Norman Russel William: Taxation (International Investment and Remedial Matters) Bill — First Reading 
Norman Russel William: Taxation (International Investment and Remedial Matters) Bill — First Reading 
[Volume:668;Page:15130] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on the Taxation (International Investment and Remedial Matters) Bill. If people have been listening to the debate they may be somewhat confused as to which bill we are talking about. The reason they might be confused is that the Minister when introducing the bill read the wrong speech. The Minister the Hon Jonathan Coleman for 10 minutes gave a speech about a bill that we are not currently considering before the House. That bill has gone through the whole process and been referred to the select committee. We are sitting here tonight discussing the Government’s technical competence to run taxation policy but the Minister in a 10-minute speech introduced another bill not the bill that is before us tonight. Can we be confident that the National Government knows what it is doing about taxation policy when the Minister does not even check that the bill name at the top of his speech notes matches the name of the bill that he is supposedly introducing into the House? He read a 10-minute speech about a bill that he is not introducing into the House. 
What we are actually considering tonight even though the National Government is completely unaware of it—even though it is a Government bill—is a bill called the Taxation (International Investment and Remedial Matters) Bill. If people want to look at the bill in more detail I suggest they go online because they will not get any information from the Minister’s speech. The Minister gave a speech about a different bill not the one that is before us tonight. 
I turn to the bill before the House tonight. The Green Party will support the bill being referred to the select committee but we have a lot of reservations about it and we will seek to redress those concerns at the select committee to see whether we can improve the bill. The bill does a lot of things. It is a pretty complex bill. I could have understood if the Minister had been confused about the bill. It is a complex bill; there is no question about it. But it was not that the Minister was confused about this bill. He thought he was introducing a different bill. It was not that he was a bit confused about the detail of this bill because it is a complicated bill; I give members that. He actually thought he was introducing an entirely different bill not this bill. Jonathan Coleman stood and gave a 10-minute speech about a different bill not the one we are looking at tonight. 
The bill we are considering tonight is a complicated bill but the long and short of it is that it is a trade-off. Basically it says we will effectively cut some of the corporate taxes in order to try to encourage New Zealand businesses to stay here rather than relocate overseas. That is the long and the short of it. There is a lot more to the bill. It is a long bill but basically it says that there is a bit of a trade-off in that we will accept some lower company tax revenue in New Zealand in the order of tens of millions of dollars. This will be done on the basis that by doing this we are more likely to keep these New Zealand businesses in New Zealand rather than their locating themselves overseas. 
The Green Party accepts that we live in a globalised world with a globalised economy. We have to be competitive and that means looking at the tax system. However the measures that promote tax equity with other countries and encourage New Zealand - based companies to stay here bring jobs and they keep expertise here but there is a trade-off in terms of loss of tax revenue. The problem for us is whether this is a clever response to the challenge of globalisation; that is the real question. It seems to us that this bill is a pretty blunt response. It is largely ideological in fact. There is very little evidence that these tax changes will stop companies from moving offshore. 
The regulatory impact statements—of this bill I say to Mr Coleman; not another one—prepared by Treasury and the Inland Revenue Department are very thin on hard evidence of the threat of companies moving overseas. In fact the Inland Revenue Department says in one of its regulatory impact statements on this bill: “A key gap in the analysis is that it is not possible to quantify the economic benefits of fairer tax treatment. Quantification would require knowledge about the sensitivity of business-location choices to tax which is not directly observable.” That is we are not exactly sure what would happen if we did not introduce these tax changes. Would any New Zealand businesses relocate overseas? We do not know. The Inland Revenue Department and Treasury are saying that there is very little hard evidence to know. 
The other thing about this bill is that it does nothing to promote better business outcomes through tax treatment that backs winners. This legislation will do nothing to drive the New Zealand economy to deliver more sustainable outcomes. Although there is a hope—and it really is only a hope because there is no hard evidence that this bill will help to keep businesses in New Zealand—it does not actually drive us towards what the Greens think we should be embracing which is the green economic wave. 
The next economic wave is the green economic wave and if New Zealand wants to prosper we must write our laws in a way that prioritises the development of sustainable industries like renewable energy sustainable agriculture green technology high technology green design and energy efficiency. Those are the kinds of tax measures that could be introduced if we want to be competitive in a globalised world in order to make sure that the kinds of businesses that will prosper in the future base themselves in New Zealand. We could have tax law that targets tax breaks to those kinds of businesses. This bill has a generic tax break in the hope that by giving away a few tens of millions of dollars we will keep these New Zealand businesses here. It would be much better in our view if we were to target those tax breaks towards the kinds of industries that we want to encourage and have prosper in New Zealand. 
This bill adds about another $30 million to the Government’s $1.5 billion corporate tax cut package. None of the package that the Government has promoted picks winners and none of it promotes more sustainable economic outcomes. We think there is a strong argument for supporting and targeting tax breaks towards the industries of the future which will be the cleantech and greentech industries. Obviously the Green Party’s approach is to reform the tax system to encourage those kinds of industries. 
So although the detail is complex the majority of the tax measures in the bill involve a similar trade-off: lower company tax revenue versus the risk of company emigration offshore. This creates a problematic tension between racing to the bottom with company tax breaks—a race we simply cannot win in the long term—and the losing of tax revenue and jobs as companies move offshore motivated by tax reasons. 
The labour law that we recently saw passed through the House under urgency to secure the filming of  
The Hobbit 
 was a disturbing example of this kind of bidding war in a race to the bottom. The danger with this kind of tax legislation is that sovereign nations all around the planet compete with each other to have lower and lower corporate taxation in order to try to keep businesses or get them to locate to a certain country. We do not think that this race to the bottom is a very clever strategy in terms of trying to support New Zealand businesses and encourage sustainable New Zealand businesses that embrace the green wave here. 
Each tax measure in this bill is slightly different. There is a whole bunch of them and we may support some measures while not supporting others. However as a Parliament we should not in principle support the slow erosion of our tax base for these kinds of unquantifiable theoretical gains and as the regulatory impact statement states it is very hard to quantify. New Zealand would do much better to understand our natural advantages and play to them while simultaneously extending our efforts abroad in international forums to agree to satisfactory environmental labour and tax standards. We would do much better to work with other countries to agree on some minimum standards around tax labour and environmental standards so that we do not compete with each other on environmental standards labour standards or tax rates. This is a relatively small sum in this bill—maybe $30 million a year. So it is small compared with the nearly $100 million that was given away to encourage  
The Hobbit 
 to be filmed here. But it is still part of the overall trend of the race to the bottom. 
So for these reasons the Green Party will be supporting the bill’s referral to the select committee. We understand the basic intent of the bill and the bill has a lot of components that we do support but we do raise a flag and we are not guaranteeing our support further because of the whole problem of the race to the bottom that is encapsulated in this bill.