IAIN LEES-GALLOWAY (Labour—Palmerston North) : In 1 minute, what can I achieve? Last night I was talking about clause 4 of the Misuse of Drugs Amendment Bill, and about the fact that Labour has some concerns about clause 4. We will seek to have that clause removed from the bill when we get to the Committee stage. The guts of our concern is that it does nothing to reduce harm. In fact, the submissions we heard on the Health Committee said that by broadening out the definition of utensils and including the components of drug utensils, we will actually increase the amount of harm as people seek alternatives to those utensils, or, in fact, do not use utensils at all, given that the purpose of those utensils is to assist in reducing harm. In summary, although the Labour Party supports this bill, we think the time for tinkering with the Misuse of Drugs Act is over. We would like to see real change and new legislation on the control of drugs in New Zealand.

Dr PAUL HUTCHISON (National—Hunua) : Thank you for the opportunity to speak on the Misuse of Drugs Amendment Bill, which is highly important. This bill is part of the Government’s war against amphetamine, and part of a five-part plan. As the Law Commission pointed out in its very worthwhile review of the Misuse of Drugs Act 1975, unfortunately there are no silver bullets. It is important that the issues relating to banning drug utensils do not distract from the major thrust of this bill, which is to restrict access to the precursor chemicals that pure methamphetamine is made from. The bill will reclassify both ephedrine and pseudoephedrine as class B2 controlled drugs, and establish the presumption of supply at 10 grams.

Everybody in this House knows something of the horrors of P, or pure methamphetamine. It is highly addictive, it is associated with gang activity, and it can ruin young lives. Pure methamphetamine undoubtedly affects every stratum of New Zealand society, and, certainly, it costs. The Business and Economic Research study estimated the cost to New Zealand of drugs other than alcohol to be about $1.58 billion, and the accounts were that $1 billion was attributed to methamphetamine.

Over the last 2 years in Pukekohe, part of the area I represent, the community was absolutely stunned and shaken when an elder statesman chemist—he was also an elder of the Presbyterian Church and a Rotarian—was convicted of dealing in precursors of pure methamphetamine. As to whether he was coerced by gangs, nobody really knows what the circumstances were, but it illustrates very much that every stratum of New Zealand society can be involved in drugs, however unexpected. Local police tell me that anywhere in the vast rural electorate of Hunua, which I represent, within 10 kilometres one could probably find a clandestine laboratory. Of course we have heard many stories of explosions from these clan-labs. In fact, there was one in Glenbrook, in my electorate, just some months ago, with a loss of life.

The Health Committee worked collaboratively and well on this bill, but there were differences of opinion relating to drug utensils and their parts. But I emphasise that the major thrust of this bill is to restrict methamphetamine precursors. We were informed by the Chief Science Advisor’s report that at least 10 percent of pure methamphetamine in New Zealand had its source from precursors obtained within New Zealand. The police, however, gave a much higher estimation that something like 30 percent of precursors from cold and cough mixtures, etc. were found when they busted the clan-labs around New Zealand.

Sir Peter Gluckman told us that there were safe and effective alternatives to pseudoephedrine. Phenylephrine is a safe alternative. Anecdotal evidence suggests it might not be quite as good, and I would concur personally with that. However, there is no doubt in my mind that the overwhelming view of the Government is correct, that placing restrictions on these precursors is absolutely justified. The Pharmaceutical Society of New Zealand submitted that there might be options other than restricting it to doctors’ prescriptions only but, again, I reiterate that I think that the Government’s policy is absolutely appropriate.

An 8-year jail term is brought in once the drugs are reclassified as class B drugs, and this shows the absolute importance with which the Government regards the restriction of these drugs. We were told that packets of cold and flu remedies containing pseudoephedrine can have up to 1.44 grams of active ingredient, but that the more common types have much less than that. Even at the higher levels, a presumption of supply of 10 grams would allow about seven boxes of pseudoephedrine tablets, so it is a fair amount.

Another important point is that the Attorney-General’s report states that the bill contravenes section 5 of the New Zealand Bill of Rights Act. He cites the New Zealand Supreme Court in R v Hansen, and states that “The majority in Hansen concluded that the control of the supply of illegal drugs is a pressing social objective which might justify limitations on rights and freedoms affirmed in the Bill of Rights Act.” Accordingly, the Attorney-General stated: “I have concluded that the Bill’s objective is sufficiently important and significant.”

The issues relating to restricting further the importation of incomplete utensils and their parts, and banning their advertising, were controversial, and there were many submissions against those being enforced. There was a fear that these legislative changes would drive underground the trade in these utensils, and that unsuitable substitutes could easily be made. I took the trouble to visit the Hemp Store Aotearoa in Auckland, and I must admit that I was amazed at the variety of drug utensils and paraphernalia that were available there. In my discussions with the manager of that store, Chris Fowlie, he made the point that a change in law would be hard to police. However, both the police themselves and customs officials were absolutely adamant that such moves as those in this bill will assist them in enforcing our drug laws and in tracking down illegal importations. It is also important to mention the Law Commission’s report Controlling and Regulating Drugs. This is an incredibly important body of work that needs serious review for the future.

We have to look at better rehabilitation in New Zealand, at the minimisation of harms, and at prevention, but we must have clear messages in our fight to stop the use of illegal drugs in New Zealand. I am sure that everyone in this House will welcome the Hon Peter Dunne’s announcement last night that he will introduce a Supplementary Order Paper at the Committee stage to deal with synthetic cannabinoids. I know that thousands of parents up and down the country will breathe a sigh of relief when the ever-expanding range of synthetic cannabinoids is banned from being sold in corner dairies.

The manufacturers of these drugs are cunning, intelligent, and ruthless. Manufacturers such as Matt Bowden, who has appeared before the Health Committee, seem to have little regard for the serious harm they are causing, but lots of regard for the money they are making. The criminals and business people behind the drug trade are utterly ruthless and will stop at nothing. It is very important to counteract their influence with clear legislation such as the provisions contained within this bill. I look forward to the Committee stage.

KRIS FAAFOI (Labour—Mana) : Labour supports this Misuse of Drugs Amendment Bill, but, as the member speaking before me, Dr Paul Hutchison, mentioned, we have some differences of opinion about some of its aspects. Dr Hutchison claimed that this legislation was part of National’s war on P. I think that it is more of a skirmish with P, to be fair, because we on this side of the House do not think that this bill will be effective in making sure we reduce the harm of P and other drugs in our society. As I say, Labour supports this bill. However, we remain concerned that, as it stands now, it will not achieve the aims of reducing the accessibility of P and reducing drug-related harm. The purpose of the bill, as it is set out now, is to reclassify ephedrine and pseudoephedrine as class B2 controlled drugs, to remove thalidomide’s classification as a class A drug—and why it was there as a class A drug in the first instance I do not know—to allow hazardous substances to be scheduled as restricted substances, to extend the definition of amphetamine analogues, and to extend controls over drug paraphernalia. As I mentioned earlier in my contribution, we have a difference of opinion with the Government in respect of controls over drug paraphernalia.

As I said, we do not believe that this legislation will reduce harm in terms of the over-the-counter pseudoephedrine accessibility for Kiwis. In a cost of living sense, we do not think that enough work has been done by the Ministry of Health or the Government to discover what kind of financial impact it will have on the public or on the workload of general practitioners. Those who are after a stronger drug when they get their winter ills will now have to go through their general practitioners to access pseudoephedrine. We all know just how flat out our general practitioners are at the moment, so we do not think that enough work has been done on the cost to go to general practitioners and the demands on them. We still think that that is still a very live issue.

Overall, we believe that this legislation is an example of a bit of a smoke-and-mirrors approach from the Government. As I have already mentioned, Dr Paul Hutchison said that this bill is part of National’s war on drugs and part of its five-pronged approach in the war against P. Although the Government is talking tough, we do not actually think that this bill backs up the rhetoric. We believe that talking tough and taking some action is a lot different from talking tough and taking effective action. But, as we have said, taking some action is better than taking no action, and that is why we are supporting this bill. We are trying to be helpful, so we are supporting this bill. To a degree this bill is window dressing, and many others agree with us that it will not achieve the aims and purpose that it sets out to achieve. As I said, there are five prongs in the war on drugs.

A number of institutions and organisations that gave submissions during the Health Committee process did not believe that the rhetoric matched the provisions in the bill. One submission was from the New Zealand Nurses Organisation, by policy analyst Marilyn Head. In the organisation’s submission to the Health Committee, it was stated: “we strongly suggest that all of these measures some of which will require more police monitoring and all of which will result in increased prosecutions and imprisonment will make very little difference to the significant number of people afflicted with drug addictions and substance abuse. Dealing with the misuse of drugs requires good, consistent, evidence-based education; having a scientifically-based Misuse of Drugs Act; and improving access to harm reduction treatments. Currently”—and this is the most damning part of this submission—“we seem to be moving, against the evidence, in the opposite direction on all counts. We do not anticipate this Bill can or will address the fundamental issues causing the misuse of drugs.” That submission is pretty damning, and it is supportive of the position of this side of the House that in terms of effectiveness, this bill, as it stands now, does not quite cut the mustard.

There were other submissions, including a submission from the New Zealand Drug Foundation. Its very outspoken executive director, Ross Bell, said in his submission to the Health Committee that the foundation believed that it was likely that the measures in the bill would “achieve positive results in the short term. However research from the United States indicates that the impact of precursor regulation on its own is temporary. After initial decreases, rates of hospital admissions and arrests rebounded in the months and years after regulations took effect. This pattern was reliably repeated over three phases of precursor regulation,”. So there we have another submission to the Health Committee that concurs with the belief on this side of the House that this bill does not go far enough, despite the rhetoric we have had from the Government.

