Adams Amy: Taxation (International Investment and Remedial Matters) Bill — First Reading 
Adams Amy: Taxation (International Investment and Remedial Matters) Bill — First Reading 
[Volume:668;Page:15139] 
AMY ADAMS (National—Selwyn) 
: 
 It has actually been a little while since I have risen to take a call in this House. I have been sitting here hoping that it is like riding a bike and that I will remember how to do it. 
It is an interesting time to take a call on the Taxation (International Investment and Remedial Matters) Bill. The first trick with this legislation is not to get it confused with the Taxation (International Taxation Life Insurance and Remedial Matters) Bill which of course went through the House earlier last year and is now law. I tell Mr Robertson how much I enjoyed sitting through the Finance and Expenditure Committee when we worked through the detail of that bill. In actual fact the process of working through that earlier bill has been quite helpful for me in framing the debate around this legislation because it looked at the same core issues that this bill is addressing: in essence the proper way that we tax in New Zealand income both passive and active from foreign entities. 
With that bill the select committee worked through the process and saw the wisdom of moving away from the old “grey list” test by which we exempted income earned in certain qualifying countries but which was very unfair and unclear as to how everything else was taxed. We moved instead to a much simpler test where Inland Revenue would look at whether the income was actively earned in that country and whether the company was actively trading in which case it made sense to put them on a similar footing to local companies in that jurisdiction or whether that revenue was earned on a passive basis in which case fairness suggested that it should be taxed here in New Zealand according to New Zealand rules. That made sense to the committee it was subsequently passed by this House and as far as I know it is working very well. 
With this bill before us tonight we see the extension of that regime to non-controlled foreign entities owned by New Zealand residents. On the face of it that extension seems to make a lot of sense to me but of course if this House approves the first reading tonight we will have to work through in select committee exactly what impacts that extension will have why those entities were originally left out of the regime and what any unforeseen aspects might be. 
I will touch very quickly on two other matters in my contribution tonight. One is around the changes to the thin capitalisation rules which are probably a little-known pointy-head aspect of taxation law but are actually rather important. This bill proposes changes to the thin capitalisation rules for non-residents. One important change is providing an alternative test which on the face of it seems to be a very sensible alternative allowing an assessment of interest expenditure as a proportion of income for companies that are not State-owned banks. That seems to make a lot of sense in ensuring that those thin capitalisation rules work well; again I will be very interested to hear from officials and submitters as to the impact of that change as we work through the process. 
The final point I want to pick up on is about looking back into the dark old ages. Reading through the explanatory note I saw a reference to the Stamp and Cheque Duties Act 1971. I have to say that in my early days of practising—and Minister Wilkinson will remember those days—we had to collect stamp and cheque duty in all conveyances. I was surprised to see that it is still active. But yes we indeed have a requirement under that Act that for approved issuers there is an exemption from non-resident withholding tax and that the rate for those approved issuer levies is set under the Stamp and Cheque Duties Act. This bill would see that rate reduced from the current 2 percent to a robust rate of zero percent. I am very pleased to see that my old friend the Stamp and Cheque Duties Act still breathes life. Again I will be very interested in talking to officials about how reducing that rate to zero percent will affect the situation. 
I support the bill. It seems to be a sensible extension of the regime previously approved by this House but of course until we hear from submitters and until we work through the process we will not know exactly how it will apply. At this stage I am very happy to commend the bill to the select committee. Thank you.