I would like to start by thanking the Minister for his comments of clarification in his earlier speech. As a new member to this House, the whole process of select committee consideration was an eye-opener to me. I acknowledge the bipartisan nature of the Finance and Expenditure Committee’s deliberation. I also acknowledge the cooperation of Mr Cunliffe and his team, and the chairmanship of Mr Foss.
I was intending to draw members’ attention to a paragraph in the commentary on the bill in relation to use-of-money interest deductibility. It states: “We are concerned that the existing legislation is not clear about the circumstances in which use-of-money interest is deductible. This uncertainty may cause some taxpayers to incur penalties for mistakenly claiming a deduction for use-of-money interest where it is in fact non-deductible.” In the course of the consideration, as a new member of Parliament, it was an eye-opener to me that Parliament would have these laws. We acknowledge the law, and we acknowledge that the law was uncertain. Members of the public and taxpayers could mistakenly pay their tax and be penalised. It is incumbent on us as lawmakers to pass laws that are certain, so people going about their lawful business can comply with them without fear of penalty.
The provisions of this bill are designed to assist small to medium sized businesses to trade in the current environment. We all know how difficult it is. The small to medium sized sector is very important to New Zealand, in just the same way as businesses in Auckland are. The point I was trying to make this afternoon is that it is very important to have a very efficient transport system in Auckland. The deputy leader of the Labour Party seemed to think that I was from Hawke’s Bay. Although it is a very wonderful part of the country—I had a business in Hawke’s Bay—I have long been a resident of Auckland. I grew up in Auckland. I said in my maiden speech that I am an old boy of Otahuhu College, and I am very proud of it. I am very much aware of the transport problems in Auckland. The deputy leader of the Labour Party clearly did not listen to my speech, because I acknowledged the work that had been done by Labour in the latter years of its 9-year term.
This bill is designed to assist small to medium sized businesses, as I said. It will lift the thresholds for the payment of PAYE, fringe benefit tax, and GST. It will also reduce the provisional tax uplift for provisional taxpayers. It makes provisions for the deduction of legal expenditure in certain circumstances, and it reduces the rates of interest due for underpayment of provisional tax. However, it is interesting that Mr Cunliffe said that the bill did not go far enough. Mr Nash talked about supporting the bill despite the fact that it is not perfect.
I think the real issue is the one that Mr Dunne raised. It is all very well to talk about bills not going far enough and asking where the National Party’s plan is. Mr Dunne talked about the real issue of how much revenue we can give up. The reality is that this Government finds itself in a position where it cannot give up revenue.
Mr Foss generously talked about the submissions that have been received from the three submitters, and, in particular, the submission from the New Zealand Council of Social Services. Its spokesperson Ros Rice appeared before the committee. The interesting thing about that submission is that the council is very concerned about the economy that this country faces right now. In fact, it suggested that far from reducing the rate of provisional tax uplift, the Government should actually reduce it below 100 percent. The council said that in its best estimate the average profits accruing to small business in the years ahead during this recession will be at best 80 percent of last year’s income—80 percent!
The New Zealand Council of Social Services was suggesting that in the calculation of provisional tax, taxpayers should be required to base their tax payments on only 80 percent of the previous year’s tax. We all know that we have the ability to estimate down or up, but if we estimate down and we make a mistake, then we are subject to penalties. One of the reasons that the select committee ruled out the lowering of the rate of provisional tax uplift from 100 percent down to 80 percent was simply that the country could not afford it.
I believe that one of the reasons the country is not in a position to afford it is the expenditure that was carried out by the previous Government, which has not been efficient expenditure. There has been a huge amount of money wasted, and I note the Green Party member spoke earlier about a national cycleway. The previous Government, less than a year ago, spent $1 billion buying KiwiRail, and that business has been written down to virtually nil.
The New Zealand Council of Social Services came to our committee and told us that the country was in recession and that small to medium sized businesses are hurting by the Government’s insistence that people pay their tax based on 100 percent of their previous year’s income. It said that the Government is taxing people too much and asked us for relief, but we are not in a position to be able to grant that submission.
The ACT Party will be supporting the bill. The bill could go further, but the current Government finds itself not in the position to be able to do so. Thank you, Mr Chairman.