Dunne Peter: Budget Debate 
Dunne Peter: Budget Debate 
[Volume:639;Page:9372] 
Hon PETER DUNNE (Leader—United Future) 
: 
 United Future is pleased to give its support to this Budget because in many senses it delivers on a number of the key policy objectives that were put in our election policy in 2005 and that were part of our confidence and supply agreement with the Labour-led Government. I refer to the business tax review to the changes in the donations regime for charities and to the establishment of a pest-control group to study how future pest management can occur in this country. I want to talk about each of those in a little detail in the time I have available this afternoon because collectively they demonstrate the role that a small party can play in supporting a Government to achieve its policy objectives and make significant progress for the benefit of the people of New Zealand. 
This Budget contains a $3.4 billion business tax package. It is the biggest business tax package since 1988 and the first change to our corporate tax regime since that time. I am very proud of the fact that what the package delivers is entirely the policy United Future put to the electorate 2 years ago. We talked about reducing the company tax rate to 30c in the dollar. That is achieved. We talked about bringing in a research and development tax rebate regime at around 15 percent. That is achieved. We talked about the need to maintain competitiveness in our international tax regime and through the work being done with the forthcoming changes to the international regime we can tick that off as achieved as well. Although we can sit here and feel some satisfaction at our achievement the really big gain is for New Zealanders because all those gains represent wins for New Zealand workers for their employers and for the enterprises for which they dedicate their time. 
 One of the key objectives of the business tax review was to maintain competitiveness with Australia and to boost productivity in New Zealand. By moving to a rate of 30c in the dollar we match the Australian rate and we come close to the OECD weighted average. But more important we go ahead of the Australians because we do not have the state taxes the stamp duties the capital gains taxes and the other impositions that go on top of the federally imposed corporate tax regime in Australia. At the time we started to talk about comparability with Australia some people asked: “Why limit your horizons?”. It is very simple: 70 percent of New Zealand’s business is with Australia. Australia is our major trading partner. If we can get a competitive advantage over Australia then we are well placed to take on the rest of the world and that is what the driver of that business tax review was. 
But at the time we released the document I think that potentially the most significant point came late in the document and was overlooked by many. That was the review of the international tax regime that we foreshadowed. A discussion paper was released last year. The Budget today makes it clear we are going to move to an active-passive regime for New Zealand income earned overseas. I want to explain that in a little more detail because it is critically important. At the moment we tax all New Zealanders businesses or otherwise in New Zealand on their worldwide income. So a New Zealand company that may have a manufacturing plant in Shanghai for instance paying the local tax rate that may be equivalent to 10 percent in the dollar is under our current regime taxed on that rate plus then the statutory rate in New Zealand. It makes no sense and it is a complete disincentive for those businesses to stay in New Zealand. Of course they will want to relocate manufacturing plant offshore to be nearer to markets but what we are having at the moment is that they are relocating the entire business because of the tax disadvantage. 
So the introduction of an active-passive test means that income earned actively overseas—in this case through the manufacturing entity that I gave the example of—can be offset against tax payable in New Zealand. That will even out a number of the discrepancies that are present at the moment. We have worked very closely with the business community. We have consulted widely with them and we will continue to do so in the ongoing design and implementation of that package. 
It is significant in most of the comment I have seen since the Budget that there has been very positive recognition of both the change in the company tax rate and the move to reform our international tax regime. It is rather absurd when we look back on all the changes that have occurred since 1988 in the international economic environment—the growth of free trade around the world and the opening up of various closed economies in the past—to see that we are one of the few countries that maintain the same international tax regime today as in the days when the Soviet Union was alive when the proverbial Polish shipyard was alive right through eastern Europe when the growth of China had not started to explode and when all the developments we have seen in recent years and that we have been so keen to be part of were incipient. So it makes common sense to change our rules now to get us up to play with everyone else’s game. That is exactly what today’s changes are all about and I am very very pleased to see those. 
Similarly—and I refer to changes to research and development rules—we have often prided ourselves on Kiwi ingenuity. We call it the No. 8 fencing wire mentality. In more recent times we talked about what originally was the Team New Zealand approach—it then became the Weta Workshop approach—of innovation skill and brilliant devising of new products by New Zealanders. Then we lament the fact that people say that it is too difficult to do business here and that they are going elsewhere because the regimes are more attractive. A 15 percent research and development scheme in the way it has been outlined in the Budget will give us the scope to retain a significant amount of that investment and opportunity in New Zealand and also to attract new investment in the research and development area. I think that is a very positive thing not just for our image of New Zealanders but also for those young innovators coming forward who have skills who have ideas who want to work in New Zealand and make this country their base and their home and who want to see this country benefit from the innovation they have to offer. So I am pleased for them because this Budget and these moves represent a victory on their part as well. 
I refer now to the area of charitable donations. I hate to steal the Leader of the Opposition’s thunder but I have to tell him in good truth that the very day he made his first announcement was several hours after we had actually decided on the policy that is contained in the Budget. So although he is a little bit behind the eight ball I welcome his support. It is one of those happy coincidences and I assure the member that it is absolutely true. 
Rodney Hide 
: Did it leak? 
Hon PETER DUNNE 
: No it did not leak. As far as I am aware he just happened to divine the same sort of thinking that we were working on. 
But let us go through what it means. At the moment every New Zealander who makes a donation to a registered charity—there are about 90000 of these organisations in New Zealand and we as individuals donate around $356 million to them each year—gets a rebate of 33c in the dollar on the first $1867. Under the proposals contained in this Budget which will be law from 1 April next year there will be no limit. That rebate will apply to every donation made and it will apply to every donation made by a business by a Maori authority or by other corporate identities. So the total set of restrictions is being lifted and New Zealanders will be able to embark upon the development of a culture of giving knowing that the State is there to support them in that endeavour. I think that is extraordinarily positive not only for the generosity of New Zealanders—for their sense of philanthropy—but also for the role of the voluntary and charitable sector in New Zealand moving forward. I am delighted we have been able to deliver that. 
But it goes one step further. We are also investigating the introduction of payroll giving which means that the deduction can be made at the point of payment. The employee simply notifies the employer of the charities he or she wishes to make the donation to and the rebate will be payable instantly. That happens in other countries. I think the Australians have moved in that direction; the British certainly have. We are looking at the feasibility of legislation coming in next year to provide for payroll giving in New Zealand. So a complete new way of approaching charitable donations is on the way. The one area we need to do more work on—and it was contained in the discussion paper; there is huge support for it but we have to develop the mechanisms a little better—is how we recognise the voluntary contribution of time. I give notice that that is on the agenda as well. 
To sum up—because I know Mr Assistant Speaker that you are going to call me to a halt very shortly—this Budget titled “Saving and Investing” is a positive statement for the country’s future. Its achievements as far as United Future is concerned show what a small party working constructively in Government in the MMP environment can achieve. In that sense contrary to some of the doom I have heard I think this Budget is a triumph for the politics of collaborative Government where partners work together to achieve policy objectives within a coherent whole. I think New Zealanders will look with some satisfaction at the fact that we have been able to bring together a Budget that is as bold as this one is in so many different areas. That is why United Future is pleased to support it.