I am sorry, I did not hear that. I was otherwise engaged. However, the member is completely right. Members must not make allegations of such nature. They can be taken as a personal reflection against a member. The member will withdraw and apologise, if that is the case.

I withdraw and apologise. I am sorry if I caused offence.

I was speaking on why this provision should be delayed 1 more year, from 1 April 2006 to 1 April 2007, when businesses out there are trying to plan and get their cash flows ready. Suddenly, when something nice and good was dangled in front of them, it has now been whipped away because another bill—which, I believe, in the greater scheme of things, is not really good for New Zealand—managed to be passed through in about a few weeks. The effects of the student loan bill, as opposed to this one, will not come into reality for quite some time.

Also, with regard to payroll agents, it will be the same thing. Yes, it is a good measure for businesses to be helped and to be able to write off contributions to payroll agents, especially once they will have to deal with yet another 346 pages of tax law—so they will have a big job in the future. But again, that change has been delayed until 1 October 2006, not 1 April 2006. Again, what was thrust out to be nice and business-friendly, has not come through.

In the second reading the other night I pointed out that the bill also touches on share lending, equity lending, or the repo market, and I would like to go on record as saying that, quite honestly, I am nervous about this move. Quite simply, yes, it is a step in the right direction, but what was thrown in the too-hard basket is, in fact, a part of the global financial market, which is massive and is a multiple of shares equity, rather than just on balance sheet items. I mentioned the other night derivatives and credit derivatives that are derived from share equities, etc. It is very technical stuff, I know, but I would like to note that members have to be very wary, because I have been told things can happen off the balance sheet—not just on the balance sheet—that various auditors and others look at.

I also note we are starting to look at addressing some research and development write-offs in this part, as a member commented before. Again, I would like to point out what we are up against when I keep saying that we are not being bold enough in New Zealand. We are tinkering here. The other day I heard that China is offering 150 percent research and development write-offs. I also heard that in Kuala Lumpur a business can go for 5 years without paying any tax on any research and development write-offs. I am not saying that New Zealand goes there right away, but that is what we are up against. That is why we have to be bolder and harder.

Peters Rt Hon WINSTON PETERS (Minister for Racing) Link to this

I seek leave for the amendments standing in the name of New Zealand First and my name to be taken as one question.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

Is there any objection to that course of action being taken? There is not.

The question was put that the amendments set out on Supplementary Order Paper 15 in the name of the Rt Hon Winston Peters to insert new clauses 49BA to 49BAD and new clause 76BA be agreed to.

Amendments agreed to.

The question was put that the following amendment in the name of Dr the Hon Lockwood Smith to Part 2 be agreed to:

to insert the following new clause:

56BAssets with very low tax values

(1)In section EE 32 the heading is replaced by “ Items no longer used or with very low tax values”.

(2)After section EE 32(1B), the following is inserted:

“(IC) This section applies when a person in an income year has an item of depreciable property that has an adjusted tax value at the start of the income year of $10 or less.”

A party vote was called for on the question that the amendment be agreed to.

Bennett DAVID BENNETT (National—Hamilton East) Link to this

I raise a point of order, Mr Chairperson. I understand that one of the rules we have been told of is that voting is to be held in absolute silence. The Minister of Foreign Affairs spoke out of turn during that vote.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

I thank the honourable member for drawing that to my attention. Members well know that under Speaker’s ruling 63/2: “No other comment at all is allowed.”

Peters Rt Hon WINSTON PETERS (Minister for Racing) Link to this

I raise a point of order, Mr Chairperson. You had not called for the vote from Mr Anderton’s party yet.

Robertson The CHAIRPERSON (H V Ross Robertson) Link to this

Yes, that has been done.