Flavell Te Ururoa: Taxation (International Investment and Remedial Matters) Bill — First Reading 
Flavell Te Ururoa: Taxation (International Investment and Remedial Matters) Bill — First Reading 
[Volume:668;Page:15132] 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 Tena koe Mr Assistant Speaker. Kia ora tatou katoa. I am pleased to take a short call on the Taxation (International Investment and Remedial Matters) Bill on behalf of te Pati Maori. Three weeks ago the Minister of Finance told the House that New Zealand’s economic recovery is vulnerable to any kinds of price shocks including oil price shocks. At the moment there is evidence of increases in commodity prices which suggests that there could be risks in the future and of course we come to this bill aware of the impacts of what many economists consider to be the worst financial crisis since the Great Depression of the 1930s. We have been through a time marked by a failure of key businesses declines in consumer wealth estimated to be worth hundreds of trillions of US dollars and a significant decline in economic activity. In this context then we are interested in the impact of the proposed introduction of an active income exemption for foreign investment funds. 
Basically this bill aims to reduce compliance costs by offering transparency in the current law by streamlining the process around the taxation of income from foreign investment funds. It does this in an attempt to encourage New Zealand investment in offshore investment funds. In terms of the extent to which such a proposal may incentivise small businesses to grow by reducing compliance costs the Maori Party is definitely interested in seeing how this plays out over time. The Maori Party places particular priority on the need to support the development and innovation of small businesses including minimising taxation and compliance costs. In this bill that goal will be achieved by simplifying the number of calculation measures. Apparently six different measures are currently available. Under the act of income exemption for foreign investment funds only passive income such as interest royalties and rents derived by New Zealand shareholders in offshore companies will be subject to New Zealand tax. 
The key problem the bill is seeking to address is the inequity experienced by foreign companies offshore in having to pay New Zealand tax as well as comply with the tax rules of their particular country. New Zealand’s international tax rules can often impose higher tax or compliance costs on offshore operations than those faced by competing businesses operating in the same country. Any New Zealand business that invests in a foreign company must not only comply with the tax rules of that country but also attribute income and potentially additional tax in New Zealand. Such a situation can tend to create an incentive for New Zealand companies seeking to establish business ventures outside of Aotearoa to relocate their headquarters to countries that have far more favourable tax rules. 
So a very clear benefit in the proposal in this bill is that although we are unable to stop the seemingly unstoppable drive to expand offshore at least we will not be threatened by the possibility that New Zealanders will sell up and leave Aotearoa for good because of an unforgiving tax regime. The Maori Party is happy to support this bill at its first reading to enable the korero to be had. Kia ora tatou.