Copeland Gordon: Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill — Instruction to CommitteeCWH In Committee 
Copeland Gordon: Taxation (Annual Rates GST Trans-Tasman Imputation and Miscellaneous Provisions) Bill — Instruction to CommitteeCWH In Committee 
[Volume:613;Page:10108] 
GORDON COPELAND (United Future) 
: 
 I would like to speak briefly about three items in Part 2 of this bill. The first one concerns the large-budget screen production grants which are set out in Supplementary Order Paper 170 in the name of the Hon Dr Michael Cullen. United Future has signalled its support for those grants to proceed but we do so with a number of reservations. Although that particular scheme seems to have been well-thought-through and well costed and I am assured by the officials that it will result in net gains for the New Zealand economy instinctively in a way I think I still feel uneasy about the fact that it does involve a process of picking winners. We do open ourselves up to the criticism that if grants should be made for movies then why not for building luxury yachts for example? If the idea is to attract movie business to New Zealand through those grants then why not say that we can also bid into New Zealand the construction for example of luxury yachts that might otherwise be built somewhere else? So I think that we will get on to a slippery slope. 
The point I would like to make is that United Future for that reason would support a general decrease in the corporate tax rate itself. In that regard we are all square with the National Party in saying that we believe the corporate rate should be reduced from 33c to 30c in the dollar. However some of my reasoning is a little different from that advanced by John Key. He simply mentioned that that would bring the headline rate between Australia and New Zealand to a comparable level and that is a very valid point. But I think there are some more important issues than that. 
The first issue I would like to mention is that lowering the taxation rate would actually reduce the cost of capital for New Zealand companies. All companies assess the cost of capital after taxation and if the taxation rate is lowered to 30c in the dollar New Zealand would be brought back into a much more competitive situation with regard to the cost of capital if for nothing else than because normally we run a higher interest rate than virtually anyone else in the world. So I see that as very much a business-friendly thing that would reduce the cost of capital and encourage investment in this country. That is the first point I wanted to make. 
The second point is that by reducing the company tax rate to 30c in the dollar—when the personal tax rate remains at 39c in the dollar and the trustee rate stays at 33c in the dollar—we would increase the incentive for people to leave money in their businesses and capitalise them because if they withdrew money from their businesses then their tax would go up. If they went through a trust then they would go from a rate of 30c to one of 33c in the dollar. At the moment a lot of people go through a trust in order to avoid the 39c in the dollar rate. The gap becomes bigger if the company rate is reduced to 30c in the dollar and we create an incentive for people to leave money in their businesses. That would be good for business and good for saving and I believe it would unleash a dynamic scoring effect in our economy in the sense that the flow-on would be an increase in job creation and in wealth for all New Zealanders. Those are United Future’s reasons for supporting the bill but in our view not doing so at the cost of continuing to examine the possibility of lowering the corporate tax rate. 
The second matter I will mention in brief is Subpart S “Arrangements involving money not at risk” which is to be inserted in Part E of the Act by clause 14. I am delighted this action has been taken to sew up the blatant tax avoidance schemes that have been going on. In particular I congratulate the Inland Revenue Department on its recent success in the Advanced Communication Technologies of New Zealand case which involved hundreds of millions of dollars. When I look at tax avoidance arrangements I always keep something very simple in my mind. We have nurses for example who work very hard in the intensive care ward at Wellington Hospital and do fantastic work paying tax on every single cent they earn. I do not think it is acceptable that when some clever dick comes up with a so-called “smart” scheme for avoiding tax we should let him or her get away with it. Anybody who walks into an office and says that if we put $1000 into a scheme that will save us $2000 or $3000 against our tax bill—” 
John Key 
: Where do I sign? 
GORDON COPELAND 
: I say to John Key that if he buys into that and wants to sign up for it then he has succumbed to—[ 
Interruption 
] I was going to say avarice one of the seven deadly sins. It is avaricious to enter into schemes like that because at the end of the day all the other people of New Zealand pay the bill.