Ross Bell did not stop there, and we have a Supplementary Order Paper to clause 4 that my colleague Iain Lees-Galloway has introduced, which concerns tighter control of the importation of drug utensils. Mr Bell said that this would be ineffective and that the Drug Foundation has some reservations with the proposed legislation for tighter control of the importation of some of these utensils. The first concern was the fact that the Law Commission review was still under way and that it was premature to make such a move. The second and more practical concern from the Drug Foundation was the potential for the criminalisation of these pipes and utensils to increase the risks of drug-related harm to cannabis smokers. The Drug Foundation and Ross went on to say: “Water pipes and vaporisers reduce the risks of respiratory disease from the inhalation of cannabis smoke.” The foundation was of the opinion that further tightening of the laws on pipes and utensils could close the door on interventions that could reduce harm. They believe that taking the action set out in clause 4 could cause more harm to those who are using these pipes and utensils at the moment to use drugs.

Later on in his submission, Mr Bell said—again, damningly against the general thrust of this bill—that “the Drug Foundation believes that the proposed provisions are largely symbolic and unlikely to have any impact on actual rates of cannabis use, and are more likely to increase drug harms than reduce them.” There we go; that is another opinion from an organisation that made a submission to the Health Committee that this bill does not go far enough, and in some places is a little premature in respect of clause 4. A trader who sells these pipes and utensils shared similar concerns to the Drug Foundation. He went on to say that pipes allow the legal herb user to place a safer distance between himself and burning the legal herb, which, in the manner of one smoking pipe, allows the harmful tar to be in the bowl and stem before reaching the user’s lungs. The thrust of his submission in respect of clause 4 is that fools rush into that area.

As I say, Labour supports the general thrust of the bill, but we are concerned that it will not achieve its general purpose. We believe there is no merit in placing further restrictions on these drug utensils when there is no evidence base for it. In terms of the cost of living, not enough work has been done by the Ministry of Health on the impact on those who are struggling to make ends meet. People who find themselves in need of pseudoephedrine will be negatively impacted when they need to visit their general practitioner to get hold of these drugs.

I conclude by saying that this is another example of the Government trying to sell legislation as being tough, but it does not have the teeth to set out what it promises to achieve. We can call it what we like—window dressing or smoke and mirrors. It is another instance where this National Government has talked the talk with the slogans, with the war on P, and with the five prongs, but it has failed to walk the walk. It has done that on jobs, it has done that on GST, it has done that on KiwiSaver, and it has done that on asset sales, with the suggestion that mum and dad investors will be the first ones in the queue and that the shares will stay with mum and dad investors as we go forward. Unfortunately, methamphetamine and P is a serious issue. The Government has promised one thing, but delivered another. Thank you.

KEVIN HAGUE (Green) : Tēnā koe, Mr Assistant Speaker Robertson. Nga mihi nui ki a koe me te Whare hoki. I want to begin in the usual way by thanking officials from the Ministry of Health who worked with the Health Committee on consideration of the Misuse of Drugs Amendment Bill, officials from the Office of the Clerk who serviced the select committee, and officials from the Parliamentary Counsel Office. I acknowledge the very many thoughtful submissions that the select committee received, and I also acknowledge the non-partisan way in which the select committee went about its work.

It would be great, would it not, if we were able to have a cross-party approach to dealing with drug issues. It seemed to me, from time to time on the select committee, that we were not far away from that. So it is sad in some ways that in this debate I need to speak in opposition to the bill. That is because of two clauses. I also want to comment on the indication that the Minister, the Hon Peter Dunne, gave last evening about his intention to introduce a Supplementary Order Paper in the Committee stage.

The first issue I want to draw attention to—and it will be no surprise to the House because many speakers have referred to this provision—is clause 4, which sets out to increase the range of offences associated with utensils. It extends the range of items in relation to which offences exist, and it extends the range of offences themselves. In particular, there is the worrying extension of the definition of “utensil” to include “identifiable component of a pipe or other utensil”.

The Health Committee received no evidence that the changes that this clause would bring about would reduce drug use at all. Instead, we received many submissions to the effect that harm would be caused. We heard that the new provisions would not reduce drug use. We heard that the utensils provisions might provide a minor inconvenience to those importing and selling them but that they would be very likely to respond in short order with small changes of behaviour that would evade the new law, with the result that we would be no further ahead. The utensils provisions are also likely to be applied unevenly, based on assumptions about intent.

Some very interesting submissions were made to the committee. They demonstrated that plumbing fittings could be used in drug-taking utensils, so the enforcement of the law would require enforcement officers to make judgment calls about the intended use. That seems to me to be an inappropriate way of going about making law. The potential for this same behaviour to be legal or illegal, depending on who does it, suggests strongly that the law has been miscast.

As my colleague Kris Faafoi has pointed out, the select committee heard from the Drug Foundation and many others that the use of utensils typically reduces the amount of harm associated with drug use, and, therefore, provisions in law that reduce the ability of cannabis smokers to use such utensils may well result in increased harm.

In summary, I say that the provisions seem unlikely to achieve anything useful. Indeed, they seem somewhat likely to increase the harm associated with drug taking. They also seem to be an unhelpful distraction from the Law Commission’s report. They seem to be tinkering around the edges of New Zealand’s drug laws at a time when the Law Commission has been undertaking a major review of New Zealand’s drug laws and making a comprehensive set of recommendations to this House. Why on earth are we making this small tinkering change when we have before us something that would be a very productive use of this House’s time?

Clause 6 has also attracted much debate. This is the clause that sets out to reclassify ephedrine and pseudoephedrine as class B2 drugs, meaning that medicines containing those substances could be supplied only with a prescription from a doctor. There seems no reason to oppose the reclassification of ephedrine. We were told that this drug essentially has no therapeutic value, or almost no therapeutic value. On the other hand, pseudoephedrine is widely used, and it is probably used by members of this House. It has therapeutic value for many people.

The select committee asked for, but could not be given, any evidence of the extent to which pseudoephedrine purchased from retail pharmacies has been used for methamphetamine manufacture. The closest we got to it was Sir Peter Gluckman’s educated guess, I suppose. None the less, the Green Party accepts that this source does play a role in the manufacture of methamphetamine.

However, we are persuaded by the evidence received from the Pharmaceutical Society of New Zealand—and members should remember that this organisation represents the professional expertise and interests of pharmacists—which told us that alternatives to pseudoephedrine were not as effective. Indeed, it challenged members of the select committee who had used the alternatives to pseudoephedrine to contradict it, if we wished to, but not one member of the select committee did so.

The universal experience, I think, is that these alternatives do not work as well as pseudoephedrine. So the change that is contemplated in this bill will represent a substantial reduction in the effectiveness of the therapeutic value that New Zealanders across the board gain from the availability of this drug.

The bill would require people with infectious diseases to visit their general practitioners in large numbers in order to get access to effective treatment, with the result that many more of these diseases will be passed on, and there will be more morbidity and more sickness. That seems to us to be a disproportionate harm. The Pharmaceutical Society offered several alternatives, which would stop pseudoephedrine-containing medicines being available over the counter but allow them to be available from pharmacies without the need for a prescription. That, certainly, seems to be the more sensible way to proceed.

Lastly, I come to the Supplementary Order Paper that the Minister gave notice of during his contribution yesterday in respect of synthetic cannabinoids and related herbal highs. Most New Zealanders would share the Minister’s concerns about these drugs, but we want to draw attention to the fact that the Supplementary Order Paper the Minister proposes has not been put in front of the New Zealand public for submissions, and represents a very substantial departure from the scope of this bill.

We believe that the correct approach—and I challenge the Minister to do this now—is for the Minister to table his Supplementary Order Paper today and move that it be referred back to the select committee so that submissions from the public and interested parties can be sought. Before this bill comes back to the House, in, essentially, 3 weeks’ time, there is time for a public process that would enable the public to have its say.

It seems to us to be bad lawmaking for the Supplementary Order Paper to be put forward during the Committee stage and for the public to be excluded from a debate on those provisions. When people had the opportunity to make submissions earlier, they could not possibly have imagined that the provisions in the Supplementary Order Paper would be in the bill that went forward to its third reading. In summary, I say that we oppose this bill’s second reading. We invite the Minister to make those changes and table his Supplementary Order Paper today.

RAHUI KATENE (Māori Party—Te Tai Tonga) : Tēnā koe. The Misuse of Drugs Amendment Bill is one that the Māori Party feels extremely strongly about, and it is timely that it is being debated on the same day that another harmful drug of choice is being debated—that is, tobacco. The Māori Party promotes Whānau Ora as the way forward to achieving a future where whānau determine what is in their best interests. Quite simply, addiction and the misuse of drugs are not part of that pathway. Controlling the supply of illegal drugs is an important and significant objective, and an objective that the Māori Party fully accepts. The production of, and addiction to, drugs are accepted as not being in the best interests of Māori.

Apparently, the Prime Minister’s Chief Science Advisor, Professor Sir Peter Gluckman, has estimated that the value of the methamphetamine market in New Zealand is about $1 billion per annum. At least 10 percent of this amount is derived from domestically diverted pseudoephedrine. But, of course, the greatest cost is the loss of human potential. I remember a case in April 2010 when a Taranaki P dealer handed himself into police and asked to be charged. He was desperate to get away from what he had been involved in, and his desperate action indicates that, like cigarette smokers, people addicted to P more than likely want to quit but find it hard to do so, due to physical withdrawals. This case and so many of the tragic situations that we hear of where whānau have been held to account by the impact of illegal drugs have motivated us to really consider carefully the type of bold response we need to take to P—as we have done with cigarettes—given the uniqueness of the problem and its effects on whānau.

Bulk quantities of pseudoephedrine are now being intercepted in much larger volumes. They are hidden in furniture in cargo ship containers, instead of other small-time methods. We can all recall different stories we have been told of drug hawks standing outside chemists and paying elderly women up to $100 to buy them a few boxes of Coldrex, such is the grip of the addiction.

So it is not a question of whether we should or should not do something. It is a question of what we can do, what strategies we can introduce, and what support we can provide within our families to keep our families drug-free. But in the interim we support the passage of this legislation to prohibit the importation of controlled drugs. We do, however, question the validity of passing an amendment to the Misuse of Drugs Act while the Law Commission is carrying out a wide-ranging review of that Act. It seems to us that the most sensible course of action would be to hold a comprehensive review, which takes all issues into account and scopes out a long pathway ahead, and then we look at the law.

