Foss Craig: Taxation (International Investment and Remedial Matters) Bill — First Reading 
Foss Craig: Taxation (International Investment and Remedial Matters) Bill — First Reading 
[Volume:668;Page:15126] 
CRAIG FOSS (National—Tukituki) 
: 
 It is a pleasure to speak to the Taxation (International Investment and Remedial Matters) Bill. [ 
Interruption 
] Obviously I have found some more Twitter followers over there. I acknowledge the previous two speakers in this debate Dr Jonathan Coleman and David Cunliffe. I am sure that this bill will be sent to the Finance and Expenditure Committee. The issues raised by the previous speaker do of course deserve a lot of attention. The Finance and Expenditure Committee will work through some of the key changes in the bill. There are not too many—there are a lot of remedial matters—but there are some and we will give them fair due and the sector will submit on them as normal. 
This bill must be seen as part of a journey. To be fair much of that journey started under the previous administration. These changes—the foreign investment fund changes the portfolio investment entities the tidy-ups the fix-ups the clarifications and the widening—all reference back to previous tax changes that came about mostly under the previous administration. So I welcome the magnifying glass that Opposition members have said they will be putting over this bill to make sure that it is in tune with where the original bills started out and with some of the issues that have arisen after they have come in. In particular foreign investment fund stuff has arisen since about 2007 I think. It brought in the 5 percent rate of return which is not quite the risk-free rate of return. It is all those changes around the “grey list” and the Aussie-listed companies—Aussie is essentially the one “grey list” country—and all those kinds of things. To be fair to the sector there has been a huge change and there has been quite a large impost of administration and compliance around those changes. I am glad to see that that has been acknowledged in the lead-up to this bill. The very good commentary which is about 80 pages goes on to explain many of the key aspects of the bill. 
As I noted the bill builds on and extends earlier legislation in particular the international tax reforms and reforms around passive and active income—what might be interest and what might relate to the ongoing activity of the business. The whole mission here is to create and encourage an environment where New Zealand companies that may be doing well around the globe can feel comfortable that they can stay tax resident in New Zealand particularly for earnings that would apply under New Zealand taxation law and not to put them at a disadvantage in some other jurisdiction which may have slightly different tax arrangements from ourselves. At the end of the day New Zealand will not change tax law in other countries but we can acknowledge the differences in the various tax treaties we have. 
This legislation will put “New Zealand Inc.” on a fair playing field with other entities. New Zealand has a sad track record of New Zealand companies moving offshore basically to chase capital and to get closer to the capital they require to grow. This bill starts to address that alongside other changes that came through in 2007; in particular in the large tax bill we passed in 2008; and in a recent bill that again clarified a lot of the issues. 
I want to concentrate on one thing in particular because I think it might get the attention of some members. I am looking forward to discussing this particular part at the Finance and Expenditure Committee. It is in relation to the zero rating of the approved issuer levy on bonds. The monetary policy inquiry that began under the previous administration in the Finance and Expenditure Committee and which was delivered in September 2008 just before the election spent a bit of time on this issue. As a headline everyone would often think that those who are issuing bonds into New Zealand should be subject to the same tax rates the same interest rates the same resident withholding tax etc. as others. In one sense that is fair enough. But if we tunnel down into the issues around it we see that at the end of the day this makes the interest rates that New Zealanders pay higher than they need to be. I will touch on some of the caveats related to that later. If the offshore investor who is issuing into New Zealand is asking for some returns of 6 7 8 9 or 10 percent—or whatever it might be; let us just use 10 percent—and if the approved issuer levy is two points 20 points or whatever it might be then that is added on. Therefore the end borrower in New Zealand is facing 10.2 percent as opposed to 10 percent. 
That must be seen in the context of where New Zealand is at. We are a debtor nation unfortunately; I think we all acknowledge the many issues to do with a lack of savings. But the reflection of the fact that we are a debtor nation is that we need to welcome foreign capital at least for the moment to help get us through this current situation and to put our economy on a better footing that may allow us to become a creditor nation and to start to deliver on some of our wants for this new millennium. 
I will just touch on some of the caveats. They are very tight but I see that they are getting the first cut analysis or one-dimensional analysis if you like. The approved issuer levy will be at zero percent. Issuers will still have to file a return on the 20th of every month to make sure that they qualify but it will be rated at zero. 
I will quickly touch on some of the caveats just to allay any fears that something untoward is going on. Among the key features of the changes to the approved issuer levy is that the security—that is debt by the way—is denominated in New Zealand dollars. The security is offered to the public for the purposes of the Securities Act 1978 which is another catch. The security is not issued as a private placement so nothing untoward is going on with dodgy partnerships or anything like that. The security is not an asset-backed security so there is no double leverage out of New Zealand or some equity funding something offshore. The registry and the paying agent activities for the security are conducted through one or more fixed establishments in New Zealand—that is it stays within these borders. And the security is listed on an exchange registered under the Securities Market Act 1988 such as the NZDX Debt Market or satisfies a widely held test because we do not know what might develop as far as exchanges go in the future. I particularly wanted to concentrate on that feature in my last few minutes because the amounts involved are huge. At the end of the day the $180 billion or $200 billion that New Zealand owes offshore all came through vehicles such as the Eurokiwi the various issuances out of Japan etc. 
This bill is essentially remedial. It makes it cleaner and better in recognition of New Zealand’s place in the world. It ties up with all the other tax agreements that New Zealand has signed to help New Zealand. Regardless of whether we acknowledge that we have to borrow the capital—we do—the intention is to at least try to make it as cheap and crisp as possible for “New Zealand Inc.” as we try to fund our way and build our way out of the economic quagmire that we are currently in. I look forward to discussing this bill further at the Finance and Expenditure Committee if the House so wishes.