Cullen Must Provide Urgent Answers on MPs' Tax Rort

Sunday 15 Dec 2002 Rodney Hide Press Releases -- Economy

ACT Finance Spokesman Rodney Hide said today that Revenue Minister Dr Michael Cullen must front up and explain the tax rort that he has had legislated for MPs' overseas air travel.

"As Minister of Revenue, Dr Cullen is charged with using his `best endeavours to protect the integrity of the tax system'. It's hard to see that Dr Cullen has done anything but undermine the integrity of the tax system in designing and legislating a rort that favours MPs over all other taxpayers.

"At issue is who should pay the tax on the subsidy on MPs' overseas air travel. The subsidy covers up to 90 percent of the cost of the flight for senior MPs and ex-MPs depending on their length of parliamentary service. The taxpayer pays about a million dollars Fringe Benefit Tax a year on top of the subsidy.

"The problem is that MPs and ex-MPs should be paying tax on this perk at Cullen's top rate of 39 percent through PAYE, not the taxpayer having to stump up with the FBT. That's because the perk is technically a discretionary payment and not a contractual one.

"But the Standing Orders Committee on which Dr Cullen sits reworked the Remuneration Authority (Members of Parliament) Bill to, among other things, shift the burden for the tax of the perk firmly and squarely on the taxpayer. The move was a cunning one that was neither explained in the Committee's report nor mentioned in the Minister's speech. And it is hard to discover in the Bill itself, because the effect can only be understood by carefully tracing how this Bill changes obscure provisions of the Income Tax Act.

"The Bill puts MPs' and ex- MPs' and their partners' `travel, accommodation, attendance or communication services' on the same footing as the Governor-General's salary - that is, not subject to PAYE.

"Exempting the Governor-General's salary is an anachronism; exempting MPs' overseas travel is a legislated rort. The Bill then makes the travel subsidy subject to Fringe Benefit Tax. The effect is to shift any liability for tax to be paid away from MPs and back on the taxpayer. The perk is again tax-free to MPs.

"We now have one rule for MPs and another for all other taxpayers. The Minister of Revenue's duty is to close the tax loopholes to ensure the tax system applies equally to all - not open up loopholes to MPs' advantage.

I will be asking Dr Cullen through Parliament just what role he and his officials played in designing this rort. I will also be interested to learn when Prime Minister Helen Clark first realised what was going on and what she makes of it. Technically, Dr Cullen and the Prime Minister have until the New Year to answer my questions but I am sure given the seriousness they will be keen to answer them this side of Christmas," Mr Hide said.

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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