Bennett David: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
Bennett David: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
[Advance Copy - Subject to minor change before inclusion in Bound Volume.] 
DAVID BENNETT (National—Hamilton East) 
: 
 Thank you Mr Assistant Speaker Robertson. I want to congratulate you as well on your appointment to your role and to follow on in regard to the Taxation (International Investment and Remedial Matters) Bill. 
I think there were some interesting points that were raised by the last speaker. One of the things in taxation law is that sometimes it can get too complex and the more complexity you bring into taxation law the more opportunity there is for people to try to avoid the law by getting around those rules. The essence of what we are doing here today is to take out some complexity to make it fair for New Zealand companies that are investing overseas in a manner in which they do not have control of those companies but have a significant investment in them so that they are not under some set of rules and regulations that are frankly outdated and can lead to people having to structure their affairs in certain ways to avoid taxation when it would be much better if we did it in a simpler and more effective form. That is the purpose of this reform that is before Parliament and it is something that in essence does not lead to the problems that the previous speaker spoke of which are encouraged by having too many rules and regulations. 
Many people have spoken about the nature and aspects of this bill including the active and passive taxation. For those who are not tax gurus “active” is when you have a business that is actively producing something. If for example Fisher and Paykel Appliances was building washing machines in China that would be “active” whereas “passive” is something where you just receive an interest royalty or dividend. That is the difference between “active” and “passive”. 
When you hear members of Parliament talking about that in regard to this bill it is very much to extend the active income exemption to extend the exemption for those companies that are actively engaging in activities. These are basically controlled foreign companies or CFCs so it applies to joint ventures and other significant shareholdings. You may have less than 50 percent but a significant shareholding and in an active company you would be taxed in this manner. That is to give some fairness to New Zealand companies that are investing overseas and to give them some simplicity in how we do business for them. 
One of the things that was changed in the Finance and Expenditure Committee was in regard to the use of accounting principles. Generally accepted accounting practice is the American approach and this legislation enables companies to fulfil generally accepted accounting practice in accordance with US rules. So that means that they do not have to prepare two sets of accounts because the US typically does not recognise the international accounting standards that a lot of New Zealand companies will be following. If we did not have that they would have to supply generally accepted accounting practice accounts for their activities in the US and also international accounting standards - supplied regulations and financial reporting for those operations. This is another attempt within the committee to reduce the compliance costs on companies so that they do not have to have two forms of accounting records produced when it comes to the US and companies in that jurisdiction. 
So in essence this bill is there to make it easier for New Zealand businesses to make money overseas. That is good for New Zealand. If our businesses make more money overseas and can bring that back to New Zealanders that is in the best interests of “New Zealand Incorporated” and something that I know all members of this House will want to see happen because that grows the pie here. That is what we are all about so that we can actually deliver those better services for our people. 
So this legislation is important. It is part of providing growth for our country. It delivers a taxation system that is much more up to date recognises the current circumstances and enables New Zealand companies to have a structure and system that are comparable with other countries so that they can compete on a level playing field and do not have excess regulation from the New Zealand side. Thank you.