At the end of the day, doing something about drug abuse is in line with the Māori Party’s respect for mana whakapapa. Too many young Māori lives have been destroyed by P. This bill supports the strengthening of whakapapa lines. We support whānau-focused drug education, whānau-focused drug addiction, recovery, and restoration services, and we support any initiatives that will act to reduce the availability of methamphetamine or drug-related harm. To this end, the Māori Party stands in support of this bill.

NICKY WAGNER (National) : I rise to support the Misuse of Drugs Amendment Bill at its second reading. This bill deals with a series of issues to amend existing legislation and to improve the effectiveness of drug control. Its main provisions are to deal with the control of ephedrine and pseudoephedrine, and to increase controls on the sale of drug paraphernalia. It also reclassifies thalidomide so that it can be controlled under the Medicines Act, and it allows hazardous substances to be restricted substances, which will assist with the continued control of low-risk psychoactive substances, such as party pills, as restricted substances.

Many New Zealanders are concerned about the use of illicit drugs in our communities. They are particularly concerned about methamphetamine, commonly known as P. For some reason, New Zealanders have been particularly taken with P. We have one of the highest percentages of P users in the world, and the Prime Minister and the National Government have been focusing on combating this addiction. This bill is just another step towards controlling the supply of that drug.

The bill is designed to close off the source of precursor substances for the local manufacturing of methamphetamine. Ephedrine and pseudoephedrine are the active ingredients used in the manufacture of P. Currently, they are available over the counter in cold and flu remedies from pharmacies. We have all heard of the big buy-ups of these products for drug production. The police estimate that up to one-third of methamphetamine produced in New Zealand comes from these previously legal products. The bill reclassifies both ephedrine and pseudoephedrine so that they will no longer be easily available. But they will not be prohibited; patients will still able to obtain them by prescription.

The bill also increases controls on the sale of drug paraphernalia. That is a difficult area to control, because common tools and implements can be used for drug taking, and some loopholes in the past have allowed the utensils to be imported in a knock-down format to be reassembled in this country. This amendment has been carefully worded, and will help to minimise the availability and the visibility of drug-taking paraphernalia.

Finally, I will talk a little bit about broadening the definition of amphetamine analogues, a provision designed to control by default a wider range of emerging designer drugs. We are all aware of the new psychoactive substances coming on to the market, and we want to be proactive in dealing with these products before they do harm. This is a first step towards the better control of products such as Kronic, but more work needs to be done in this area in the future. I commend this bill to the House.

LOUISA WALL (Labour) : Tēnā koe. Kia ora. It is my pleasure to stand in support of the Misuse of Drugs Amendment Bill. At the beginning of my speech I will highlight the Law Commission review. The commission comprehensively reviewed the misuse of drugs and concluded by saying that “the most fundamental issue with the Act is that it seems poorly aligned with New Zealand’s current drug policy based on the principle of harm minimisation.” I highlight that we have had a comprehensive review and this was one of the critical findings of the Law Commission’s report. The other thing the commission concluded was that “We think that these changes can only be effected by a completely new Act and the repeal of the existing Act is therefore necessary. A key issue … is how any new legislative framework might better support the pillars of demand reduction and problem limitation in drug policy.” As a party we very much concur with the Law Commission’s position. We support this bill, but we remain concerned that the bill as written will not achieve the aims of reducing the availability of methamphetamine or reducing drug-related harm.

I did not have the pleasure of sitting on the Health Committee and hearing submissions on the bill, but I want to highlight, given the purposes of the bill—I will not read through them again—and linger on the point of extended controls over drug paraphernalia. I highlight that the select committee reported that “Most of the submissions we received expressed opposition to the proposed amendment to the utensils provision. Many argued that prohibiting drug utensils would be ineffective and would increase the harm suffered by drug users because they would make their own utensils or would buy them illegally.”

I highlight at this point in time the fact that my colleague Iain Lees-Galloway signalled when he spoke on this bill earlier that we will be putting forward an amendment to have clause 4 removed from this legislation. Clause 4 relates to drug utensils. From the information I have, no submitter at the Health Committee said that this particular provision of the bill would achieve anything. In fact, we heard that potentially we would see an increase in harm caused by people using ad hoc replacements. I think we need to take this seriously. As such, we are going to put forward our own amendment to that effect.

It was very interesting to have an opportunity to speak on this particular bill. I decided to go to the Law Commission as a source of information because I had not been involved in the select committee process. What I find really interesting is that overwhelmingly there is clear evidence that we have a problem in New Zealand. In 2001 and 2003 a New Zealand national household survey looked at amphetamine and methamphetamine use. After cannabis, it was the second most widely used illegal drug in New Zealand. So we know we have a problem.

In 2001, 5 percent of New Zealanders who responded to this survey said they had used methamphetamine during the previous year. This definitely concurs with international trends about the prevalence of such use, which really started in the late 1990s. The Law Commission reported that “overall levels of use of psychoactive substances are significant … and that overall the proportion of the population using drugs is not really changing.” From one level we have to do something that will reduce the use of drugs, but on another level we have to look at how we reduce the harm for people who use drugs.

There is general agreement from everybody that we have a drug problem in New Zealand, but, as has been stated quite clearly, we do not believe that this ad hoc manner of amendments over consecutive years to this particular legislation will achieve much at all. As I said earlier, we concur with the Law Commission report that there should be an overhaul of this entire misuse of drugs legislation.

The other aspects I want to highlight are the continual amendments to the Misuse of Drugs Act, which was first enacted in 1975. It has been really interesting going through the different changes that happened in 1978. Of note was a provision that authorised the detention of a person for up to 21 days without being charged where there was reason to believe that that person had concealed a class A or B drug. In 1988, for example, the possession of needles and syringes that had been obtained through authorised needle exchange programmes was permitted. At that time that amendment was to try to reduce the risk of blood-borne infection from dirty or shared needles within the context of a concern over the risk of the HIV virus spreading among intravenous drug users. As we have seen, historically we have been concerned about harm minimisation within the context of the evolution of this bill.

The Law Commission itself was very clear that our approach to various drugs is inextricably linked to our history and our culture, and our regulatory framework for psychoactive substances must recognise political and social realities. I guess one of those realities we are facing today is the creation and development of analogues or products such as Kronic, which through whatever means are deemed to be legal within the context of that commodity and are able to be purchased publicly. We are now looking at how those substances engage and interact in a society where our young people are at huge risk.

It is timely we have an opportunity yet again to look at the Misuse of Drugs Act, but I contend, as my colleagues have contended previously, that we should not do it in this band-aid, ad hoc way; we should do it in a comprehensive way. It is good that some measures within this bill will address some of the issues we have in terms of the provision of drugs. But we contend that unless we have a comprehensive overview we will not address much at all.

I really do not have much more to add, other than to congratulate all the people who participated in the democratic process and submitted on this bill. I know we must see this issue within the context of substances that people are using today because they have problems in their lives. I think it is very important that we continue to put drugs on the agenda, particularly for our young people. I look forward to the continued debate on this legislation, and I thank you very much for the opportunity to speak on this bill.

CHRIS AUCHINVOLE (National—West Coast - Tasman) : I rise to speak on the Misuse of Drugs Amendment Bill. We used to be taught that the root of all evil was money, but I honestly think that nowadays there would be a general consensus that the root of all evil, particularly in this country, is drugs.

I will speak first on the horrors of P. Like the previous speaker, Louisa Wall, whom I listened to carefully, I did not have the opportunity to serve on the Health Committee, so I missed the very significant submissions that were made, but I have caught up with some of them through the system. I will be taking only a short call, but its brevity should not in any way indicate a lack of commitment or interest. We know about the horrors of P, a highly addictive drug. It is gang-related in its distribution, and thereby the evil starts. The cost to New Zealand is, I understand, estimated to be $1 billion in turnover. We heard from earlier speakers that this particular plague affects all stratas of New Zealand society.

Hon Phil Heatley: Stratae.

CHRIS AUCHINVOLE: It is “stratae” according to my colleague, who is helping me with my Latin.

Hon Members: Strata.

CHRIS AUCHINVOLE: Yes, I think it is strata. Let us just say that it affects every part of New Zealand society, and that is the worst thing. Having been so proud that New Zealand is free from all sorts of bribery and corruption, I remember hearing that in terms of drug dealing, someone could be offered a year’s salary to shut his or her eyes to malpractice and bad practice. So it is very hard to think that this evil cannot penetrate everywhere.

This bill seeks to restrict the methamphetamine precursors. The police estimate that 30 percent of P in New Zealand comes from those. Professor Gluckman states evidence showing that a safe alternative, phenylephrine, is already used in up to three-quarters of cold and flu medication. I remember that when this whole business started there was concern that we would be taking cold medicines, and others, off the shelves. It will not be necessary to remove these medications. The bill will change only their manufacture, which will be a good thing if it curtails the opportunity of these P lab producers. The offence carries an 8-year jail sentence, and that demonstrates that the issue is not being taken lightly by this Government. I was so proud when the Prime Minister announced that we would be declaring what amounts to a state of war against people who peddle these things, as we go about protecting the innocent, the easily led, the improvident, and the sad cases of the already addicted.

Under this legislation we also look to introduce better rehabilitation, and that is a necessary part of helping those who have already fallen into this difficult, difficult cycle. I personally have no experience of drugs, at all, beyond tobacco and alcohol. I have, though, a sense of sorrow—

Simon Bridges: This isn’t a counselling service.

CHRIS AUCHINVOLE: No, no—but I have not had that experience, and that is just by chance. But I do have absolute sorrow and sympathy for people who are addicted, and I have nothing but contempt and disgust for those involved in transacting the sale of drugs. They should feel the full force of the law. Thank you.

JACINDA ARDERN (Labour) : It is my pleasure to speak on the Misuse of Drugs Amendment Bill. I endorse the comments that have been made by some of my colleagues, and I would hope that as a consequence of those comments, no one would be left in any doubt that of course the Labour Party has seen the scourge on our communities that P represents, as do many other forms of drugs, some of which are more socially acceptable than others. But I will come to that.

