Nash Stuart: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Nash Stuart: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16159] 
STUART NASH (Labour) 
: 
 Part 6 is quite a narrow part. I would like to correct a mistake I made earlier when we were talking about Part 4. I said that it was the only part in this 57-page bill not to be touched by the 70-page Supplementary Order Paper but I stand corrected. Part 6 is also not touched by the Supplementary Order Paper. I wonder whether the Minister has something to table because he has made considerable amendments to the rest of this bill and I suspect that perhaps he wants to make amendments to this part. It does not seem right that one or two clauses sit outside this Supplementary Order Paper so that people have had the ability to debate them! I am being facetious; I apologise for that. I must admit that this process borders on the ridiculous a little bit. As a New Zealander let alone as a member of Parliament I find it a little insulting that again we are standing here debating a tax bill that has gone through a very rigorous process only to have a 70-page Supplementary Order Paper lumped before us. I do not think that is how New Zealanders want tax legislation passed in this Parliament—in fact I know it is not what they expect.  
I come back to clauses 102 and 103. These are basically technical amendments concerning the approved issuer levy. I will give a little bit of background. Recently concluded tax treaties with Australia and New Zealand include a new exemption from source country tax for interest derived by banks. For interest derived from New Zealand the availability of this exemption depends on the borrower paying the approved issuer levy unless the borrower is not eligible to elect to pay the levy there is no such levy or the rate of the levy exceeds 2 percent of gross payments.  
I know this sounds rather technical and it is rather technical. It is a technical amendment but I think it is very important because it concerns banks and tax treaties. New Zealanders need to know about anything that concerns banks. It needs to be out there. Anything that concerns tax treaties is most important as well. As we know under this Government a lot of New Zealanders are deciding to up and leave. The details of tax treaties between New Zealand and other nations need to be available. If they decide to read the treaties that go on between our wonderful country and the country they are travelling to they should be able to do so.  
The proposed amendments in clauses 102 and 103 clarify the circumstances in which a person is eligible to pay the approved issuer levy. They make it clear that a borrower can pay the approved issuer levy in order to qualify for an exemption under a double tax agreement. I must admit that the Finance and Expenditure Committee has seen a lot of double tax agreements come before it recently. My colleague the Hon David Cunliffe will have something to say about this bit. He has put a lot of work and effort in with the Inland Revenue Department to make sure that the information before the select committee with regard to double tax agreements is robust. I know he has had some concerns and I am sure he will talk about them when he takes a call on this part.  
These amendments will address uncertainty around the treatment of interest paid to foreign banks operating through a branch in New Zealand. We know that apart from Kiwibank the major banks are foreign-owned. I have a mortgage with a foreign-owned bank. I should have had it with Kiwibank but I must admit that the Westpac guys who came up to Wairoa did an absolutely fantastic job in dealing with workers there and getting stuff out of KiwiSaver. I take my hat off to them. Their community relations were very very good and I just put that out there.  
As I mentioned these amendments will address uncertainty. There is no doubt about it: if there is one thing that should not exist in tax law it is uncertainty. Tax law needs to be certain. Taxpayers need to know the difference between right and wrong and I am sure the commissioner will agree with that. The last thing he wants to do is put out a whole lot of rulings. We know what happens when there is uncertainty in tax legislation. We saw it recently. The banks ended up paying about $2 billion I think when they believed they knew the tax law while the commissioner believed that the tax law said something else. It went through various courts in this land and the commissioner was right. It shows what happens when we have ambiguity in tax legislation. Clauses 102 and 103 remove that level of ambiguity which is great.  
The interest that I was talking about is not subject to non-resident withholding tax so the approved issuer levy mechanism is not relevant domestically which is good to know. It is not relevant domestically. But the new treaty exemption could still apply if the loan was made from offshore instead of through a New Zealand branch. I suspect that in these tough economic times a lot of the big companies are looking for finance outside of the New Zealand domestic market. The reason I say that is that if members look at our interest rates they will see that they are quite high compared with those of a lot of our competitors. A lot of businesses are sourcing funds offshore at much lower interest rates—that is if they have the ability to do so; a lot of small to medium enterprises do not have the ability to do so but a lot of big companies do. Again these amendments clarify tax legislation around this area.  
More generally the amendments ensure a better fit between terminology used in relevant tax treaties and arrangements whereby a borrower chooses to pay the approved issuer levy under domestic law. The new treaty provisions ask specifically whether the borrower is eligible to elect to pay the approved issuer levy; this bill ensures that domestic law directly addresses this question. Again the changes come back to the whole point of clarity but also they come back to the point of responsibility. Every taxpayer—whether an actual person a small company a trust a portfolio investment entity or a huge corporate—must act in a responsible way when it comes to paying their tax. This puts the responsibility back on them. The Inland Revenue Department asks whether an entity is eligible to pay the approved issuer levy. As has been mentioned the amendments will ensure that domestic law directly addresses this question which is most important.  
The amendments are also intended to make the existing law more transparent and I suppose that is the reason why we are still debating this bill in the Committee stage at this point. We need a level of transparency in tax legislation. Transparency is vital if we are to get our tax legislation passed in a way that is robust and that really adds to the overall legislative programme. The reason I say this and the reason I have concerns about this is we have seen with this Supplementary Order Paper—in my view and I think the view of my colleagues and the Greens—that this is not a transparent process. We cannot have a 57-page bill go through an intensive select committee process and then suddenly have a 70-page Supplementary Order Paper rapped on the Table. That is not transparent. In this bill clauses 102 and 103 which are technical amendments on the approved issuer levy provide a level of transparency.  
Clauses 102 and 103 went through the Finance and Expenditure Committee and we debated them. Our expert adviser Ms Turner provided notes to us on them and we queried the Inland Revenue Department officials on the implications of the approved issuer levy. It got to a point where we understood it and we were very clear about it from a layperson’s perspective and from a technical perspective so we can stand up with a working knowledge of the approved issuer levy. Those clauses went through a very robust process so we are happy that they get passed with this bill. It is just such a shame that a Supplementary Order Paper larger than this bill has not been through that transparent process.  
As has been mentioned clauses 102 and 103 are intended to make the existing law more transparent rather than substantially alter its effect. Not much has changed. These amendments are technical so not much has changed except a level of transparency and we all demand that. I think it is very reasonable for taxpayers to expect a level of transparency. I do not think there would be any question doubt or argument about the necessity for transparency in any sort of legislation let alone tax legislation.  
It is not considered necessary for the amendments to apply retrospectively because they do not alter the law substantially. We talked at the select committee for a moment about whether those amendments should apply retrospectively. It was decided that we should probably not apply clauses 102 or 103 retrospectively because they are only technical. We are not changing the substance; we are creating a level of transparency.