Nash Stuart: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee 
Nash Stuart: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee 
[Volume:656;Page:5987] 
STUART NASH (Labour) 
: 
 First of all I acknowledge the presence of Emma and Jim and Robin who was here before from the Inland Revenue Department as has been mentioned by I think everyone. 
Simon Bridges 
: What about me? 
STUART NASH 
: No I say to Mr Bridges that he does not warrant a mention I am afraid. But on behalf of everyone on the Finance and Expenditure Committee I say that the officials did a fabulous job as has been mentioned and we thank them very much. 
As a new member of Parliament I found that this Taxation (International Taxation Life Insurance and Remedial Matters) Bill was a brilliant bill to start select committee life on. That is a perverse sort of thing to say but I mean that I believe that select committees ought to go to bed at 2 a.m. set the alarm for 5 a.m. and then get up; that is what it was about. To have this bill over but to now get reading lists of such a size makes me realise that that seems like nothing now. So I go to bed at 1 a.m. and get up at 5 a.m. and I am fine. As my colleague the Hon David Cunliffe mentioned this is a very very large piece of legislation. 
I speak in support of the bill but I will quickly outline the purpose and objectives of tax legislation if I may. First and foremost tax legislation has to be effective and it must not hinder growth. Secondly there must be equity. By that I mean we must look at who bears the burden of taxes. A bill of this size is slightly less relevant to the majority of ordinary income-earning New Zealanders but it is still very important for those who are affected by the provisions in it. Thirdly the bill has to have fiscal integrity. By this I mean that tax legislation cannot provide incentives for people to restructure their affairs in order to perpetrate tax avoidance. Fourthly there must be compliance in administration. Citizens must understand their rights and must be able to access the information that allows them to be informed of their rights. Compliance costs should be kept to a minimum without compromising the integrity of the system. Finally any tax legislation needs to take into account the fiscal implications and by this I mean how much revenue the Government will gather or how much it will miss out on by the implementation of any tax law. 
When the Finance and Expenditure Committee approached its deliberations on this bill we members had to take into account all of these points. I think that is what Mr Cunliffe was saying in the sense that when we had a bill that was so large so wide and so varied at times select committee members certainly on the Labour side felt there was not enough time to give proper and effective deliberation to many of the important clauses in the bill. I reiterate however that due to the size of the bill its depth and our time constraints it was difficult to give each separate clause its due consideration. I do believe that. This is why we have some concerns over the Supplementary Order Papers which were not put before the committee for consideration or for expert opinion. That is why we are reluctant to support those Supplementary Order Papers as my friend David Cunliffe mentioned. 
After having said that I will talk about an area of international tax law. To read out the clauses in this bill that affect international tax law would take about 5 minutes anyway. There are over 100 clauses there; members do not all know the legislation but they should believe me. The area is incredibly complex and probably deserves more attention for the reasons given. We quite quickly get into layers of complexity that reflect the ongoing game of poacher and gamekeeper. Many private entities hire very very expensive and the best tax advisers to ensure that their tax is minimised so that their tax efficiency is maximised. The Crown’s officials are required to stay one jump ahead of that practice which is why the advice from our expert consultants was so valuable in the deliberation of this bill. But the bill still strikes a reasonable balance between the need to remain internationally competitive which is vital to the sustainable growth of the economy and the need to provide clear rules that will allow the tax base to be preserved. 
I will go through just a couple of things in the bill. The bill will ensure that key provisions relating to controlled foreign companies—CFCs as Mr Bennett outlined—are set in one place in legislation. That will hopefully make the rules more accessible. The bill puts in place technical amendments to the accounting-based active business test for controlled foreign companies to reduce the cost of applying the test. The bill also provides that for the purpose of the tax-based active business test consolidation is permitted only when a taxpayer has income interest of more than 50 percent in each of the controlled foreign companies to be consolidated. These things are reasonably technical but are in fact very important for controlled foreign companies. The bill provides that income from personal services that are not essential support for a product supplied by a controlled foreign company is attributed but then is disregarded for the purposes of the active business test. We recommend that currency conversion rules also apply to the active business test.