Taxation (International Taxation Life Insurance and Remedial Matters) Bill — First Reading 
Taxation (International Taxation Life Insurance and Remedial Matters) Bill — First Reading 
[Volume:649;Page:17828] 
Taxation (International Taxation Life Insurance and Remedial Matters) Bill 
First Reading 
Debate resumed from 23 July. 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to take a call on the Taxation (International Taxation Life Insurance and Remedial Matters) Bill with the intent of bringing the debate in the House back to the issues at hand. Having listened to a number of serious personal attacks in the debate on the Appropriation (2008/09 Estimates) Bill I am keen to bring the debate in the Chamber back to a piece of legislation that National will be supporting tonight. 
This bill is enormous. It is not quite comparable with the volumes that Sir Ivor Richardson had brought to the House late last year whereby we rewrote the entire taxation Act. It became a doorstop for many of my accounting friends around New Zealand including those in Hawke’s Bay. This bill brings in some new policy in areas that National supports. We have policy out there that a number of New Zealanders particularly in the voluntary sector have been very pleased to see. Tonight I will just briefly cover some of the things that are in the bill. 
Firstly we are seeing a reform of tax rules for controlled foreign companies and for life insurers and a whole lot of base maintenance measures in the form of a widening of the “associated persons” definition. Secondly we are seeing quite a few tax simplification measures in the form of a number of tax filing threshold changes. That is good because we will see a reduction in compliance costs. For a number of small businesses out there the changes will mean that the threshold they need to reach before they are required to file certain tax returns is higher than it is currently and that will mean they are left out of that regime. That will lower their compliance costs and that is a good thing. We will also see changes that allow payroll deductions for charitable giving and for payment of volunteers which again I think is a good initiative. There is also an assortment of technical changes including remedial and tax rewrite amendments. The bill confirms the changes to the international tax rules that were previously signalled. The new rules are intended to take effect in the 2009-10 financial year. 
The key question though is whether this bill will make a step change towards lifting New Zealand towards Helen Clark’s goal of getting us into the top half of the OECD. As we count down the days to the general election we have to ask ourselves whether there is any policy on the legislative agenda that this Government is trying to drive through that will initiate innovate and get us up the OECD ladder which this Government promised to do at the commencement of its reign. One would think there was an opportunity to continue to do that. However tonight we have heard four key Ministers speaking in the appropriations debate take personal pot-shots across the Chamber when they had the opportunity to speak to the appropriations and to talk about their supposedly wonderful policies that they keep telling us about. But no they did not use that opportunity. 
We need to ask ourselves whether this Government is using its last days to address the key issues that New Zealanders are currently facing. And there are some key issues. Just a couple of days ago there was an official announcement that we had moved into a recession. We are seeing interest rates as high as they have ever been in a decade; they are seriously high. We are seeing a lot of New Zealanders rolling out of fixed-interest mortgages and into mortgages with higher interest rates and that is hurting. We are seeing high food prices and we are seeing a 5 percent inflation rate at the domestic level which is huge. We are seeing mortgagee sales for the first time in many years. There are a lot more than we have seen for a long time. We are seeing that the situation generally is a lot harder for New Zealanders. One therefore asks at this point in time what this Government is doing to improve the lot of New Zealanders. 
It was great therefore to be at the National Party conference last weekend and to hear a range of policy rolled out that will genuinely have a positive impact on the lives of hard-working Kiwis whether it be putting a cap on bureaucracy making sure that every item of Government spending is being used effectively or our education policies. We looked at the Trades in Schools programme that we are planning to roll out and our Youth Guarantee policy which is a fantastic policy aimed at keeping 16 and 17-year-olds in education for longer. Our policy of national education standards is a fantastic policy which we will be able to add to. Not only that; wonderful policy in terms of infrastructure was rolled out over the weekend adding to the $1.5 billion spend that had already been announced by John Key earlier in the year. We saw a robust transparent infrastructure policy that is aimed at helping to take New Zealand out of the tough times that we are currently facing. We have to understand that in business and in Government when the times are tough we have to invest in order to get the economy out of the doldrums and to help take it forward. 
None of those sorts of issues has been addressed or will be addressed in the speeches from Government members tonight on the appropriation legislation and this taxation legislation. 
The bill addresses some minor issues that will help in the area of volunteers and in the area of compliance costs by lowering the thresholds for small businesses. As KPMG said about the bill the amendments change business and investment tax results. It says that some of the changes are welcome and even overdue and others will adversely impact on taxpayers. There is a range of amendments as I have discussed but few will make the step change necessary to get us up the OECD ladder—to achieve the goal that Helen Clark set many many years ago. 
