Parker David: Taxation (International Investment and Remedial Matters) Bill — In Committee 
Parker David: Taxation (International Investment and Remedial Matters) Bill — In Committee 
[Volume:677;Page:462] 
Hon DAVID PARKER (Labour) 
: 
 We will be voting against Part 3 but we want to vote for the Taxation (International Investment and Remedial Matters) Bill. The bill will be improved if Part 3—or clause 142 which is the same thing—is omitted. I want to explain to the Minister of Revenue my reasoning for that.  
Since my last contribution I have confirmed that there are some bond issuers in New Zealand—namely large corporates—that can currently issue bonds that do not incur non-resident withholding tax on the interest that is paid to the overseas lender. At the moment the only contribution to the revenue in New Zealand that is made by those international lenders into New Zealand is the 2 percent issuer levy. If that levy goes to zero percent effectively the interest that is being paid to the overseas lender will incur no tax and no approved issuer levy. There will be no contribution to the New Zealand revenue in respect of an income payment that is being paid out of the New Zealand economy to that overseas lender and the Labour Party thinks that is wrong. We think that those people should be paying either non-resident withholding tax or an approved issuer levy at a decent rate.  
If there are ways currently of avoiding the approved issuer levy that are unfair to some people who go through the proper route—if other people avoid it—close the loophole. But what is the case for international sources of capital paying no tax and no approved issuer levy? They have the benefit of our enforcement of the rule of law—the enforceability of their contract—and our economic settings which are underpinned by taxation that funds the police who protect law and order that funds the court system that funds education and that funds health which means that we have a healthy and employed workforce and economy which means that the New Zealand borrowers can afford to pay the interest that the overseas people want to get. That is why they should be paying some taxation just as everybody else should be. They should not be paying as high a rate of tax as a New Zealander because they do not benefit from all of the things that we get—I get my own health and education—but they should pay some tax.  
This proposal by the Government is wrong. There are the good parts of this bill and we have acknowledged those but this part is patently wrong. I thought my colleague David Cunliffe made a very good point. If this is going to have any effect what you are effectively creating is a disincentive to New Zealand savers. You are effectively creating a bias in favour of the overseas investor which reduces the rate of return that would otherwise be earned by competing New Zealand investors. Presumably the theory that lies behind this is that the cost of funds overseas becomes more competitive because you keep interest rates in New Zealand down. Well although there was no good evidence of that—and we say it fails for that reason—if it were true it would be creating a disincentive to New Zealand savings which would be encouraging consumption rather than savings and would be going further away from this need to rebalance the New Zealand economy towards improved New Zealand savings— 
Hon David Cunliffe 
: Making the current account deficit worse. 
Hon DAVID PARKER 
: —reducing the New Zealand current account deficit through improved savings. Instead we will have less New Zealand savings and we will have a worse current account deficit. So this bill fails both in terms of the fairness of overseas people not paying their contribution towards tax and this part undermining the New Zealand economy by decreasing the incentive to save increasing the incentive to spend decreasing the incentive to invest in our productive export economy and increasing our incentive—I would suggest Mr Cunliffe—to invest in our speculative economy. Both of those things go to increasing our current account deficit and over time increasing New Zealand’s net international liabilities.  
This is a poor part of the bill. That is why despite the fact that it is a small part of the bill that will not cause us to vote against the whole of the bill we have submitted an amendment that omits this particular clause—clause 142—which is to that effect. I would ask for the support of other parties in this Committee to vote in favour of my amendment to omit clause 142 from the bill.