Nash Stuart: Taxation (International Investment and Remedial Matters) Bill — First Reading 
Nash Stuart: Taxation (International Investment and Remedial Matters) Bill — First Reading 
[Volume:668;Page:15128] 
STUART NASH (Labour) 
: 
 I rise to take a first reading call in support of the Taxation (International Investment and Remedial Matters) Bill. But before I do I would challenge Minister Coleman who brought this bill to the House to show me the clauses that talk about payroll giving associated persons insurance companies and all those sorts of matters that he brought to the House in his first reading speech. I would not mind knowing where those clauses are. But I know members all know and everyone in this House knows that there are no such clauses because the Minister gave the wrong speech. We all know that Jonathan Coleman will not have written that speech. This is not Jonathan’s area. Jonathan was the Minister in the House at the time and he was told: “Here is the speech on the bill you have to introduce.” Someone on that side of the House is trying to stitch up Jonathan Coleman. I say to Jonathan that if I were him I would watch my back. One of his colleagues over there has stitched him up. It might have been Amy Adams. She wants his place. It could have been Craig Foss but someone gave you the wrong speech and you— 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: No one gave me the wrong speech. 
STUART NASH 
: I am sorry Mr Assistant Speaker. Someone gave the Minister the wrong speech and he spoke for 10 minutes about a bill that was passed 12 months ago—12 months ago. 
Hon David Cunliffe 
: Did he notice? 
STUART NASH 
: He did not notice. But with all due respect to Jonathan it is not his portfolio area. I do not expect Jonathan to know this but someone did know. Someone handed that Minister the wrong speech and that person is sitting up there saying: “Ah look what we have done to Jonathan Coleman.” I wonder which of the Minister’s colleagues gave him the wrong speech. I know that Jonathan will get to the bottom of that. 
I would like to make two points. The first is that Labour supports any tax legislation that reforms and streamlines our tax system that promotes equity and that closes off tax avoidance opportunities. Labour has always supported such legislation. The second point is that we will support this bill’s referral to a select committee. However at the Finance and Expenditure Committee Labour members will scrutinise this bill very closely and the reason we will do so is that the National Government’s track record on recent tax bills has been very poor in terms of promoting fairness and equity. As mentioned Labour supports any reforms that streamline our tax system close off tax avoidance opportunities and build on fiscal equity. This bill on the surface does appear to do this. It builds on recent changes to the tax treatment of international investments that were contained in a substantial tax bill that has been considered—a bill that was passed about 12 months ago I say to Mr Coleman. 
Specifically this bill changes the rules relating to foreign investment income by aligning it with the current method for calculating attributed controlled company income. The bill means that New Zealanders holding stakes of 10 percent or more in offshore companies will not be subject to New Zealand tax on interest unless the companies earn passive income such as interest royalties and rents. The bill replaces the current exemption for non-portfolio foreign investment funds in the eight “grey list” countries with an exemption of non-portfolio foreign investment funds that are resident and subject to tax in Australia. The bill makes changes to the thin capitalisation rules. Just for clarification a company is said to be thinly capitalised when its capital is made up of a much greater proportion of debt than equity—that is its gearing or leverage is considered high. I understand that what has been happening is that overseas companies have been gearing up to high levels in New Zealand and then claiming back deductions against interest payments. On paper as an individual entity the company may look a little shaky. However on a global basis the company is in no trouble at all and although I would not go so far as to say that this is a tax rort but it is certainly a way that multinational companies minimise their global liabilities. The bill provides for the delayed abolition of branch equivalent tax accounts for companies and the abolition of conduit tax relief accounts. It also makes some remedial amendments to the changes already made to controlled foreign company rules as mentioned in the big bill that the Hon Jonathan Coleman talked about tonight and which we passed last year. As mentioned Labour does support legislation that improves the integrity of the country’s tax system as well as closes down loopholes through which people are able to freely jump and avoid paying their fair share. 
My second point is that we in the Labour Party will support this bill’s referral to a select committee. However at the Finance and Expenditure Committee we will scrutinise this bill very closely because the National Government’s track record on recent tax bills has been very poor in terms of promoting fairness and equity. I will outline a couple of examples highlighting what I mean by this. The first example of a Government tax bill that pulled the wool over New Zealanders’ eyes was the bill that increased GST. John Key stood in front of New Zealanders looked them in the eye and said: “National will not increase GST.” and he did. National increased GST after he told New Zealanders that he would not. That Government raised GST when that Government’s leader had said that he would not do that and that is simply wrong. It is an example of a tax bill put forward by the National Government that is not good for the people of New Zealand. To tell New Zealanders that the price of items would rise by only 2.2 percent was always going to be wrong. Even the cost of Government-owned Lotto tickets has increased by around 10 percent. Another piece of tax legislation put up by this Government that was completely wrong in terms of promoting fairness and equity was the revision to the personal income tax rates. 
I do not think there is any doubt that as a country we are in the middle of a recession. No matter what the figures show one has only to talk to businessmen and businesswomen to the retailers and to the workers around the country to understand that the economy is suffering. So what did the National Government do? It did what no other OECD country has done and that is provide tax cuts to the most advantaged at the expense of the majority. The few did very well at the expense of the great majority. Someone earning a million dollars and there are about 650 people in this country who earn over a million dollars has just received a tax cut of $1000 a week extra in the hand. It is $1000 a week. Someone on the medium wage in Napier gets a tax cut of about $5 a week. It is $1000 versus $5. Is that fair? It simply is not fair. This tax bill in Budget 2010 cost about $14 billion and the National Minister of Finance the head of Treasury and the Governor of the Reserve Bank have all said that these tax cuts are not stimulatory. That means that the National Government has just spent $14 billion in the middle of a recession on a package that will not create economic growth at all. In fact it will have no impact whatsoever on economic growth. That is why this Government is the only Government in the world that has done this. The Minister said it will not stimulate the economy yet he spent $14 billion. We all know that in the last 3 months tax revenues have been down by a billion dollars. I ask the National Minister of Finance what he was thinking. I ask Treasury where the hell it got its forecasting from. 
In conclusion Labour will support any tax legislation that reforms and streamlines our tax system promotes equity and closes off tax avoidance opportunities. However we will scrutinise this bill very closely because the National Government’s track record on recent tax bills has been very poor in terms of promoting fairness and equity. Thank you.