Smith Lockwood: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Instruction to Committee In Committee 
Smith Lockwood: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Instruction to Committee In Committee 
[Volume:630;Page:2006] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 This is a very complex bill that deserves the Committee’s focused attention to make sure that the detail of the legislation that is passed which in principle I think has widespread support in this Parliament has been given full attention to make sure that it is in New Zealand’s best interests. Much of the legislation and certainly the provisions contained within Part 2 is business-friendly. It is legislation that does a range of things to improve the taxation arrangements of businesses and individuals in New Zealand. So in principle much of the legislation is supported. 
I want to focus on one or two clauses in Part 2. The first relates to the issue that I think is covered in clause 77. I give notice to the Committee that I have proposed some amendments to these provisions and in particular to clause 77D. Clause 77D relates to transitional provisions for residents coming back to New Zealand and how their foreign income is to be taxed. The bill proposes to introduce some measures under clause 77D that will make it possible for a New Zealander who has lived out of the country for 10 years or more to come back to New Zealand and not be taxed in New Zealand on his or her foreign income for a period of 4 years. The select committee suggested that the period should be for 4 years. 
While I think it is a step in the right direction to make New Zealand a more attractive place for returning residents and new immigrants it has become clear to me since the select committee looked at this issue that the measures do not bring us into line with Australia. I believe that the amendments proposed in a bill introduced in Australia on 16 February this year—the Tax Laws Amendment (2006 Measures No. 1) Bill 2006—would provide a measure to enable temporary residents in Australia who are already resident in Australia but only temporarily to gain the benefits of the tax concessions for their offshore income. Yet the New Zealand measure does not do that in any way. The reason it is significant is this: we are not only trying to attract high-worth new residents to New Zealand to contribute to our economy but also we want to keep temporary residents who have come to New Zealand to contribute to our economy yet who could go elsewhere. Those temporary residents could go offshore—they are not locked in here permanently. 
It is not something that I have come up with just off the top of my head. Murray Sarelius tax partner at KPMG recently raised this issue in a press release in which he stated that the officials report to the Finance and Expenditure Committee states that those who arrive in New Zealand before 1 April 2006 will not be sensitive to New Zealand tax as they have already chosen to come to New Zealand. What Murray Sarelius says is: “Officials appear not to have fully understood the nature and needs of the mobile global workforce. We cannot simply assume that international executives currently in New Zealand are here to stay—assignments need to be extended contracts need to be renewed.” 
He is saying that officials have failed to understand not only that this measure needs to attract people with potential to New Zealand but also we need to keep people here who are mobile. So I am proposing an amendment to clause 77D that I have tabled which would amend new section FC 24(3) by shifting back a year the application of the transitional provisions. That would mean that someone who arrived in New Zealand under residence arrangements whereby he or she is still a mobile citizen could gain those benefits after 1 April 2005 instead of if they arrived after 1 April 2006 as it now states. 
For example a high-value person here on a work permit could disappear out of the country if there was a more attractive opportunity offshore. What Murray Sarelius the tax partner at KPMG was saying is that we need to recognise that it is not just prospective new residents to New Zealand whom we need to be mindful of; we need to be mindful of people already in New Zealand. I have tried to come up with an amendment to deal with this. I would like the Minister and his officials to think about whether there is any way we can make this transitional measure also help us keep high-value people in New Zealand who are here on a temporary basis yet could skedaddle very easily at the end of a current contract for delivering work in New Zealand. That is the first point I want to make. When I get further opportunities I will come back with further amendments.