I want to focus on two amendments in the bill: firstly the implementation of one of National’s core policies which was announced last year and which deals with payments to volunteers—I do want to talk about that one—and secondly the tax simplification and the changes to the various thresholds. With regard to payments to volunteers that is a policy that John Key rolled out earlier and it has been picked up by the Labour Government. Labour has taken that great policy and we now see it being rolled into legislation. National is in the process of rolling out a range of innovative policies which I have talked about before—a raft of different policies—and the volunteer policy is one we are seeing delivered here tonight. 
Volunteers are a hugely important part of our community. If I look at my own seat in Napier I suggest that if those volunteers were not there the community would almost grind to a halt. Volunteers are a key part of any community and I acknowledge the volunteer sector. Craig Foss and I were privileged to hold a volunteers’ luncheon recently. We were able to acknowledge the hard work of 40-odd volunteer groups and everything they are doing in the community. It is great to have them there. It is good to have policy that supports them. National has always recognised the value of volunteers and has announced policies to support them. In this legislation we are seeing some of that policy coming to fruition and I think that is a good thing. I tell listeners out there that in the 2009-10 tax year these initiatives for the volunteer sector will be in play. 
Here are some examples of what will happen. Firstly all payments that reimburse volunteers for actual or reasonable expenses will become tax free regardless of the amount of the payment. That is a good initiative. Secondly honorarium payments will be tax free up to an amount of $500 per year. That is a good situation. It will help to increase the number of people who are involved in voluntary work. There will be opportunities to reduce compliance costs for community groups and also there is an opportunity to investigate a venture capital fund for community organisations. The removal of the cap on personal tax rebates for charitable donations is I think one of the most important things in this legislation. It will encourage more charitable giving from business and individual taxpayers. It will encourage more payments to the volunteer sector. I think that is good policy. 
I appreciate that my time is up. In summary what we are seeing here is a taxation bill that makes some amendments. National Party members do not see it as a step change that will have a big impact on New Zealand’s wealth or get us up the OECD ladder. There are some things in it that National supports particularly the changes to compliance costs and the changes in terms of the voluntary sector. 
HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Kia ora tatou e te Whare. When I applied for a job some years back they asked me whether I knew what I was looking at when looking at a financial spreadsheet. I said: “Of course I do.” because I wanted the job. They said: “Well what do you see when you look at one?”. I said: “Well I look down in the bottom right-hand corner and if the figures have brackets around them then the business is in trouble; if they haven’t got brackets around them leave it alone.” So on the basis of that I have been nominated by the Maori Party to be on the Finance and Expenditure Committee and to speak to this bill and I certainly hope never to speak to this bill again. 
The current situation of making companies earning up to $200000 a month file PAYE returns twice a month sounds like a plan to keep bureaucrats in work and bury business enthusiasm beneath piles of pointless paperwork. This bill to change things so that companies making up to $250000 a month will have to file returns only once a month is going to come as a nice surprise for many small businesses such as Te Ropu Pakihi in Horowhenua; Te Kupeka Umaka Maori Ki Araiteuru down south probably in Dunedin; Manaaki Solutions up in the Bay of Islands; and hundreds of small Maori businesses all over the country. It will also be well received by Maori business networks like Te Awe Wellington Maori Business Network here in Poneke Te Waka Umanga o Whangarei up north and even the new network launched up in Gisborne today to “inspire motivate and connect Maori business people throughout Rawhiti”. 
It is important to note that the Global Entrepreneurship Monitor reckons that 73 percent of Maori see starting business as a good career choice while only 60 percent of the rest of the population think so and that Maori have higher expectations of job creation than non-Maori—characteristics that Maori seem to have big doses of: positive thinking; risk-taking; the pursuing of ideas; and big aspirations. All of that ties in with a recent report of the New Zealand Institute of Economic Research entitled  
Te Wa o te Ao Hurihuri ki te Ohanga Whanaketanga Maori 
 which called Maori entrepreneurs “irrationally exuberant”—probably because of the fact that although Maori rate very highly in business optimism we also crash and burn more often than non-Maori. Despite our best intentions and notwithstanding our irrational exuberance Maori business survival rates are very much lower. Maori businesses will really appreciate having to go through the PAYE rigmarole only once a month thereby saving time and money and hopefully being able to focus on the business. 
