Connell Brian: Taxation (Base Maintenance and Miscellaneous  Provisions) Bill — First Reading 
Connell Brian: Taxation (Base Maintenance and Miscellaneous  Provisions) Bill — First Reading 
[Volume:622;Page:18056] 
BRIAN CONNELL (National—Rakaia) 
: 
 I agree with the Minister that this legislation is extremely significant to New Zealand and some of the implications the Minister has talked about and are referred to in the commentary will be far-reaching. 
The bill is divided into three significant areas which I want to address. The first deals with the thin-capitalisation rules for foreign-owned banks. As the Minister pointed out—maybe not in as much detail as I would have liked—this is the method or deception of loading excessive debt to hide the amount of equity to support assets and that has significant tax implications. As much as it pains me to say it having worked for Westpac Banking Corporation for some time and seeing that it is now in the sights of the Minister of Revenue in relation to this I do believe that the bank may have a case to answer. The practice of debt loading to disguise the true equity position goes back 15-odd years. As I was reminded yesterday when I met some Westpac executive and board members some very fine people are engaged in that institution right now who had no part in what has transpired. 
I want to be on the record as making it very clear that that bank and some of the other foreign-owned banks have not been involved as has been alleged by the Minister in anything illegal. Essentially they used the law as it was drafted and thus were able to enhance profitability to their shareholders on the other side of the Tasman. I agree with the Minister that the loophole needs to be closed. Hundreds of millions of dollars have run out of New Zealand into the Australian economy and to Australian banks and shareholders and New Zealand shareholders to some degree have been left exposed. 
The issue at hand is one that will reap the Government an extra $300-odd million and some of it will be retrospective—some of the legislation will apply retrospectively. I have two issues of concern on this. The first is that the Minister and his Government will now have an extra $300 million to put into their coffers—money they never expected to have—and I expect the Minister to rebate that by way of tax deduction to the hard-working Kiwis who have contributed to the $6.5 billion surplus the Minister is so pleased to talk about ad infinitum. 
The second issue that concerns me is the retrospective nature of some of the legislation. Legislation that applies retrospectively—[ 
Interruption 
] The member should sober up and listen. The National Party is strongly opposed in principle to legislation that applies retrospectively. It should not be happening. When the bill goes to the select committee we will run a very clear rule of thumb over that. I look to some of the other members of the House for support on this because it is a very very dangerous principle. This Minister has an insatiable appetite for taxation and that is something that bothers me. He is very good at spending other people’s money and now that he will get a windfall of an extra $300 million he will be put on notice by the National Party that it is time to cut taxation for the productive sector that has contributed to the surplus I talked about. 
Another issue I want to talk about is the amendments to introduce temporary exemptions. I see from the commentary that that relates to 6 years of income earned by foreign companies for offshore surveys for possible petroleum fields. That type of tax incentive to support our natural resources and infrastructure development—a foreign concept for this Minister—is a very good initiative. That New Zealand is exposed in terms of its petroleum resources and its inability as it were to attract foreign capital into a very capital intensive and capital hungry area around petroleum development is not in doubt. We need to think a little bit more laterally than is suggested here. I would like the select committee to look at the wider application of this suggested amendment because I believe that any infrastructure development for which we need to attract large amounts of capital is something that could have application to what is being suggested. 
New Zealand is in a dire position in terms of infrastructure and development. In particular I am thinking about our ability to generate energy or electricity. Our energy resources are running out and our ability to generate electricity is hurting our ability to attract foreign investment to our country. As National’s spokesperson on forestry amongst other things I am confronted with this issue nearly every day from organisations that are looking at opportunities to invest here. They have the same mantra when they talk to me—that New Zealand is a good place to grow trees that we need to get involved in the processing market and that the two things that concern them deeply are the Resource Management Act and the uncertainty of electricity supply. Anything this bill can do and any wider application of what it suggests will get the National Party’s support. 
The third area I want to speak about relates to the amendments that will allow deductions for expenditure incurred by business in avoiding remedying or mitigating detrimental effects on the environment from the discharge of contaminants. I find I also agree with that. We have a pristine environment in this country that we as New Zealanders are all very proud of. But it is not something we should take for granted. Anything we can do to maintain that environment will get National Party support provided the cost does not outweigh the benefits. That is an issue the select committee will look at and I will ask it to reflect on whether the medicine is worse than the illness itself. Conceptually what is being suggested in this legislation is very sound constructive and sensible. I think that all large organisations—and most of the organisations in this country are responsible corporate citizens—will look at their ability to mitigate any environmental effects and if they can work in partnership with the Government to achieve that then I think we will find they are very responsive to that. 
In conclusion the three major initiatives suggested in this bill go to the select committee with the National Party’s endorsement but on the very clear proviso that we will look to see what devil is in the detail. A practice of this Government has been to put in place solutions that are not cost effective and we need to be very mindful of that.