I rise in support of this Taxation (Business Tax Measures) Bill. The ACT Party will be voting for this bill.
I will start by saying that this is the first experience I have had of sitting on a select committee—the Finance and Expenditure Committee—and speaking following its deliberations. I congratulate the chairmanship of Craig Foss and I also congratulate the bipartisan support that this bill has received from the Labour members on that committee, including the deputy chairman, David Cunliffe. I also acknowledge the support of the officials and, in particular, the submitters.
We received only six submissions, but one was a detailed submission from the Institute of Chartered Accountants of New Zealand. Members of the institute made an oral submission and, as a new member of Parliament, I noted that it reflected on the amount of work that these groups do for the good of the people of New Zealand. Only yesterday we heard submissions from a number of legal and accounting firms on the new international tax bill. Two of those submissions totalled 150 pages each. So a huge amount of work is done freely for the benefit of New Zealanders.
This bill makes a number of changes. It is designed to support small to medium sized businesses by easing the pressure of taxes on their cash flow and compliance costs. When the Minister of Justice was speaking on behalf of the Minister of Revenue, he outlined some of those changes, so I do not propose to go into them in a great deal of detail. But I will say that they lift the thresholds for a number of issues to do with GST and fringe benefit tax. For example, the threshold for having to register for GST is lifted from $40,000 to $60,000, which enables a number of smaller enterprises that might otherwise have had to register for GST and be subject to those compliance costs to be exempt. Similarly, larger organisations with a turnover in excess of $200,000 that might have had to file 2-monthly GST returns can now file their returns every 6 months, under the provisions of this bill, as long as their turnover is less than $500,000.
It was also interesting that we received during the course of the select committee submission process a very detailed submission on the taxation of patents. I think it is fair to say that it was not an issue that many members of the committee had given a great deal of thought to. Once again, that was a benefit of being involved in the process of hearing submissions.
In rising to speak on this bill, the deputy chairman of the select committee, the Hon David Cunliffe, talked about the deepening and worsening financial crisis that this country faces and about the fact that people fear the loss of their jobs. He noted that the Governor of the Reserve Bank reduced the official cash rate by 0.5 percent today, and he also said that the world was going backwards. The issues that David Cunliffe raised are all very true.
But I would comment that although this bill is aimed at small to medium sized businesses—and we heard earlier that the relief available under the 9-day working fortnight is available only to employers with more than 100 employees—another group in society is also very much affected by the recession the country is in. This group does not get a lot of air time in this country. This group is what I call the people who save. They are the people who save, who go out to do their work, and who, rather than spend $1.10 or $1.15 for every $1 they earn, spend 95c and put something away for saving. The issue of saving is very, very important. Although we always look to the lowering of the official cash rate, which has been good for those of us with mortgages, the reality is that it actually reduces the income of our savers. They are mainly, but not exclusively, elderly people. It is very easy to ignore the effect of a reduction in interest rates on those savers.
I stood in this House yesterday and said that I would raise at the Commerce Committee this morning the issue of an inquiry into the activities of various finance companies and into the issues associated with the failure of finance companies. I was very heartened to have the support of the chair of that committee, the Hon Lianne Dalziel, who said she has a very open mind on this issue. She has offered her assistance to me in drawing up a draft terms of reference for that inquiry, and I shall be very pleased to have her help. I should also say that I have the full support of the ACT caucus in calling for that inquiry.
My inquiry is made even more relevant by the submission given to the Commerce Committee this morning by Jane Diplock, the chairperson of the Securities Commission. Jane Diplock appeared before the committee during the course of the committee’s annual review of the commission’s activities, and she raised a number of issues of public policy. These are very serious issues, and I do not believe that they can be swept under the carpet. It is very easy to look at what will benefit small to medium sized businesses and at what will affect big business, but we cannot afford to forget the ordinary New Zealanders—the savers in society.
I will start by looking at the issue of trustees. For the benefit of members of the House, I inform them that a trust is a commercial relationship, if you like, between a trustee company or a trustee organisation and the directors or owners of a finance company. Jane Diplock pointed out that it is competitive; it is a business. We have seen over the last 3 or 4 years that trustee companies have been bidding against each other to get business. They have brought down their fees, they have offered to do the work for a lower and lower price to gain the business, and this has probably resulted in a lower quality of supervision of management. Jane Diplock pointed out that the trustees are not entitled to demand under the trust deed a number of things that they might like to do. Lianne Dalziel said that it was an issue of their own making because, when they enter into a contract with a finance company to provide a trustee relationship, they are negotiating a fee to do a certain package of duties, and that, therefore, they have brought this issue upon themselves.
Jane Diplock raised a number of issues of conflict of interest, which I thought were very interesting. If a finance company is likely to fail, or looks like it is close to failing, one option is for the trustee to appoint a receiver. If a receiver is appointed to the finance company, the receiver will go into that company and may find some failure on the part of the trustee. One of the receiver’s options is to bring a civil action against the trustee, because until recently no criminal proceedings could be brought against a trustee. There is a conflict of interest, because the receivers get their business from the trustees. Which receiver will dob in—to use Lianne Dalziel’s words—the trustee that is likely to give it its work?
We also have the issue of moratoria. Under a moratoria the company—
Hon Trevor Mallard: A moratorium.
JOHN BOSCAWEN: A moratorium—that is right; I thank Mr Mallard. Under a moratorium the company is kept running under its current management, and it is unlikely that the management will bring an action against the trustees. Once again, there is a conflict of interest. The trustees have motivation, if you like, to support a moratorium rather than a receivership, because, if there is a receivership, it lays open the opportunity for the receivers to make a challenge of that trustee.
The other issue that Jane Diplock referred to was related party transactions. She said that a finance company can put out a prospectus and call for funds, and as long as the prospectus meets the Securities Commission’s legal requirements, there is nothing the commission can do. The commission does not act as an arbiter on the quality of that prospectus. It does not act as referee. What has happened is that a number of finance companies have used money they had raised for purposes other than were laid out in their prospectus.
Finally, I also attended the briefing of the Governor of the Reserve Bank to the Finance and Expenditure Committee this afternoon. When asked, he made the point that when this country comes out of the recession, what will be important are savings. This country has relied on a bigger and bigger quantity of the cheap savings of foreigners, and we will need to save for ourselves. If we are to create a savings environment, then we need to look at why finance companies fail and at the conflicts of interest.
Insolvency Amendment Bill — First Reading 12 March 2009
It is 1 minute to 6pm, but let me very briefly say that the Minister of Commerce, Hon Simon Power, gave a very detailed summary of the Insolvency Amendment Bill’s provisions. He was followed by the Hon Lianne Dalziel giving her very detailed knowledge of the circumstances that gave rise to the original Insolvency Bill being passed just 2 years ago.
This is a bill that the ACT Party will be supporting for referral to the Commerce Committee. I do not propose to go into the details of the bill. But I would like to talk about the issues of insolvency and saving, because insolvency is an issue that I personally know something about.
Debate interrupted.