Another key area in the bill is the updating of the petroleum mining tax rules to encourage greater investment in oil and gas exploration but also to safeguard our taxing rights over our own petroleum resources. For Maori that is important because looking back into our own history we see that Maori still had legal title to petroleum here in Aotearoa right up to 1937 and that as a result of the loss of that title a number of Taranaki iwi took a case to the Waitangi Tribunal for recognition of their rights and settlement of their petroleum claims. The Waitangi Tribunal ruled that Maori had a Treaty interest created by loss of legal title to petroleum and that whenever that Treaty interest came up Maori would have a right to remedy and the Crown would have an obligation to provide compensation. Yet the Government refused to pay up making it very very frustrating for Taranaki iwi to have to sit and watch everybody else clicking the ticket and maximising the bucks from the Taranaki oil and gas fields while the iwi got nothing. Although we recognise that this bill introduces changes to ensure that New Zealand gets its fair share of the benefits from the petroleum mining industry we call on the Government to also recognise how those benefits derive directly from resources stolen from tangata whenua and to consider how full and proper ongoing compensation might be made to iwi in the future. 
The key focus of the bill though is on changing the rules for taxing the offshore income of Kiwi businesses in order to promote growth and to enable them to compete more effectively in foreign markets. That all sounds good but business growth also brings its own set of problems including a culture that values growth at all costs quantity over quality and profit above people. That is why the Maori Party thinks the time is right for a national dialogue about the genuine progress index reforming the tax system regulating growth to achieve a sustainable economy and ensuring that growth leads to real and measurable prosperity taking into account the impact of business activity on people’s well-being health jobs lifestyles energy use resource use and attitudes to the environment—like making big polluters pay up first rather than giving them a big holiday while the ordinary folk have to cough up for that pollution in more ways than one. 
One final thing: we hear reports that the changes to how we tax overseas income may lead to a $50 million loss of tax revenue. Well our calculations suggest that it might be a lot more than that so we are looking to the select committee for a more thorough analysis of what that loss might actually be. Kia ora tatou. 
KATRINA SHANKS (National) 
: 
 It is my pleasure to rise and speak tonight to the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. This bill is having its first reading and as I said it is a pleasure to stand here and support it. 
I will give a bit of a background on what this bill is about and I want to look at one little part in particular—that is the payroll giving section. This is really all about charities and about allowing money to be channelled much more effectively into charities in New Zealand. In fact in the 2007 Budget the Government announced plans to look at several measures aimed at laying the foundation for a stronger culture of charitable giving in New Zealand which sounds really wonderful. 
Unfortunately it has taken the Government a long time to get to this point in terms of encouraging people to donate to charities. In fact this measure has come on the back of National Party policy which was announced last year on community groups and turbocharging community groups. It is surprising that it took National to come forward with such an initiative before the Labour Government actually thought of doing this and putting something in place. The Government waited 8 long years—until National came out with a discussion document and some policy around community initiatives—to get this legislation to where it is today. 
National’s policy is to introduce the following measures in order to promote the growth and vitality of our community groups. It is about removing the cap on personal donations in order to encourage more people to donate to charities in New Zealand. The cap on personal rebates for charitable donations will be removed. Donations of any amount up to an individual’s total net income would be eligible for the rebate. So if a person wanted to give $30000 for example he or she would be able to get a rebate of $10000 at the end of that year. This is absolutely a great initiative that we put out in our policy paper. 
The other policy is the removal of the cap on business donations. Every business will be able to claim a tax deduction for any level of donation up to its total net income for the year. This will encourage businesses to support groups doing good works in their communities. It is very important as well that we get businesses involved in donating to organisations and charities around New Zealand just as individuals do. Hand in hand individuals and businesses can make a huge difference to the charities in New Zealand. 
Then of course we went on to expand it a little bit further—which this bill does not do—by having tax-free reimbursement for expenses. Payments that charities make to volunteers to reimburse their expenses will be tax free regardless of the amount of that payment. Currently if a charity reimburses a volunteer for his or her costs it has to be declared as income and income tax should be paid. Some charities have an historical arrangement with the Inland Revenue Department to waive this tax but most do not. That just is not fair. 
As members can see National has gone ahead and addressed many of the issues around donations and giving to charities which this Labour-led Government has not yet got around to. Maybe it will put forward a Supplementary Order Paper to reflect some of our good initiatives and that may happen as we go through this debate. Also National brought out in its policy the fact that honorarium payments of up to $500 per year per person will be tax free. At the moment if a charity makes an honorarium payment to a volunteer it is seen as a taxable income. That is something that really should be looked at and adjusted. 
