Nash Stuart: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee Third Reading 
Nash Stuart: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee Third Reading 
[Volume:657;Page:6648] 
STUART NASH (Labour) 
: 
 First and foremost even though we are debating the Committee stage—and are about to go into the third reading—in urgency I think it is important to note that after the first reading of the Taxation (International Taxation Life Insurance and Remedial Matters) Bill it went to the Finance and Expenditure Committee. Select committee examination is quite an important part of the legislative process. Some of the other bills before the House recently have not gone to a select committee. Therefore the public does not have any right or ability to present submissions on them. In terms of process this bill followed a very good process. The select committee received and considered 78 submissions and heard 51 oral submissions. As members can imagine they were on some very complex areas of tax law. Reading those submissions and doing the background reading on the oral submissions was quite onerous and that is what I think a lot of members mean when they say that there was quite a tight time constraint. 
It seems a while since we mentioned one of big aspects of this bill and that is associated persons which I would like to talk about. Amy Adams is right; this bill is about more than international taxation life insurance and remedial matters. This bill covers a whole raft of provisions and a whole raft of changes to the actual tax system. It is the largest tax bill apart from the rewrite to come before the House. Let us talk about the definition of “associated persons”. This part of the bill received much consideration from all members and resulted in many reams of paper spitting out a whole lot of judgments from officials consultants and advisers. We wrestled with the risk that by relaxing the rules the resulting law might not catch people who should be caught by an associated persons rule. We all acknowledge that the implementation of this provision will be very important and the ongoing supervision and monitoring by officials will also be important. Because it is a complete rewrite we may be back in this House considering amendments if it does not look good. 
The committee proposed amendments that aimed to reduce uncertainty which is what tax legislation should be about and to narrow the scope of the proposed test to exclude truly arm’s-length transactions. The amendments included narrowing the scope of the tripartite test and excluding certain relatives from it. An example was given of parents who divorce the father marries again and the woman he marries has a son from another relationship; that relationship would have been caught before. We wanted to make sure that those quite tenuous relationships were excluded and to create certainty. We created an additional exception test for relating companies we recommended that the test apply not only for the purpose of land provisions we excluded charitable organisations from the test and we created an exception for certain employee trusts and an exception for partnerships. As I said the associated persons section took up quite a lot of time. 
I would also like to talk about international tax rules. I take the Minister of Revenue’s point that some of these provisions had been debated and discussed in the earlier Committee debate but that was a while ago and I think it is worth reiterating them. This area was incredibly complex and deserved a lot of attention. Well it received a lot of attention but it probably deserved a little more attention. We quite quickly got down to layers of complexity that reflect the ongoing game of poacher versus gamekeeper. I think we all understood that in terms of the global economy and global competitiveness New Zealand’s international tax regime needed to be amended and that was what the bill did but many private entities of course hire very very expensive—the best—tax lawyers and advisers to ensure their tax is minimised. I think it was Dr Michael Cullen who said that if as much time and energy went into creating wealth in this country as go into looking at ways to avoid tax we would be a very wealthy country. The Crown’s officials are required to stay one jump ahead whilst also maintaining the integrity of the tax system and making sure that New Zealand retains its global competitive advantages. 
The bill strikes a reasonable balance between the need to remain internationally competitive and the need to provide clear rules that allow the integrity of the tax base to be preserved. The committee ensured that key provisions relating to controlled foreign company rules were set out in one place in the legislation making the rules more accessible. We recommended that technical amendments to the accounting-based active business test for controlled foreign companies— 
The question was put that the following amendment in the name of the Hon Peter Dunne to a proposed amendment set out on Supplementary Order Paper 34 in his name to clause 2 be agreed to: 
to omit from subclause (29) “and (5)”.