First, I will say that as I was listening to some of the other speakers I was recalling the first time I heard a discussion or any presentation on the issue of P. It might have been as far back as 2003 that I went to a presentation by, I think, either a drugs specialist or a law enforcement officer from Hawaii. He had come to New Zealand to talk especially about what was then a new drug. He came to New Zealand before the issues with regard to this particular drug were really in the public consciousness—actually, it might have been in 2002, now that I think about it. His warning to us was that Hawaii, probably much like New Zealand, had not experienced the same level of issues with other drugs like, for instance, heroin. The nature of our borders meant that we were able to protect ourselves much more from the trafficking of such illicit drugs, but the ability to manufacture drugs like P within our borders, almost anywhere if the right products were available, made this drug particularly difficult to control. The second issue that the presenter highlighted was that this kind of drug would have such an impact in terms of social and community harm. It obviously struck me, because I remember it to this day.

No one here denies the issue that P represents for our communities, but the debate then comes down to what we do about it. Some of the issues about P have been raised in the House today, and I would not want there to be any doubt in anyone’s mind that of course we wish to combat this drug in every way we can, but we want to do it effectively. With some of the questions that we have been raising, we have been asking—and rightly so—whether we have been targeting our energies in the best way possible. One of the issues we have raised relates to the measures around the sale of pseudoephedrine, in particular, over a pharmacy counter and whether those measures will have the impact that is needed in order to stop the proliferation of P. That is one of the issues we wanted to raise.

Another significant issue for us is that if we look across the board at the way we have been approaching the control of drugs across the spectrum within New Zealand, we wonder whether it is time for us to take a much more comprehensive approach to the way we control drugs. This is not a debate that is happening only here or that we are urging to happen here; it is happening at a global level.

Not all that long ago the United Nations commissioned and produced a report on the global trade, criminalisation, and classification of drugs. As I recall, one member of the commission was Georgios Papandreou. He is, of course, the much embattled leader of Greece. I have worked with him in another capacity, and he is a very thoughtful and intelligent man. A range of individuals and politicians from countries we associate with drug issues, rightly or wrongly, were also members of the commission, and the conclusions they came to were bold. They suggested that we have perhaps in the past targeted the wrong people, and that was their view in the way we dealt with Afghanistan, in particular. But the commission also called on countries to review their own legislation as to whether we were over-criminalising for drugs that were not having the same level of social harm, and whether, as a consequence of that over-criminalisation, we were creating our own social harm by institutionalising prison within some of those communities. That is a big issue, and we have denied that issue for a long time.

I heard one of the most shocking statistics that I have heard in my political career recently, and it came from Kim Workman from Rethinking Crime and Punishment. He had questioned the number himself because it was so high. He said that 40 percent of our 15-year-old - plus Māori males have experienced either a form of community detention or prison—40 percent. That is a travesty and a shame on New Zealand. I would be incredibly interested to know how many of those offences are for what we would probably classify as low-level drug offences. I would be really interested to know that. Is it society’s expectation that that is the kind of statistic we want to be dealing with?

I think it is time for Parliament to be bold, and the Law Commission has provided us with the perfect opportunity to do that. The UN has started it and the Law Commission has done so, as well, with its report on controlling and regulating drugs. It is an excellent starting point for us as a Parliament to review the classification of drugs across the board. But I would also say that in doing so we cannot ignore that alcohol, by far, causes the most social harm in New Zealand—by far. I would not mind looking at a bit of a comparison as to how much in our communities or in Parliament we have discussed the war on P relative to the war we need to make on the culture of drinking in this country, because it has a much more costly impact on our families, our communities, and our health sector than methamphetamine. That is not to say that we cannot deal with both, but at the present time we are paying disproportionately less, and not enough, time on the issue of alcohol.

I am glad that the Government has instigated a comprehensive review of alcohol. That review has been going on and a select committee is dealing with that report at present, but I think it was neglectful of us to take one of the options off the table as early on as this, and that option is the issue of price. I know that we have looked at advertising, marketing, supply, accessibility, and the age at which one can purchase alcohol, but I think we have neglected our duty to our communities by taking away the issue of price. I know that the Government has said that once it has collected some more data and more information, it will come back and look at it. We did not collect the data or information when it came to the legislation we are looking at now. We knew that it was a political hot potato and that no one would stand up and say that we should not be dealing with P, so we did it without the evidence. Yet we will not do that with alcohol when, actually, in my mind, we have all the evidence we need. The Law Commission presented all the evidence we needed to deal with alcohol in a much more comprehensive way.

I want to share one little anecdote. Not all that long ago I visited a drug and alcohol rehabilitation centre and asked those working there whether they had enough bed space to deal with all the patients they needed to deal with. I was told: “We will be honest. We have had additional funding for bed space to deal with those who identify as being methamphetamine addicts, but we have been cross-using those beds. We have been putting those who need assistance for alcohol addiction into those beds.” They were able to identify that at some point in the drug-use history of those people they may have once used P and therefore they could legitimately put them into those beds, but that was where the demand and the need were. Although the Government is saying that one of its five-pronged attacks is to assist families who are dealing with methamphetamine, I would wager there are far more New Zealand families who need assistance in the area of drug-alcohol usage.

Those are some of the challenges that I wanted to lay out in the mix. I applaud the fact that the Government is trying to look at what it is doing in relation to other topical issues, like the restriction of synthetic cannabis and reversing the onus so that these substances are unable to be put up for sale until it is proven that these products are safe and that they can be sold, but I think this demonstrates to us that this is a fast-moving area. I remember when I worked—

Mr DEPUTY SPEAKER: I am sorry to interrupt the honourable member but her time has expired.

Dr JACKIE BLUE (National) : I am pleased to speak on the second reading of the Misuse of Drugs Amendment Bill. This bill complements the measures the Government has already undertaken in its strategy to combat the impact of P in our community. The bill amends the Misuse of Drugs Act 1975 and reclassifies ephedrine and pseudoephedrine as class B2 controlled drugs, which means they are available only on prescription. Up until now they have been available over the counter and are often used for simple colds and flus. They will no longer be available over the counter and therefore will no longer be a source for those seeking to use them as precursors to make methamphetamine. Of course, suitable alternatives are available already for consumers, such as phenylephrine.

The Government is really serious about the fight against the impact of P and we released a strategy a year or two ago. In particular, new powers have been given to break the drug supply chain of gangs and criminal organisations. Efforts have been made to ensure that P addicts get the treatment they need, that we improve the treatment capacity, that we have better routes into treatment, and, of course, that we support families and communities so that people do not become addicts in the first place.

There is a number of other measures in this bill, such as reclassifying thalidomide as a class A controlled drug so that it now comes under the Medicines Act, which is entirely appropriate. The bill also broadens the definition of amphetamine analogues and allows greater control over paraphernalia.

The Government is serious about minimising harm from P and this bill is part of that suite of measures. I commend the bill to the House.

Hon STEVE CHADWICK (Labour) : I am going to take the last call because not all parties have spoken in the House and I think it is important that we take the full complement of calls today. I am disappointed in this bill, the Misuse of Drugs Amendment Bill. I chaired the cannabis inquiry and we said then that we needed to have a comprehensive review of the law relating to drugs, and this bill just does not cut it. There is a wonderful opportunity before the Government now with the Law Commission report Controlling and Regulating Drugs - A Review of the Misuse of Drugs Act 1975. I cannot see why, other than the Prime Minister’s so-called war on drugs, this bill has been brought before the House as a Government bill.

I think this bill is small. I do not think it will make much difference at all, because a lot of the precursors for the manufacture of P are from imported precursors of amphetamine and methamphetamine, and that needs to be cut off at the border. But we must also have a far more comprehensive approach than this bill. For a Government bill to go through the stages of being referred to a select committee, the select committee calling for responses, then to be back in the House today is, frankly, in my view, a rather cynical view of the tools the Government could have used if it truly wanted to look tough on crime and drugs.

It was interesting to hear Mr Auchinvole say that the root of all evil used to be money but now it is drugs, without even mentioning the impact of alcohol on society and the tools that this Government has had in its hands with the Law Commission report to implement comprehensive legislation to curb the harmful effects of alcohol. However, I must congratulate Tariana Turia on her comprehensive approach to harm minimisation in relation to tobacco. We have one Minister in this Government doing good things about harm minimisation in relation to tobacco, but the Government is actually playing around with being tough on drugs and it is not addressing the impact of alcohol to its full extent. It is now avoiding another opportunity to be tough on the impact of drug regulation and drug control in New Zealand today. I think that is a great pity. I think this Government has wasted 3 years, because it has gone soft on bringing in what the Law Commission recommends is a comprehensive overhaul of drug reform.

One comment I will challenge was made by Rahui Katene about the sale of precursors of P by pharmacists. When we were in Government, pharmacists themselves were the first professionals to take a proactive stance, and we congratulate the pharmacists who did that. It began in Rotorua, where pharmacists clubbed together and put precursors under the counter. They would not sell packets and packets of precursors and common cold remedies to a person without checking out with other pharmacists as to whether they had been asked to sell five boxes of cold remedies. They were truly proactive professionals. That was a great initiative, and it certainly saw a curbing of the domestic precursors of methamphetamine. I put on the record that pharmacists were the first proactive professionals, and they set up a network. That model caught on in several other communities. I think we ought to look at the Pharmaceutical Society. In its submission, it said that alternatives to pseudoephedrine were not as effective, yet I heard members in Government say that there are plenty of other cold remedies that are just as effective.

Also, there is an unnecessary level of blockage in the bill—we would not have brought it in as a Labour Government—of having to have a prescription for common cold remedies from a doctor. That will cost people more, so they might go without common cold remedies and spread infection. We looked at that from a public health perspective, but I also think this will create another unwelcome workload pressure on pharmacists and general practitioners. General practitioners do not want to prescribe for the common cold. They have much more work to do and much higher-need patients coming to see them on a daily basis than having to prescribe for common cold remedies. I think that is an unnecessary barrier. Access to health care is something that we in Labour really do see as a primary public health imperative. I think that measure is silly. I think pharmacists were under way and should have been supported far more comprehensibly by the Government to carry on with their initiatives for getting precursors to methamphetamine out of sight, off shelves, and under the counter. I think that measure is rather stupid.

