Connell Brian: Taxation (Annual Rates GST Trans-tasman Imputation and Miscellaneous provisions) bill — First Reading 
Connell Brian: Taxation (Annual Rates GST Trans-tasman Imputation and Miscellaneous provisions) bill — First Reading 
[Volume:609;Page:6665] 
BRIAN CONNELL (NZ National—Rakaia) 
: 
 I rise to take a call on the first reading of—let me take a deep breath—the Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill. I think there is probably a compliance cost just in saying that name if one takes time into account. 
I am in a reasonably conciliatory mood and I acknowledge the Government for introducing this legislation. Essentially it is pragmatic. It supports business—yes I said that it supports business. Generally I do not think it is picking favourites and I think it treats all citizens fairly. Accordingly National will support this legislation going to the select committee. But I make the point that like my colleague Stephen Franks I think a lot of work needs to take place in the select committee before the bill gets our universal support. I might add that the bill’s pragmatism and the areas that support business that I have alluded to now make some sense my having listened to some of my National colleagues; in essence what I am talking about is legislation that the National Party initiated. 
I would like to take a bit of a walk through the explanatory note of the bill and in particular I want to start with the section on Part 2 “Amendments to Income Tax Act 1994” which includes the trans-Tasman imputation component. This is reasonably complex so I will read just the first piece for the sake of accuracy: “Australia and New Zealand are reforming their imputation laws to reduce a long-standing problem of the double taxation of certain trans-Tasman investments known as ‘triangular tax’.” It goes on to state: “As part of a joint Australia/New Zealand initiative amendments are proposed that permit Australian companies to join New Zealand’s imputation credit rules.” This is a significant step forward. Anything that helps to attract and retain investment in New Zealand is on the right path. It is sorely needed. However it will not be enough in itself. It is on the right track but unless we deal with and address the issues of the Kyoto protocol the Resource Management Act and in particular electricity we will not get the foreign investment that we are looking for. 
 I want to take a moment to expand on my concern about electricity. Business of course is concerned about cost but generally it is more concerned about certainty and guarantee of supply. The one component that will turn investment away from these shores is if we cannot give certainty on this core commodity. 
I expect that the Government now that it has started down this path will finish the job and start to write back some of its anti-business legislation starting with—but not exclusively confining itself to—its accident compensation legislation its employment relations legislation and its minimum wage legislation. I was going to take bids but there are not enough of us here so I will help out members. Some of the other things that I think might be of interest to note include some of the taxes or levies that have been introduced in the last 2 or 3 years that are hurting business. I believe that the Government has to turn its attention to those. We have touched on income tax and if we look at the fiscal drag—or bracket creep—in that component itself we see that it now attracts the 10 percent of the population who are now caught up in that higher marginal tax rate than was first intended. That is something the Government said it would not do. Fringe benefit tax has increased from 49 percent to 64 percent. The excise duty on tobacco has risen by 23 percent. I am not a fagger but I just do not know how people can afford to smoke under that type of regime. 
Hon Dr Michael Cullen 
: Good. 
BRIAN CONNELL 
: I agree with the Minister. I have been conciliatory—I am actually giving him some bouquets today. The levy on petrol and diesel has gone up considerably as have road-user charges. Members will remember that that was just a temporary initiative but it has now gone beyond its 18 months and is approaching its second year. I do not think that members of the House dispute that half that money has gone into the consolidated account. I know that people particularly in the South Island are concerned that no roading projects are due to start in the South Island inside the next 10 years. We have seen the accident compensation levy and we know where that is going—and Dr Cullen knows that a levy is a tax. We have seen the alcoholic beverages tax—the sherry tax. That I have to admit was not anti-business; it was anti-everybody particularly old folk. Accident compensation motor vehicle levies have gone through the roof. I have touched on just a few. 
The other thing I would like to commend the Government for is its work on the deferred deduction rule. That rule is designed to combat aggressive tax arrangements many of which are mass marketed. Members of the House know and accept that in the last 20 years in Australia a number of scams and schemes emerged that essentially exposed hard-working people and investors to rip-offs. A few that come to mind were the tea tree oil scam and some of the ostrich scams. Essentially they were funded by the taxpayer. I have to admit that I was nearly tempted to get involved in a couple but I did not. However I did see my friends get involved and they lost considerable amounts of money. When the Australian Taxation Office was forced to step in and do something about the matter the blood was on the streets for everybody to see. There was a real mess and the office had to exercise the courage of its convictions and work through it. Essentially those schemes are funded by taxpayers and that is not fair. 
The bill’s explanatory note gives a number of examples and I agree with most of them. But I suggest that the select committee has a close look at the rule because not all such schemes are bad. We do not want to discourage legitimate research. We do not want to discourage legitimate development legitimate investment or sensible risk-taking. I accept that on balance it is a problem. As one of my colleagues has already noted the amount of money that taxpayers are funding is in the vicinity of $400 million to $450 million and that is a major exposure. I refer to the last paragraph under the heading ”Deferred deduction rule” in the explanatory note. It is a steer to the select committee. It states: “Loans where the terms are on an arm’s-length basis where the lender regularly lends money on arm’s-length terms and carries on business in New Zealand are excluded from the definition of ‘money that is not at risk’.”—and I agree with that—“Also excluded are loans by associated persons who are not otherwise parties to an arrangement and whose money is genuinely ‘at risk’.” They are the people whom the select committee should look at carefully so that the bill does not kill the goose that lays the golden egg. That is my advice to the select committee. 
I note also that a number of the initiatives that this legislation looks at pick up compliance costs. I think there are some sensible and pragmatic suggestions here and they have my support. I finish by saying that although National supports the bill going to the select committee we will be looking at the select committee to be very cognisant of the issues that I and my colleagues have raised. On that basis I conclude.