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Taxation—Research and Development Question

Released By Bill English, MP



Taxation—Research and Development

1. Hon BILL ENGLISH (NZ National – Clutha Southland) to the Minister of Finance: Does he agree with the statement by the Prime Minister, on research and development, that “For the time being, the Treasury has gained the upper hand in scaring the pants off the Minister of Finance about the possible leakage to the revenue base…”?

Hon. Dr MICHAEL CULLEN (Minister of Finance): I have just checked, and as far as I can make out, I still have my pants on.
Hon. Bill English: How can anyone believe what the Minister says when his Prime Minister says the Government will look at tax deductibility the day after he has announced and defended a policy not to look at tax deductibility?

Hon. Dr MICHAEL CULLEN: The Prime Minister made that comment at lunchtime*, some hours after I made a very similar comment at the business breakfast that we were prepared to look again at the issue. If the member can come up with an answer as to how to solve the black hole* issue by not opening up an avoidance issue, he will win a prize I am prepared to offer.
Clayton Cosgrove: What was the Government’s advice from Treasury on the fiscal risk, and was it reflected by the *Inland Revenue Department?

Hon. Dr MICHAEL CULLEN: Both Treasury and the Inland Revenue Department advised very strongly that there was a significant fiscal risk associated with extending the present tax concession to all research and development expenditure. The leakage was estimated at between $100 million and $120 million a year.

Hon. Richard Prebble: Does the Minister believe that the Prime Minister was showing support for him and his Budget when she said: “For the time being, Treasury has gained the upper hand in scaring the pants off the Minister of Finance about the possible leakage to the revenue base…”, and if he does believe that she is showing a lack of support, is that why she has moved to the back and will not sit beside him?

Hon. Dr MICHAEL CULLEN: It may be because she is afraid that I have not got my pants on!


Continuation Line [Peters: Putting aside the concern about possible fiscal risks]

Rt Hon. Winston Peters: Putting aside the concern about possible fiscal risks, when will this Government act on the known perils to the revenue occasioned by the court case late last year in respect of the wine box*.

Mr SPEAKER: That is not to do with this particular question.
(A point of order follows)
Hon. Bill English: If, on Friday, the Government did have its pants scared off and it wanted to look at tax deductibility, why was that not the case on Thursday when it announced in the Budget that it would not do that?

Hon. Dr MICHAEL CULLEN: I am growing increasingly concerned at the member’s worry about the state of my legs and my underwear. I point out to him that that particular part of the Prime Minister’s speech on that matter was drafted by me.

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