I also congratulate Iain Lees-Galloway, who will bring in an amendment looking at—what were they called—

Iain Lees-Galloway: Utensils.

Hon STEVE CHADWICK: —utensils that drug users use. Honestly, that is just a waste of time. We learnt on the cannabis inquiry how nimble drug users are at making their own utensils. Drug users will create them out of anything—straws, bits of glass, teaspoons, anything. I cannot understand what the Associate Minister of Health the Hon Peter Dunne was proposing to do about drug utensils. We will never stop them. It is an innovation in technology how users go out and create sometimes quite artful utensils for their enjoyment of these drugs, which none of us think are safe to have.

When members are in Government, they are there to do the right thing and they are there to be bold. This bill does not have the boldness that John Key went out in 2009 and said he would have in this Government in its so-called war on drugs. This bill does not cut it. I think that is a lost opportunity, which is really sad.

I am now going around community health providers and mental health providers. There are two in our town of Rotorua that have lost their contracts and they are closing their doors in October of this year. I think that is a disgrace. They are Māori mental health providers. I have been in to see them. They are for people who suffer from chronic mental health problems—not always drug related. They are kept out of acute forensic units by community mental health providers, which are shutting their doors because the primary focus is now on youth mental health. I do not say that it is wrong to look at youth mental health, but I tell members to not close the doors on community mental health providers who are doing a wonderful job of keeping people well and their family members keeping them well, and keeping them out of mental health institutions.

I think the Prime Minister is no longer sticking to what he said in his five-pronged approach. He said that the Government would support families in the first place. The support for families in the first place is through access to community mental health provisions. That is where these people and their wider families are supported and awhi-ed about the problem that these people and these families have. That is the Whānau Ora approach, which we will also support when we get back into Government.

I think it is very sad that this opportunity is a lost opportunity, and that 2½ years later this is the best that this Government can do. When we were in Government, we set up the Expert Advisory Committee on Drugs. That was so it could be flexible, nimble, and fast at rescheduling. I absolutely applaud it for coming back with a rescheduled approach in this bill for the precursors to methamphetamine. But, boy, it is not as fast, nimble, or flexible as we intended that committee to be. Perhaps there has been other legislation before the House in 2½ years that was considered to have a higher priority. I think it is a sad opportunity lost. The Law Commission report calls for a comprehensive reform of drug use and of legislation relating to drug use in this country. We will be looking at that reform in our approach to managing the scourge of drugs in our society. We will support this bill—after that little rave; I feel better for getting it off my chest—because it is something, but it is small and not too consequential. I am afraid that in 3 years we will be coming back to this House.

RAHUI KATENE (Māori Party—Te Tai Tonga) : I move, That it be an instruction to the Committee of the whole House on the Smoke-free Environments (Controls and Enforcement) Amendment Bill that it have the authority to consider and, if it thinks fit adopt, the amendments in my name relating to the registration of tobacco sellers. The reason I am moving this motion today is very simple: the Māori Party is absolutely committed to a smoke-free Aotearoa. We are committed to saving lives. We are committed to a healthy smoke-free environment, so we are determined that we will leave no stone unturned in our pursuit of comprehensive and effective solutions to create a smoke-free nation. In January 2010 the New Zealand Medical Journal stated that the scale of harm from tobacco use in New Zealand has not been matched by appropriate Government action to advance tobacco control. George Thomson, Nick Wilson, and Richard Edwards from the department of public health of the University of Otago laid down the challenge fair and square: “New Zealand political parties now need to engage with the idea of the end of commercial tobacco sales in a finite and predictable timetable, rather than using small steps to control the tobacco epidemic.”

This motion is to ensure that our pathway towards becoming smoke-free takes every contingency into account. We want to broaden the debate today to enable registration to be mandatory and a condition of selling tobacco. The problem my amendment seeks to address is that currently there is not a central list of tobacco retailers. As a consequence of that, all national estimates for the number of retailers vary widely. In a letter I saw today from Professor Richard Edwards, Dr George Thomson, Professor Chris Cunningham, Dr Heather Gifford, Professor Janet Hoek, and Stephanie Erick there was a clear message: with tobacco displays moved out of sight there will be difficulties in identifying tobacco retailers. Their letter makes a very clear statement, which I again will cite for the record. “We see such a register as the minimum system necessary to enable health enforcement officers to effectively and efficiently do their job of working with retailers. Furthermore such a register would help to keep track of the growing move by tobacco companies to market tobacco products through temporary outlets at festivals and other events.” I want to make it explicitly clear: we are tremendously proud of the profile that the Māori Party and, in particular, Tariana Turia in her capacity as an Associate Minister of Health have been able to achieve in the area of tobacco control. The ongoing tobacco tax increases have triggered—

Mr DEPUTY SPEAKER: This is a narrow instruction to the House. You cannot get into the debate on its merits. State just the facts. It is a very narrow instruction that you are asking the House to consider, so confine your comments just to that.

RAHUI KATENE: Thank you. Our amendment today is in many respects to supplement and strengthen the rapid progress that Tariana has been able to achieve in tobacco control in general and in this bill specifically. This is ground-breaking legislation to phase out tobacco retail displays—out of sight, out of mind. But, of course, there is the catch-22 dilemma that removing tobacco retail displays—

Hon Steve Chadwick: I raise a point of order, Mr Speaker. This does not appear to be a point of order; it is rather more of a speech.

Mr DEPUTY SPEAKER: It is not a point of order. The member has the right to move, which she has done—[Interruption] No, no she can also debate it. This is a debatable motion, and she has moved it. She is speaking and she has 10 minutes in which to speak. It is not a point of order. Her comment earlier on was not correct, but I have accepted that. She is moving a motion. She is asking for an instruction from the House to the Committee of the whole House to include her amendments.

RAHUI KATENE: Thank you. There is of course the catch-22 dilemma that removing tobacco retail displays might lead to out of sight, out of scrutiny. A mandatory register of all tobacco retailers is a perfect response to the declared need expressed by many health enforcement officers to keep track of retailers with complete and current data.

We understand that ASH, Action on Smoking and Health, is in full support of these amendments. There are four strong reasons underlying its support: one, a register is cost-effective—

Mr DEPUTY SPEAKER: The member is now getting into the debate. As I mentioned earlier this is very narrow. You are asking the House to accept your amendments going into Committee. Members can read what your amendments are, because they have been tabled. This debate is very narrow, asking permission of the House by way of an instruction to go into Committee. You cannot get into the debate of what the content of the amendments are; they are tabled for members to look at. So, just come back to the instruction that you are asking for.

RAHUI KATENE: I am not somebody who randomly stands in this House to put forward points of order and move motions for debate, to pass the time of day. In fact, in my entire parliamentary career to date I think one would be hard-pressed to find more than a couple of times when I have stood to do something like this. I have taken this action today because the Māori Party is so committed to saving lives and to doing something about the 5,000 people this country loses every year under the assault of tobacco harm. We truly believe that this measure is needed now and that this register will significantly enhance the efficiency and implementation of the entire Smoke-free Environments (Controls and Enforcement) Amendment Bill. It should be debated now.

In closing I return to the submission I quoted earlier. It stated that it is highly anomalous that anyone can set up as a retailer of tobacco products given their highly hazardous and addictive nature and in light of the continued evidence of widespread availability of tobacco products to children. This motion and the amendments it relates to address this deficiency by requiring that at least health officials know who is selling tobacco, through a register of tobacco retailers. I implore the House to at least give consideration to debating these amendments at the Committee stage.

IAIN LEES-GALLOWAY (Labour—Palmerston North) : I rise to take a brief call on this motion on behalf of Labour. We very much support instructing the Committee to debate Supplementary Order Paper 257 in the name of Rahui Katene. We think this is an important issue that requires debate—

Jo Goodhew: I raise a point of order, Mr Speaker. I feel that perhaps the member is under the misapprehension that we are debating the whole Supplementary Order Paper.

Mr DEPUTY SPEAKER: The motion from Rahui Katene asked for an instruction. If we look at Speaker’s ruling 79/3 and Standing Order 172(2) we see that any member has the right to seek, by way of an instruction, for the whole House to recommend to the Committee as a whole to include an amendment. This is not an amendment that would be done in the normal process of the Committee stage; it is an amendment that adds value, in the member’s view. It is debatable and any member can seek a call. At this stage the call has gone to Iain Lees-Galloway. I remind the member, as I reminded the mover of this motion, that this debate is very narrow. It is not a debate where we get into the details of what is in the amendment that has been tabled.

IAIN LEES-GALLOWAY: Thank you very much, Mr Deputy Speaker, and I hear what you just said. As I said, I rise to speak in support of the motion to instruct the Committee to debate Supplementary Order Paper 257.

Although the issue is clearly outside the scope of the Smoke-free Environments (Controls and Enforcement) Amendment Bill, hence the motion being moved by the member, it is a matter that came up a number of times in submissions to the Māori Affairs Committee’s inquiry into the effects of tobacco on Māori in New Zealand. A range of different options were offered. One was to license tobacco retailers and the other was to have a register. I think it is a valuable debate that is worth having. Although it falls outside the question of advertising, which is what the bill is about, I think the member made the very, very good point that one of the unintended consequences of the removal of tobacco displays is that tobacco can be out of sight and therefore might not be watched as closely as we would prefer. This is one mechanism by which that close scrutiny could be achieved. There are a number of mechanisms that might be appropriate, but this is certainly one mechanism by which that close scrutiny could be achieved.

We on this side of the House think that this is a valuable debate that needs to be held. There will be arguments—I have no doubt—for and against such a measure, but it would be unfortunate to not take the opportunity to have that debate. I congratulate the member on bringing this matter before the House. I for one would like to see this issue debated at the Committee stage. I would like to have that on the record for the member, so that she knows that Labour is absolutely behind her and that we would like to see this debate occur.

Hon PETER DUNNE (Minister of Revenue) : I move, That the Taxation (Tax Administration and Remedial Matters) Bill be now read a second time. This bill is important for New Zealand, as it introduces crucial changes to the tax system, which are needed to support economic growth and to ensure integrity and fairness within the system. A good tax system encourages economic endeavour by eliminating unnecessary hindrances and limiting compliance costs, and these themes run through this bill.

