Fran O'Sullivan: Dunne's tax stewardship will be missed

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New minister must stick with policy of making sure high net worth individuals pay their fair share.

Peter Dunne. Photo / Sarah Ivey
Peter Dunne. Photo / Sarah Ivey

Peter Dunne has always come across as one of those men of principle who knows what side his toast is buttered on.

Before I get pinged for plagiarism, let me admit straight up I first heard the term applied to one of Dunne's former Labour colleagues from the 1980s by a particularly astute French ambassador.

I've no idea of its origin. But it does rather aptly describe a certain political genre.

Particularly as Dunne had found it a very simple matter to serve as Minister of Revenue in successive Labour and National governments.

He has been a pragmatist of the first order and has just got on and done what at times must have seemed a mind-numbingly boring job: competent, professional, across-the-detail but not a star.

But a minister from a caucus of one with all the perks that comes with office.

It's been great sport to watch the methodical way in which he has overseen the Inland Revenue Department as it puts new tax or revenue policies into practice.

First, Michael Cullen with his expansion of tax credits through Working for Families. Second, Bill English with his tax switch - bumping up GST to fund personal and company income tax cuts.

I've no doubt that if Dunne had survived to be Revenue Minister again in either a Labour/Greens dominated government or even a post-John Key National administration, he would have overseen moves to introduce a wide-ranging capital gains regime.

But his proven competence has gone from the table.

There's been a lot of unsourced and unverified scuttlebutt about Dunne since he resigned his portfolio as Minister of Revenue last week after refusing to fully comply with David Henry's inquiry into who leaked the Kitteridge report into the Government Communications Security Bureau to journalist Andrea Vance so that her newspaper could splash its findings (unfiltered by the usual political spin) across its front page while the Prime Minister was busy spruiking New Zealand trade within China.

Despite the private hell Dunne is having to absorb right now as political friends and foes try to turn him into a national laughing stock or, worse, cart him in front of Parliament's privileges committee, it is just possible that principle ultimately triumphed over self-interest when the former minister turned his sights on the GCSB fiasco.

Judging by the former minister's Twitter feed, he had become obsessed by the agency's wayward behaviour and was very much focused on civil liberties and had become pretty steamed up well ahead of Vance's exclusive in the Dominion Post revealing (courtesy of the at that stage unpublished Kitteridge report) that the GCSB had unlawfully spied on 85 New Zealanders to the point where he openly admits he considered leaking the report.

If he assisted Vance with insights - well, that is something many Cabinet ministers have done with journalists over the years.

NZ First's Winston Peters has cranked up the rhetoric. But Peters - who served for a while in the Bolger Cabinet at the time it was persuaded by Treasury not to hold an inquiry on the Bank of New Zealand collapse - must surely remember back when he himself later become so fired up that he swung into gear to expose confidential material about some of BNZ's most nefarious dealings.

The difference is that Peters left the Bolger team and took his campaigns public.

Dunne appears to have settled for back-room steerage and - unlike Peters, who has had plenty of practice with leaks - has been a babe in the woods when it comes to dealing with media on sensitive issues on a no-handprints basis.

Frankly, I find it a pity that Dunne has come down in a screaming heap.

There are big issues facing his former Inland Revenue Department.

Newbie Revenue Minister Todd McClay now takes on the onerous task of holding IRD to account as it undertakes a $1.5 billion upgrade of its computer system.

Dunne had earlier admitted the system was fully stretched with the IRD saying - as far back as 2011 - that it faced a 40 per cent chance of a systems failure that would severely impact its ability to collect and distribute money. Just like his predecessor, McClay will be hoping a Novopay-like situation does not emerge.

This issue cries out for experienced ministerial guidance and monitoring and will fully test McClay.

What will also be telling is the extent to which McClay urges policy-makers to stay involved with international moves to try to ensure companies such as Facebook and Google don't cheat the system by paying just a token amount of tax here.

Dunne was a late-comer to this particular crusade.

New Zealand's tax treaties are more geared to bricks and mortar companies than highly mobile intellectual property contained within new generation companies.

Dunne would have upset purists when he jumped on the bandwagon. But he was upfront in saying that people were offended that such large companies were "often not paying any tax anywhere at all".

The problem is it will take a co-ordinated international effort to deal with the gaps in the tax net as the new generation multinationals will just play one country off against another if it tries to move ahead of the pack.

The third big issue is IRD's moves to crack down on high net worth individuals who try to avoid paying their legal due. The IRD - with Dunne's blessing - has been very gung-ho.

It is to be hoped that McClay stays on the case and is not tempted to cut back on IRD's investigative budget.

In the post-global financial crisis international environment getting the tax nets tighter requires a change of mindset at the top.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

Read more by Fran O'Sullivan

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