National went on to say that bureaucracy and compliance costs will be reduced. When the Government funds a community group to provide a service then that money should go towards helping out on the frontline not towards filling in forms that Government departments often do not read anyway. So we can see that National’s policy on communities goes a lot further than this bill even looks at going in terms of businesses and employees working together to give more money to charities. 
National went on to say that when the Government wants to run a community-based programme and there is a competitive tendering process community groups will be encouraged to put in bids that reflect the full cost of delivery including all relevant overhead costs. National policy then went on to talk about a venture capital fund. National is investigating developing a venture capital fund to boost organisations that have capacity to do more want to do things in a different way or are new to the community sector altogether. 
I find it really interesting that the Labour members of Parliament who are sitting in the House tonight have just let me read word for word National’s whole policy on communities and not one person has got up to say that this is not relevant to the bill. As we can see National members of Parliament are listening to the debate and are actively inputting into it. Labour members though are obviously not particularly interested in this legislation—I have just managed to read out National’s policy word for word. Listeners tonight have just heard some fantastic policy from National as we talk on the taxation bill. 
I am trying to work out what other policy announcement I should make while I am standing up here because we know that everybody wants to hear policy. [ 
Interruption 
] Would Labour members like me to read this to them again? I am more than happy to start from the top of this policy document. They were not listening earlier but now I have their attention and they are more than interested in listening to what I have to say about our community groups policy. If they had been listening at the beginning of the speech they would have heard me say that National produced this discussion document before the Government put together this legislation. 
I turn again to the payroll giving section which I started speaking about earlier on. It is a very very good initiative. It is about employees and employers working hand in hand to give to charities and organisations and it is a better vehicle for getting money to them. What is does is quite interesting. There is an onus on the employer in terms of the employee giving. It is fantastic that we have this vehicle whereby people can give through their payroll if they want to but there are some catches in this legislation. 
One of the catches is that people can give through payroll giving only if their employer does electronic returns. So there is an onus on employers to be electronically set up with the Inland Revenue Department and not every employer is. Those poor people out there who are still on dial-up—because this Government has not got its act together on broadband across New Zealand—will not be able to log on to the Inland Revenue Department site because access is too slow. For them access to any website with graphics will be slow and the Inland Revenue Department has a lot of graphics on its site so employers with dial-up most probably cannot offer payroll giving to their staff. 
I ask Chris Tremain to hand me National’s broadband policy. I would not mind reading it out right now; as I said Labour members are not actually listening. National’s broadband policy will allow people to do online giving. I will quickly tell members how. If employers are on dial-up they cannot offer employees this option because they will not be able to dial up to do electronic banking. National has said that we are slipping right behind the rest of the world in where we are on broadband and that we can do much better. In fact National is talking about taking broadband to 75 percent of the country and installing— 
Chris Tremain 
: Fibre to the home. 
KATRINA SHANKS 
: —fibre to the home; that is it. Fibre to the home will mean fibre to businesses and that will mean everybody’s access is much much faster and there should not be any excuse for 75 percent of New Zealand not to have broadband. 
That will mean that all those businesses that cannot dial up into the Inland Revenue Department and cannot offer payroll giving—I see we have some Young Labour members sitting up there. It is good to see that you made it here tonight. Did you enjoy the National Party conference? That is what we want to know. 
Mr DEPUTY SPEAKER 
: There is to be no discussion with people in the gallery. 
KATRINA SHANKS 
: I am sorry Mr Deputy Speaker. I wanted to welcome them into the House tonight. 
I come back to payroll giving. There are some drawbacks in the payroll giving system. The first is that the employer has to be able to file electronic returns with the Inland Revenue Department. The second is that the tax credit is calculated on a set rate which I suppose makes it easier to work out but it also means that there has to be another part of the form that will allow payroll giving. 
The one thing do I wonder about is how this will be policed. Once the donation has been taken out of the employee’s account how do we know that the money has then been handed over to the organisation it is meant to go to? I am worried about how this will be policed and I am worried about the fact that there is more onus on the employer. But overall I think it is a good initiative. 
A party vote was called for on the question  
That the Taxation (International Taxation Life Insurance and Remedial Matters) Bill be now read a first time. 
Ayes 112 
New Zealand Labour 49; New Zealand National 48; New Zealand First 7; Maori Party 3; United Future 2; Progressive 1; Independents: Copeland Field. 
Noes 6 
Green Party 6. 
Bill read a first time. 
Bill referred to the Finance and Expenditure Committee