McClay Todd: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
McClay Todd: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
[Advance Copy - Subject to minor change before inclusion in Bound Volume.] 
TODD McCLAY (National—Rotorua) 
: 
 It gives me pleasure to stand and speak on the Taxation (International Investment and Remedial Matters) Bill. Before I go into some of the substance of the bill I want to recognise the fine speech of my parliamentary colleague Mike Sabin who made his maiden speech just a short time ago. Can I say to Mike Sabin that it is great to see a member who shows feeling and emotion. In fact I think it shows the strength of so many people who come to this House to represent others and to work hard to make their lives better. I particularly enjoyed it as I have enjoyed speeches yesterday from other members and I look forward to the coming week or so when we will hear from those members who have not been able to make their maiden speeches yet. 
I am glad to speak on this bill because the centrepiece of the National Government’s Budget in 2010 was the delivery of a major tax package and a reform of the tax system to make it fairer and more sustainable and to offer better support for economic growth. The National Government is firmly focused on lifting New Zealand’s economic performance and this bill is another step in that direction. In fact it is one of a number of measures that were started in the last term of Government and will continue this time. 
Can I say that actually I agree with Clayton Cosgrove’s sentiments around small businesses and the need to recognise that for many people in business it is their livelihood they put on the line it is their hard work and for many of them—at least the ones whom I have had an opportunity to work with or have met—they often pay others pay their bills and so on before they put payments to themselves at the forefront. So whenever it comes to the work we do in this House particularly in our committees around taxation and to the need to make sure there is not too much regulation placed upon them I agree with Mr Cosgrove’s sentiments. 
This bill builds on and extends earlier international tax reforms. We have seen a lot of reform around the tax system over a number of years. The main proposal or component of this bill extends the active income exemption introduced in 2009 to offshore subsidiaries—in short this is controlled foreign companies—so that it also applies to joint ventures and other significant shareholders in foreign companies that are not controlled by New Zealanders. 
It also deals with the active income exemption and it brings New Zealand tax rules into line with the practice of other countries. I think that very clearly it helps New Zealand - based businesses to compete more effectively in foreign markets by freeing them from a tax cost that similar companies in other countries do not face. An example of this would be New Zealand - owned manufacturing plants in parts of Asia where the Government has worked very hard over a number of years to increase trade and to bring down tariff barriers and non-tariff barriers through trade agreements; China is an example. A New Zealand - owned company that might manufacture in China today or in the future will now generally face the same tax rate as other manufacturers operating in China. 
In brief international tax calculation methods will be rationalised by this bill exemption for investment in Australia will be maintained thin capitalisation rules for investors will be dealt with and when we come to the Committee stage I look forward to going into particularly that last one in much much greater detail. Thank you.