A key feature of the bill is the abolition of gift duty. Gift duty is a relic of the estate duty era, which is long since passed. It has continued to impose $70 million of compliance costs on New Zealanders each year, while no longer serving its intended purpose and raising less than $1 million in annual revenue. About 99 percent of annual gift duty returns are nil returns, which further illustrates the pointless nature of this tax. So it is time to abolish gift duty once and for all.

Since the notion of abolishing gift duty was first aired last year, some concern has been voiced about the consequences for the tax system. There have been predictable amounts of criticism that there has not been enough analysis. Well, let me assure members that the decision to proceed with the abolition of gift duty was taken following considerable research. Eight Government agencies were involved in consultation on the likely consequences of abolition, and the Inland Revenue Department was at the centre of the review. The decision, therefore, has not been taken lightly.

Members will note that the accompanying regulatory impact statement goes into some depth. That is because it is dealing with an issue of great moment: the abolition of a tax. So comprehensive was the regulatory impact statement that it has been described as a model of what a regulatory impact statement should be. It deliberately outlines the problems with gift duty, and considers a number of options for addressing them, before coming down in favour of repeal.

The potential for tax avoidance was one of the key areas considered during the gift duty review. The review concluded that gift duty is not an effective way to target tax avoidance. A range of existing rules in the Income Tax Act better target avoidance arrangements involving gifts. These include rules for gifts involving companies and employers, in addition to trusts. Last year’s Budget further reduced opportunities for avoidance by aligning the top personal tax rate and the trust tax rate. Trusts, therefore, can no longer provide a tax shelter, as was previously the case. The Inland Revenue Department will continue to monitor the situation, and a post-implementation review will be undertaken to ensure that existing measures are operating as intended.

The move to abolish gift duty is part of a carefully constructed package that has seen all marginal tax rates fall substantially, and the top personal and trust rates aligned. Any moves to unpick this package, by introducing either new taxes on capital or differential rates for trusts and the top personal rate, would inevitably raise questions about the need not only to reinstate a form of gift duty far more stringent than the one this bill repeals but to maybe restore estate duty, or indeed introduce some other forms of wealth tax to prevent significant avoidance occurring. An equally unpopular and cumbersome alternative would be to continue the alignment of the top personal and trust rates, but at a significantly higher level than is currently the case. The House should give careful consideration to those points as this debate unfolds, and as subsequent events unfold, as well.

This bill also includes a number of proposed changes to the rules relating to the tax disputes process, which complement major changes made by the Inland Revenue Department to the way it administers that process. Our tax system relies on voluntary compliance, and it is therefore appropriate that the disputes that inevitably arise are resolved quickly and efficiently for both parties.

The bill also introduces changes to the secrecy provisions in the tax administration rules, to help to bring the Public Service more into line with today’s customer service expectations, and to improve efficiency across the Public Service. Overall, these amendments will result in improvements in service provision, including improved accuracy, improved efficiency by eliminating duplication of effort, and increased detection and prevention of fraud.

A Supplementary Order Paper that was referred to the Finance and Expenditure Committee provides for the removal of the overtaxation of non-residents’ investment through portfolio investment entities. A number of useful submissions were received and considered by the committee, and the legislative changes have now been incorporated into the bill. Those changes will facilitate the development of New Zealand as a financial hub.

Earlier today I released a further Supplementary Order Paper to provide roll-over relief for depreciation recovery arising from the Canterbury earthquakes. This will make replacement of assets lost in the earthquakes more feasible for Canterbury businesses, and is another step towards providing taxpayers with relief from taxation on windfall gains from depreciation resulting from the earthquakes.

The Supplementary Order Paper also addresses the issue of the timing of deemed sales of destroyed insured assets, allowing the time of sale to be deemed the point when insurance proceeds can be reasonably estimated. The Government is seeking to encourage productive investment in Canterbury, and these depreciation measures will help to achieve that. As further tax issues arise in response to the earthquakes, the Government will assess them and respond accordingly, as indeed we have been doing throughout the course of this year.

The Government cannot, of course, control the business sector, but we can support it by providing an environment that creates jobs and wealth. By improving efficiency and removing undue compliance costs, this bill will help to create that environment, while also ensuring the maintenance of the integrity of our tax system. It is therefore with a great deal of pleasure that I commend the Taxation (Tax Administration and Remedial Matters) Bill to the attention of the House.

STUART NASH (Labour) : The Finance and Expenditure Committee spent a lot of time and heard a lot of submissions on various parts of the Taxation (Tax Administration and Remedial Matters) Bill. There is some very good law contained within the pages of this bill. However, there is one glaring addition in this bill, one glaring part, that Labour simply cannot support. It is a real shame that the abolition of gift duty was not brought to this House as a separate piece of legislation, because what will happen is that all the other good law in this bill, all the other remedial matters, will get lost in the arguments about the abolition of gift duty.

It is my contention, and it is Labour’s contention, that the abolition of gift duty will open the door to massive tax avoidance, and make the defrauding of creditors, including the Inland Revenue Department, vastly easier than it is at present. My belief is that the Government has misjudged this one, and that the Minister of Revenue is out of his depth. The Inland Revenue Department was given about $100 million recently to chase those people who use various schemes to perpetrate avoidance. Well, that department will need a hell of a lot more once this bill comes into force, because the day after this bill becomes law, without gift duty to slow things down, people will instantaneously move valuable assets more or less without restriction and without tax implications. Not all of those people will do that for the wrong reason; in fact, not many will do it for the wrong reasons. But some will do it, and enough will do it to cause concern.

The change to abolish gift duty was proposed as a way to simplify tax law and remove a $70 million burden and seemingly unnecessary compliance costs on taxpayers, plus about $500,000 of costs to the Inland Revenue Department. However, many submitters on the change and lawyers in private practice believe the impact of this change goes too far. Although in theory there are provisions to undo gifts in the event of insolvency, in practice one can move assets between entities and one can move them down a chain of entities, and that becomes very hard to undo. The change therefore has very wide-ranging implications for the law of trusts, the law of taxation, and the practicalities of debt enforcement, including in relation to wills and matrimonial property disputes.

Tax avoidance is a problem in this country. At the moment there are over 325 fraud cases, totalling about $450 million, under investigation by the Inland Revenue Department. This bill will add to that problem. In our minority report we state: “The analysis upon which the gift duty abolition proposal is based is fundamentally flawed because it does not adequately take into account the full range of potential tax avoidance opportunities. Trust structures are one subset of possibilities but these members do not accept that the analysis has been comprehensive. Accordingly the cost-benefit analysis upon which the bill rests must also be seen as fundamentally flawed, as no attempt has been made to quantify the counterfactual of avoidance risk pertaining to the full range of structures available. These members note that no sensitivity analysis has been provided. No options analysis has been provided. The policy process would not meet the standards expected under a thorough Regulatory Impact Statement.” At the least: “any legislation proposing the abolition of gift duty should be delayed until the Law Commission’s review of trust law is complete.” Contrary to what the Minister outlined in his speech, it is Labour’s contention that the analysis undertaken in this bill is not thorough enough to convince us that we should abolish gift duty at all.

Under present taxation law, if someone gifts assets of more than $27,500 to anyone, any being, or any entity, then that gift will attract taxation. Most people do not know this, and almost no revenue is ever collected, even though large gifts to trusts or family members are fairly routine. I was talking to a friend about this. This friend said to me: “I gave $100,000 to my son to help him get into his first house.” I said to this person: “Did you pay gift duty on that?”. He said: “No.” The awareness of gift duty was minimal, and for that I suppose we have to look at the Minister for not communicating the taxpayers’ obligation.

The reason gift duty is so easy to avoid is that the law has evolved a mechanism for circumventing gift duty in almost all circumstances. It is administering this mechanism, which looks a little like a sleight of hand, that costs taxpayers about $70 million a year. There are tens of thousands of trusts in New Zealand that have been set up in this fashion. Many professionals working in areas where they may be sued by their clients have trusts set up for this purpose. Rich individuals, families, and corporate entities of all kinds also use trusts to manage their property and wealth. Companies and corporates use them also for a variety of purposes, including creating structured tax arrangements designed to minimise tax liabilities.

The abolition of gift duty was considered when death duty was abolished in 1992, but ruled out in 1992 due to concerns about enabling tax avoidance. Various Government agencies will be responsible for monitoring the effects of gift duty abolition and the Inland Revenue Department has agreed to initiate a post-implementation review to ensure there are no unintended consequences. But I am very fearful that it is not this law but legal precedent that will decide many cases that are brought before the courts in respect of this bill.

The Institute of Chartered Accountants submitted that although it welcomed the abolition of gift duty, in its view there were “a number of tax avoidance opportunities that may arise in the absence of gift duty.” The institute went on to list five. The Institute of Chartered Accountants, the National Council of Women, and the Law Society all expressed concerns regarding the impact of the abolition on family protection and relationship property proceedings.

The Family Protection Act protects children and spouses who are excluded from inheritance from wills. By allowing full gifting prior to death, the interests of children who miss out on any inheritance will be extinguished. In the case of relationship property, a non - property-owning spouse or partner may find that the matrimonial home has been gifted into a trust without their knowledge and is therefore out of reach when they separate or divorce. A third major area of concern is creditor protection. Officials stated that there are three existing provisions in law that allow for gifts to be clawed back for the benefit of creditors. However, as I am sure the Inland Revenue Department would attest itself, the provisions that allow for the claw-back of assets passed between entities are very hard to enforce, mainly because by the time one can find a court to address the location of an asset it has moved somewhere else.

In theory, tax law is there to collect tax, so a tax that collects very little tax and costs millions to administer is, on the face of it, something of an aberration. Yes, gift duty was not intended to protect creditors, make tax avoidance more difficult, or protect children and spouses from losing family property. However, at present it does play a role in all three. The relatively few submitters to this bill argued pragmatically that the unintended consequences of this reform meant that any policy move in this area should be accompanied more slowly and carefully because of this. All of them can see the potentially huge implications that this change will have in several areas of law.

