Mallard Trevor: Taxation (International Investment and Remedial Matters) Bill — Third Reading 
Text is incorporated into the Bound Volume 
Mallard Trevor: Taxation (International Investment and Remedial Matters) Bill — Third Reading 
[Sitting date: 01 May 2012. Volume:679;Page:1783. Text is incorporated into the Bound Volume.] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I want to acknowledge Nick Smith. I am not sure whether that is the first speech he has made as a backbencher since he became one and I want to indicate some sympathy for him when he watches in this House the treatment—the preference—that has been given to John Banks in much worse circumstances than that member was in— 
Hon Dr Nick Smith 
: What was this member’s approach when he was convicted of assault?  
Hon TREVOR MALLARD 
: This member has not been convicted of assault.  
Hon Dr Nick Smith 
: With respect to Tau Henare when you got— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Order! That is not necessary.  
Hon TREVOR MALLARD 
: There is no doubt that I pled guilty to fighting. I did and there was a period of time when I was in some pretty serious trouble and I did not come into this House during that time but we sorted it out. But the point I am making is that John Banks is getting an easy ride. John Banks is getting a very easy ride whereas the Prime Minister knew he could rely on Nick Smith. Notwithstanding Judith Collins dumping on him he knew he could rely on Nick Smith. That meant that Nick Smith goes back and John Banks keeps at least for a period of time his ministerial portfolio. I noted the former Minister also used the expression that “the boat goes faster” under a National Government. I wonder whether he was referring to the cabbage boat going faster as his friend John Banks has been on regular occasions.  
Labour members are supporting this bill the Taxation (International Investment and Remedial Matters) Bill. It is fair to say that we are doing so not with enormous enthusiasm. It is on balance a bill that we are prepared to support but there are some concerns around the removal of the approved issuer levy on the payment of interest on securities meeting certain requirements as notified under the Income Tax Act. What we are concerned about is that this is a further erosion of the taxation base associated with financial transactions. It is both an erosion in the amount of total tax and a narrowing of the systems of collecting tax when we need at the moment especially given the Minister’s billion-dollar sudden deficit all the tax that we can get and it does not seem wise to be sacrificing tax in this way. I think it is also felt that it is better to have a number of bases to the revenue rather than as we appear to be doing at the moment being narrower and narrower in the areas from which we collect tax with the changes here—the changes to do with gift duty and a number of areas.  
It was interesting to look at the submissions and at the way the submitters indicated that the proposals will not help increase liquidity in New Zealand they will do nothing to reduce interest rates and they will not add depth to the capital markets. It is fair to say that the Government is for a National Party Government in a relatively unusual position to be criticised by submitters on this bill and to be criticised by some people who one would have thought would be their real allies on the sale of State-owned enterprises. The submitters were basically saying that although they agree in principle—and in fact I am sure they agree in their pockets—with the sale of State-owned enterprises they think that the Government is making a mess of that particular exercise.  
In addition something that Labour members are getting more and more concerned about is that the current tax system effectively contains a lower rate of tax on offshore sources of capital relative to the tax on domestic savings thereby providing what is really an unhealthy incentive for funds to be sourced from offshore rather than from savings in New Zealand. The effect of the taxation system is that returns are more for offshore lenders than they are for onshore lenders in New Zealand. If the returns are more for the funds that are sourced offshore then the effect of that is that our debt our capital coming into the country will increase and our balance of payments will over time get worse.  
I think that it does not matter which side of the House people are on; there is an understanding that the invisible side of our balance of payments is a major issue. We quite often get into a trade surplus situation—not as often as we should with the very good commodity prices and terms of trade but we often get into positive balance there. But it is the invisibles that are mainly associated with overseas ownership of such a high proportion of our economy and the rents the profits the dividends and the interest that are going offshore as a result of that foreign ownership mean that we have to earn more and more and more offshore in order to stay in balance in the current account. That is why members from our side look pretty carefully at any exercise like this one which in fact worsens the situation. 
 We believe pretty strongly that we do need to have further work to improve the neutrality at least of tax treatment across domestic and international sourcing. In fact I think even to say neutrality might lack ambition. A lot of countries have a preference for sourcing their financing onshore rather than offshore. One of the things that we need to consider is whether rather than giving preference to offshore lenders we should in fact focus on building up our own domestic capital and domestic borrowing in order to retain the financing of our businesses onshore as much as possible and thereby reduce the flow offshore.  
That of course would require more ambition around savings than we currently have. I note that it has been the policy of the Government to not put money into the Cullen fund. I note that it has been the decision of the Government to run down KiwiSaver to reduce the incentives and to reduce the flow of payments into the system and that of course is something that works against the development of capital in New Zealand. I think that has been a short-term approach. It is the approach I think of people who are more used to playing the markets and to being currency traders rather than people who have a genuine view on the importance of investment and of productive investment. I am careful as I say this with the member for Piako or similar— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Waikato. 
Hon TREVOR MALLARD 
: —Waikato—in the Chair but it is not only investment in our farms and our traditional productive sector but also investment in some of the smart new firms that we have around the country. I spent some time over the adjournment going to quite a number in my own electorate and there are a couple there at least that within 10 or 15 years could be billion-dollar industries—if we can hold them. The key to holding them is making sure that we have the onshore capital in order to have the investment in them and to keep the ownership in New Zealand. What is clear is that all around the world there are people who are bidding for those businesses and while we are giving them more favourable terms in their purchases and in their financing arrangements than we are giving to local purchasers that is something that tips the balance towards some of our best businesses going offshore.  
In conclusion the Labour Party will support this bill. We do so because it is not doing massive harm but we are concerned that there is no plan to do what is right in the financing area.