Cosgrove Clayton: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
Cosgrove Clayton: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
[Advance Copy - Subject to minor change before inclusion in Bound Volume.] 
Hon CLAYTON COSGROVE (Labour) 
: 
 Mr Assistant Speaker— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I recognise the Hon Clayton Cosgrove. 
Hon CLAYTON COSGROVE 
: And I recognise you too sir. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Well done. 
Hon CLAYTON COSGROVE 
: Thank you. I am sure we all recognise you actually Mr Assistant Speaker given the venerable status you have—building on Mr Bennett’s comments. 
On a serious note Labour will support the Taxation (International Investment and Remedial Matters) Bill. As we know this bill builds on the recent changes to the tax treatment of international investments and like other members who have spoken have said obviously we are in favour of simplification and making it easier for companies to grow their revenues and to increase their capacities. It also aligns the rules relating to the foreign investment fund—or as it is known FIF—income with the current method for calculating attributed controlled foreign company income. 
But we do want to raise—and Labour members did raise in the commentary—a concern in respect of the approved issuer levy. Those concerns are regarding the removal of the approved issuer levy on payments of interest on securities meeting certain requirements as notified under the Income Tax Act. Now one of the issues I want to raise in respect of this is that there is a concern that relates to a further erosion of the tax base associated with financial transactions at a time as we know and as the Government has forecast of falling Government revenue. 
In a public session on the Finance and Expenditure Committee earlier this week we heard from the Inland Revenue Department and other submitters on a number of issues but there seemed to be a theme running through some of the submissions that the Government is of course you know in a sort of dash-for-cash mode. Whether it is cutting and slashing Government department capacity and services or trying to screw extra cash out of various other entities and agencies it is in a sort of clawback mode. We know why: because it has to fund on the borrowings and it is borrowing wide because it has given a small percentage of New Zealanders right at the top of the stack a large tax cut. Now all that means is that this Government is chasing revenue like billy-o. Everywhere there is revenue it wants it. It wants to drag it in. 
The concern that we raise—we support the bill—is that this move in terms of the removal of the approved issuer levy may indeed erode a falling and reducing Government revenue base. We were advised by a number of submitters that the proposals outlined in the bill would not help increase liquidity reduce interest rates or add depth to our capital markets. 
I know that the Prime Minister has waxed eloquent about wanting to increase the depth of our capital markets. He spins that as part of the line or the alibi for promoting asset sales—that somehow the partial asset sales will add depth to our markets and will give opportunities for investment; you have heard it all etc. etc. etc.—when we know exactly what will happen in respect of those assets. They will fall offshore and the returns that are made at least on the 49 percent of those assets will not flow into the coffers of the Crown. That is important for New Zealanders because those resources could be deployed to provide the social services we need but they will flow offshore. So at a time when the tax base is reducing at a time when the Government seeks to grab every bit of revenue it can there is a concern that this move may simply add to that. 
In addition our side of the fence is concerned that in some cases the current tax system already effectively contains a lower tax burden on offshore sources of capital relevant to the tax on domestic savings thereby providing an undesirable incentive for funds to be sourced offshore rather than being retained or saved domestically. I think that is a valid point to raise. Surely one of the objectives is for companies to retain capital onshore to save capital onshore and utilise that here. Now you know we are in sort of unchartered waters with some of this stuff. There are a number of international obligations here but again I think it is worth raising those concerns. 
Our side of the fence believes that there is a need for further work on this issue in order to improve the neutrality of the tax treatment of capital across domestic and international sources. So we of course are for simplification. We are for providing an environment where companies can grow and prosper and of course invest internationally but we think this is one area where the Government should have done some more work done some more in-depth analysis at least to allay I think the fears of a number of us in this House. I come back to it again: if there is a further erosion of the tax base do we have projections on that? I was not on the committee at the time but at a time when the Government is sort of out there trying to rake up everything that looks like a dollar then one wonders whether this is a potential risk. 
 We support this bill. We note that companies both domestically and those that are showing a tonne of guts actually to expand their operations and pursue markets offshore in order to expand their domestic capacity—and we applaud that. We want to see those companies growing and prospering here but also of course paying their fair share. I think it is worth when we are dealing with these bills to note with a degree of pride that we have some of the most innovative companies in the world. We have companies that are small in their number in their capacity but they are some of the most creative on the globe. So it is appropriate that we do what we can to assist—to align to make it easier to do business and to expand markets internationally—and we should pay tribute to those companies. 
I was in business once for a short period in my life. Probably the best lesson I learnt was that if you are in business it is the one area where if you do not work you do not eat. You are totally reliant on your own capabilities. We are lucky in that we get a pay cheque every second Thursday or whenever it is and whether we are any good at it—whether we sit on our chuffs or we do the work—the taxpayer is generous enough to pay us. When you are a small business when you are a sole trader you are a business and you are risking your own shirt. Again we had the privilege in Government when we were there and now these folk are there risking everybody else’s money on their behalf and utilising everybody else’s money on their behalf. When you are in business as we know you are risking your own shirt. 
I know that there are people across the country innovative business people who have shed a lot of sweat to get where they are or to maintain the number of employees they have in exceptionally difficult times. As I say the best lesson I learnt in life was if you do not work if you do not get out of bed and if you do not keep your eye on navigating the business through you do not eat because you do not get paid. It is all up to the business person and they do risk a lot. They are the ones of course who put bread and butter on the table of their employees. 
Governments can knock down roadblocks Governments can assist sometimes Governments create roadblocks but at the end of the day businesses create jobs companies create wealth and what we must ensure is that you know everybody pays their fair share. I know companies especially smaller businesses are staring at this and saying: “Oh no more compliance. More stuff we have got to keep our eye on or get up to speed on.” and every time you are getting up to speed on more Government compliance of course you are not behind the counter growing the business; you are behind the desk almost doing the Government’s work. So it is appropriate I think as we deal with these taxation bills that we do acknowledge the contribution of business. Labour will support the bill.