In practice, sophisticated tax avoidance involves the use of deliberately confusing structures to hide the true effect of financial arrangements. The removal of gift duty will make the design, construction, and execution of these arrangements easier. It will therefore make the enforcement of anti-avoidance law harder. On the issue of trusts, officials clearly pointed to the Law Commission’s work, as did Labour. We requested that this part of the bill, the abolition of gift duty, be delayed until at least the Law Commission had finished its work.

Why is the Government doing this? The beneficiaries of the law as it stands are the wealthy who have to pay fees in order to organise their affairs to protect and administer their assets. The removal of gift duty is bad law, and I am afraid that I cannot support it. Thank you.

AMY ADAMS (National—Selwyn) : I am very happy to take a call this evening on the second reading of the Taxation (Tax Administration and Remedial Matters) Bill.

Before I talk about gift duty, which obviously is one of the key elements of this bill, I will touch on the other major aspect, which is the changes being made around information sharing and secrecy. That is certainly an area that the Finance and Expenditure Committee spent quite a bit of time considering. Certainly we concur with the Minister of Revenue that there is a need for the Inland Revenue Department to share its information more efficiently and easily with other agencies, but of course we were very concerned to ensure that that is done in a proper and carefully controlled way. I think the balance that we have reached within the legislation as it is before the House is good and robust. One of the components we have built into the bill is a reporting back to the House on how that information sharing works, so that this House can continue to monitor the way in which those new powers are set out.

I will touch briefly on gift duty, and in particular respond to some of the comments of the speaker who has just resumed his seat, Stuart Nash. The contentions Labour Party members are putting up in relation to this aspect really reflect, more than anything, their lack of understanding about how this area of law works. The reality is that trusts already exist, people can already put their assets into trusts, and they can already avoid tax. Tax avoidance is a serious issue, but the abolition of gift duty will not make any significant difference.

The member referred to the concerns of the Institute of Chartered Accountants and the Law Society being on record, but it is worth pointing out that the beneficiaries of the $70 million of compliance costs that this outdated and useless regime imposes are the lawyers and the accountants. It is lawyers and accountants who get to charge that $70 million in compliance costs to their clients every year to comply with a system—and let us be very clear about this—that generates less than $1 million, but costs nearly half a million dollars a year to run. So we have a tax that is generating almost nothing and on which there is almost zero enforcement.

If we ask the Inland Revenue Department for records of gift statements for a transaction going back, the department can barely give us that information. There is no follow-up. This is not a highly enforced tax, and 99.6 percent of all transactions that go through the department are time-wasting for everyone involved, because there is no duty payable.

This tax has long since run its course. The costs imposed on the private sector—with the beneficiaries of those costs being the sector’s lawyers and accountants—are unnecessary. They are not serving any public good. They are not, in fact, protecting the beneficiaries that Labour claims they are protecting, and it is time this outdated duty was abolished. It is long overdue, and I am very pleased to commend the bill to the House.

Hon DAVID PARKER (Labour) : The Taxation (Tax Administration and Remedial Matters) Bill is another example of how this Government rules for the interests of a very, very narrow class of New Zealander. The previous speaker, Amy Adams, rose to her feet and did not address any of the issues that were raised by my colleague Stuart Nash. Already under current law there is no limit on gifts to a charity. Already under current law any person can gift $27,000 per annum without paying gift duty; a couple can gift $54,000 per annum without paying any gift duty.

This law creates a number of injustices. Peter Dunne believes in income splitting. The Government said it would not agree to income splitting. Editorials in this country said that income splitting was unfair. This legislation enables income splitting for people who can split assets and therefore the income from those assets. Wealthy people can avoid tax through splitting their assets and dividing their income.

Mr DEPUTY SPEAKER: I would like to hear what the member is saying.

Peseta Sam Lotu-Iiga: Well, we don’t.

Mr DEPUTY SPEAKER: That will do; I am on my feet. Just calm it down a little so that I can actually hear the debate.

Hon DAVID PARKER: Everything I have said so far is correct. An even more shameful example—[Interruption] Amy Adams knows this; an incest victim in New Zealand can be cut out of a will. It happens quite often. The people who perpetrate the crime against the young person who is an incest victim blame the child sometimes. I have seen this in my own legal career. The Family Protection Act states that that child can make a claim against the estate for a fair share of the estate. This legislation prevents that, because in the week or decades prior to the death the older person can gift their estate beyond the reach of that child. They could give it all to the Filipino wife, and the incest victim, who currently has a remedy under the Family Protection Act, is being completely set aside by this Government. This is outrageous legislation. The Law Society came to the Finance and Expenditure Committee and told it that fact, and National has ignored it.

I will give another example. Matrimonial property can be put beyond the reach of the courts, through gifting. That is another example of the injustices that can be done under this ill-considered legislation. I will give members another example—

Mr DEPUTY SPEAKER: Interjections are fine, but where a member shifts seats—and members know who I am looking at—to gain an advantage, that is unacceptable. I ask members again to calm it down. Otherwise I will ask members to go out to the lobbies.

Hon DAVID PARKER: Every one of the examples I have given so far is factually correct. Amy Adams knows they are. There were leading submissions to the select committee. Great injustices are being caused as a consequence of this bill.

I will give members another example. The Institute of Chartered Accountants and the Law Society came to the select committee and said that the bill would put more assets beyond the reach of creditors. In other words, a creditor will have less of a remedy because the assets will have been transferred by gifting. In this situation there are some theoretical rights if it is done 2 years prior to the date of insolvency. If it is done more than 2 years prior to the date of insolvency, there are not. If Mr Petricevic started to put assets beyond the reach of creditors more than 2 years prior to his going bankrupt, his assets would be beyond the reach of any creditor under New Zealand’s law, following the enactment of this bill. That is another example.

I will give another example of how the tax base is being eroded. At present there are continuity of shareholder requirements in respect of losses in a company, so if a company makes a big loss—for example, a company might make a $10 million loss on a bad investment—that loss is not carried for the future benefit of shareholders, unless there is a continuity of shareholders. That rule can be worked around now, because assets can be gifted to that company to take advantage of some of those tax losses.

That is not the worst example. The worst example here, in my opinion, is what the Government is doing to an incest victim.

Hon Members: Oh!

Hon DAVID PARKER: National members might deny that, but that is what the Law Society told them, and it was right. If assets are gifted out of the estate of someone who has perpetrated a crime of incest against his or her children, there will now be no remedy under the Family Protection Act. That is what the select committee was told, and that information was right, yet the Government is pushing on with this bill because it has another objective, and that is to serve the interests of the very narrow class of people who will benefit from this legislation. Those are the people who will benefit from income splitting, who will benefit from some of the continuity of shareholder rules, and who will benefit by effectively reducing their taxes. Bear in mind that if they reduce their taxes, someone else has to pay them. Who is that someone else? That someone else is someone less wealthy.

This legislation is terrible. We heard from Stuart Nash that at the time when death duties were abolished, the Government of the day—it was actually a National Government—said it would not abolish gift duty because there were all of these other potential problems with abolishing it. Since then it has done nothing to cure the other problems. National members just come here with a very simplistic logic, saying that the Government does not collect much in duty and therefore it is not important. They miss the other important factors: income splitting, creditor protection, and the protection of estates for people who have been abused by their parents. There are lots of other cases where people have not been abused by their parents but they have fallen out with them for some reason. It might be that a parent has married for the second time and the children do not get on with the second wife, and, therefore, for whatever reason, they are disentitled under the estate. That person could have a serious illness, there could be a moral duty owed by the deceased, the testator to the surviving children, and this legislation means that they will not have an effective remedy.

I have already mentioned the concerns around matrimonial property or other non-matrimonial partnerships. Again, this is something that both the Law Society and accountants warned about, and it is not even referred to by National in its commentary on the bill. It does not even address the issue. National pretends that the issue does not exist, because it does not meet National’s prescription. This is bad law. This Government plainly governs for the interests of a narrow section of the population and it is causing injustice.

Dr RUSSEL NORMAN (Co-Leader—Green) : The Green Party will not be supporting the Taxation (Tax Administration and Remedial Matters) Bill, for similar reasons to Labour. In my first reading speech on this bill I raised the concerns the Greens had at that time about the abolition of gift duty, and nothing we heard at the Finance and Expenditure Committee has led me to change my views about the abolition of gift duty as a major problem for the New Zealand tax system.

People need to understand that a bit of a cat and mouse game gets played between the Inland Revenue Department and trusts, because trusts are systematically used to avoid tax in New Zealand. We have a systematic tax avoidance problem involving trusts. It is very hard for the Inland Revenue Department to know what goes on inside a trust. There is some information about what goes on inside trusts, but often trusts are quite invisible to the tax department. It is difficult to crack down on tax avoidance activities without information about what is going on inside trusts.

Gift duty is important because fundamentally it provides a lot of information about what is happening to trusts in New Zealand. Even though on the face of it it does not appear to do much, about 220,000 statements on gift duty are provided each year. Very little tax is actually being raised, but there are considerable compliance costs. People said: “Hey, look. You’re not raising much money in tax. There are a lot of compliance costs here. Why on earth are you keeping this thing?” The reason gift duty plays a very important role is that it provides a lot of information about what is going on with regard to trusts, which will not be available once gift duty is abolished. The reason it provides information is that people can transfer only $27,000 per person per year as a gift without attracting gift duty, and they have to register that they are doing that, so a bunch of information is provided. Once gift duty is abolished, people can transfer very large amounts of money into trusts, hide it away, and move it around, so this bill will facilitate tax avoidance in New Zealand.

It is quite important for people to understand that this is quite a serious problem. The Minister of Finance even just today in the House was talking about the tax avoidance problem in New Zealand and how it is a significant problem. He talked about a number of changes he has made to the tax system to try to reduce the incentives for tax avoidance, and I acknowledge the work he is trying to do there. However, by abolishing gift duty we are actually reducing the tools we have available to crack down on tax avoidance. As Mr Nash said earlier, $450 million is currently under investigation because of tax avoidance.

