Addition to tax bill facing opposition

The Labour Party is opposing a batch of last minute add-ons to the already large Taxation (International Taxation, Life Insurance and Remedial Matters) Bill.

The bill is back in the House next week and the government has added a 52-page supplementary order paper (SOP) to the legislation, mostly covering issues which have arisen since the bill was introduced in July 2008.

These include:

• Allowing finance companies and other IFRS-reporting companies that enter into "workout" arrangements with their creditors to use the "yield to maturity" method so as to remove the volatility that IFRS financial reporting causes.
• Allowing companies to recognise, for tax purposes, hedges that are recognised only upon the preparation of consolidated financial statements.
• Allowing special-purpose vehicles that issue residential mortgage-backed securities to enable banks to borrow from the Reserve Bank to treat them as transparent for tax purposes.
• Include pandemics as a circumstance under which the Inland Revenue Department can remit use of money interest.
• Clarify the policy intent allowing life insurance companies to draw on refunds of overpaid tax in certain circumstances.

Labour has criticized the government for rushing through the bill, although it is supporting the legislation (which it, in any case, introduced when in government).

However, it will oppose the additions, with finance spokesman David Cunliffe saying they "add insult to injury".

"There are a number of substantive matters in there, including in particular the use of mortgage-backed securities and their tax consequences, information about which the select committee never received," he told the House.

"These things are not developed in a vacuum, nor are they developed in the few weeks between the deliberation on the main bill and the presentation of the supplementary order paper. I warrant that officials had these matters under consideration while they were briefing the select committee on the rest of the bill, but no mention was made that a 52-page supplementary order paper would be forthcoming.

"When the main bill is an incredibly truncated and complex process, that is simply inappropriate. We will be voting against this supplementary order paper, not primarily because of its substance but because of this terrible, terrible process."

Labour wants the SOP to be sent back to the select committee for further consultation and consideration.

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