We have some real opportunities with gift statements to track what is happening with assets going into trusts. It is also a great way of defeating creditors. Currently, if someone slips some money—quite a lot of money—into a trust, if their business goes belly up and their creditors come after them, they can hide their money in the trust. At the moment, we have quite a lot of information about the money flowing into trusts, because of the gift duty statements; once gift duty statements are abolished we will have a lot less. It will also be harder in matrimonial property disputes to track where the money has gone. Currently through gift duty statements we have quite a lot of information about the flow of assets into trusts that are tucked away and hidden away.

Most of all, given all of these concerns about the abolition of gift duty, and about the relationship between the abolition of gift duty and the use of trusts for tax avoidance, it seems to us to be particularly foolish to rush into this decision to abolish gift duty at a time when the Law Commission is currently undertaking a review of trust law. Trusts are, of course, very extensively used in New Zealand—more so than in other countries. They are used very widely for tax avoidance, as well as for lots of perfectly legitimate purposes. The Law Commission is currently conducting a review in relation to trusts, which includes issues such as how much transparency there is around trusts and how much we can see into them. At the moment it is hard to see into trusts, let alone to know they exist. If we do not know they exist and we cannot see into them, then it is very difficult to figure out whether they are being used for tax avoidance activities or for legitimate activities.

The Law Commission is currently conducting a review in relation to trusts to try to figure out whether we should be changing the rules around trusts, whether there should be greater transparency, whether there should be some kind of register, and whether there should be a central register of information about the assets being held in trusts and who the beneficiaries of trusts are. If this central register of information were to come out of the review of trust law, then it would actually provide an alternative way for the tax department to keep track of what is going on with regard to assets, trusts, and tax. There is a logic to that.

If the Law Commission came out with such a recommendation and such a register was set up, I think the Green Party and Labour would take quite a different view of this issue. But at the moment that has not happened. We are rushing through this change, which will potentially open the floodgates to tax avoidance in New Zealand, before the Law Commission has completed its review of trust law, which might actually ameliorate the whole problem. For that reason we are not supporting this bill. There are, of course, lots of good things about this bill, and it is a pity that this particular highly contentious issue has been included within it, but there we have it.

As we said in the first reading debate, we will not be supporting this bill. I know that National will rush through with this bill, with the support of ACT and, no doubt, United Future—Peter Dunne has been a champion of this bill. I think National members need to look at themselves and ask whether they are absolutely certain, in the absence of the Law Commission review of trust law, that this bill will not create opportunities for increased tax avoidance. Of course, the written advice from the Inland Revenue Department was that it could not be absolutely certain. To be fair, the department said it thought the probability was low, but it also said it did not really know. It was uncertain what the downstream impacts would be. Given the problems we already have with tax avoidance in New Zealand, why would we open another door to tax avoidance when we are not sure of the outcomes?

DAVID BENNETT (National—Hamilton East) : I want to take just a short call on the Taxation (Tax Administration and Remedial Matters) Bill, which we are dealing with tonight. There are two main aspects to it—gift duty and the information-sharing and secrecy provisions. Gift duty is an old tax that has had its time, and for the compliance costs involved it does not generate much revenue for New Zealand’s taxpayers. It is another compliance cost on the productive sector of the New Zealand economy. So this bill is another example of the Government delivering a more efficient system in which people can get on with doing business and making the most money for this country to go forward. The information-sharing and secrecy provisions are very important provisions that I think all parties in the House will support, in the sense that they will help the Inland Revenue Department in its relationship with other departments, and also it is in the best interests of the New Zealand taxpayer that the department be able to access the information that is needed to make sure taxpayers are paying their fair due. National supports this bill and I recommend it to the House.

RAYMOND HUO (Labour) : The purpose of the Taxation (Tax Administration and Remedial Matters) Bill is to abolish gift duty and, among other things, amend the Tax Administration Act 1994 in order to improve the ability of the Inland Revenue Department to disclose information in the course of good tax administration practice.

There are two main reasons why Labour opposes this bill. Politics is all about priorities, but under National, hard-working Kiwi families have been struggling to keep up with the increasing cost of living, and their power bills and food prices are increasing as the cold of winter bites.

Mr DEPUTY SPEAKER: This is a second reading debate—like last night’s debate was a third reading debate. We must confine ourselves to what is in the bill. Other things are irrelevant and should not be discussed.

RAYMOND HUO: Thank you, Mr Deputy Speaker. The reason I decided to say this was that I wanted to share with members and demonstrate that the National-ACT Government has its priorities wrong.

The second reason we oppose this bill is more of a technical nature. It is wrong to use a bill that is supposedly for administrative and remedial matters to push through the abolition of a tax. Such legislation should be reserved for technical changes and would usually be non-controversial. Therefore, apart from the provisions relating to gift duty, Labour supports the content of this bill, and in the normal course of events would vote for it. However, due to those concerns, we have to vote against the entire bill.

The Law Society and a number of other submitters raised a further concern that the abolition of gift duty would create problems for the enforcement of claims under the Property (Relationships) Act 1976 and the Family Protection Act 1955. Poorly thought-out legislation will simply require further amendments in the future. It is a waste of this Parliament’s time and will create huge legal uncertainties.

Further, the abolition of gift duty may create just another avenue for tax evasion. The submission from the Institute of Chartered Accountants of New Zealand noted a number of tax avoidance opportunities that may arise in the absence of gift duty. Even the Inland Revenue Department officials cautioned in the regulatory impact statement that tax avoidance could increase in the absence of the duty. It is no wonder that New Zealand Trustee Services called for any changes to gift duty to be delayed until the Law Commission’s review of trust law is completed.

The Law Commission has embarked on an in-depth review of trust law in New Zealand. The first issues paper was released in November 2010, and this year the Law Commission will release its fourth and final part on trust law. As Labour spokesperson for the Law Commission, I find it a bit odd that the Government has ignored the fact that the review of our trust law is under way and has still decided to go ahead and abolish the gift duty that has existed for 125 years.

I note that the reason for the decision is that the revenue from gift duty is about $1 million a year, but it costs the Inland Revenue Department about $500,000 to administer. On the other hand, the compliance costs on the private sector amount to $70 million each year. The fact that people currently spend $70 million every year on gift duty compliance to achieve something is no reason per se for removing it. I acknowledge that the original purpose was to protect the estate duty base by discouraging the gifting of assets prior to death and to raise revenue, and it has applied in some form since 1885. But, again, I am not convinced that gift duty should be removed on the basis that the original rationale is no longer relevant. More important, gift duty actually exists to prevent tax avoidance and so-called structuring. The scrapping of gift duty opens the way to tax avoidance and structuring.

Estate duties were abolished in 1992, but gift duties remained in place to prevent people from hiding assets in order to defeat creditors, avoid tax liabilities, and obtain access to Government benefits, such as rest home subsidies. This was one of the major concerns in reviewing whether gift duties should be abolished at all. But the Minister Peter Dunne, in his speech earlier, assured us that adequate measures are in place to prevent such manipulations and protect creditors. The Government will monitor the effect on the economy and the tax system to ensure there are no unintended effects or unexpected oversights that arise. I invite the Minister to advise us in more detail of the “adequate measures” at some later stage of the development of this bill. Naturally, once gift duty is abolished new assets can be transferred to a trust without the need for a gifting programme, and existing debts can be forgiven in full.

According to George Tanner QC, who is in charge of the Law Commission’s inquiry into trust law, which I wish was granted the attention of this House, New Zealanders must have a solid reason why they are so passionate about establishing trusts. In New Zealand there is one trust for every 18 people, in Australia it is one for every 34 people, in Canada it is one for every 148 people, and in the United Kingdom it is one for every 294 people.

The abolition of gift duty will have far-reaching consequences. The bill as introduced by Minister Dunne is very simple, but the change will have ramifications in other areas of law, as I covered earlier—for instance, relationship property, creditor protection, and insolvency. The Law Commission has proposed that the existing Trustee Act, which was passed in 1956, be reviewed and modernised. One of the outcomes is likely to be stricter compliance requirements for trusts. Here again are “stricter compliance requirements”. Will the stricter compliance requirements for trusts be warranted, for the Government to reject those recommendations? We will see.

We also learnt, according to the Minister who introduced this bill, that Government agencies such as Work and Income and the Inland Revenue Department could potentially establish new rules and procedures for how gifts to family trusts are treated. This could mean a trust settlor may not be able to simply gift the assets in one transaction, then expect wider benefits to accrue as a matter of course. Again, I invite the Minister to advise us of those possible measures, especially how gifting to family trusts is to be treated. As I said, given that the Law Commission’s review of trusts is in progress, will the Government implement the Law Commission’s recommendations, especially those recommendations that are contrary to what the Government has already done?

Some legal experts have already argued that if the Government abolishes gift duty, then it must amend the law to allow the courts to order a division of trust capital to achieve a fair and equitable settlement. My question to the Minister again is whether his Government will amend relevant law to achieve that purpose. I have outlined what George Tanner QC cited as why New Zealanders are so passionate about establishing trusts. This is all about trusts. Indeed, the general election this November is about trusts. Thank you.

PESETA SAM LOTU-IIGA (National—Maungakiekie) : It is a real pleasure to take a short call at this time of night on the Taxation (Tax Administration and Remedial Matters) Bill. We have heard why this legislation is being put forward. It is about abolishing gift duty and about the sharing of information between Government departments, which will lead to more effective outcomes for the Government.

We have heard tonight from speakers opposite why they are not voting for this bill. We heard them say that gift duty raises $1 million for the Government and it costs the Government $430,000 in added administration. However, the private sector spends up to $70 million on compliance. We heard the last speaker, Raymond Huo, say that is no reason to change the law. That is unbelievable. Those members wonder why they are sitting in Opposition, when there are effective compliance costs of $70 million and they do not want to change the law.

We heard his colleague talk about incest and we heard him talk about Filipino wives. We heard him talk about income splitting, which is not within the realms of this bill. And those members wonder why they are sitting in Opposition. It is because of the financial illiteracy and incompetence that has been demonstrated tonight from that side of the House. They will bring out their policy of a capital gains tax tomorrow, yet they do not understand that $70 million of compliance costs going to lawyers and accountants is a waste of money.

• Debate interrupted.