Goldsmith Paul: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
Text is incorporated into the Bound Volume 
Goldsmith Paul: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
[Sitting date: 09 February 2012. Volume:677;Page:274. Text is incorporated into the Bound Volume.] 
PAUL GOLDSMITH (National) 
: 
 I speak in support of this bill the Taxation (International Investment and Remedial Matters) Bill which represents a small but important part of the National-led Government’s efforts to lift New Zealand’s economic performance. I do welcome the widespread support in this House for the bill.  
Tax law has a massive influence on the economy often in a manner opposite to the effect anticipated or desired by legislators so we keep refining in the hope of delivering a system that extracts the revenues required in a way that minimises not just the direct burden but also the dead-weight cost of that taxation. That is the economic cost to the country caused by the effects tax laws have on behaviour.  
 International tax law is a good example of generating dead-weight costs. Because of the New Zealand international tax regime many New Zealand companies over the years have simply decided not to expand abroad and New Zealand is the poorer for it. These costs have seldom been taken into account by legislators but they are considerable. The centrepiece of Budget 2010 was the delivery of a major tax package reforming the tax system to make it fairer more sustainable and a better support for economic growth.  
The Taxation (International Investment and Remedial Matters) Bill builds on and extends earlier international tax reforms. As we have heard the main proposal is to extend the active income exemption introduced in 2009 to offshore subsidiaries—controlled foreign companies or CFCs as they are often referred to—so that it also applies to joint ventures and other significant shareholdings in foreign companies that are not controlled by New Zealanders’ non-portfolio foreign investment funds.  
New Zealand went out on a limb on the tax regime for controlled foreign companies in the late 1980s and early 1990s in its desire to be comprehensive. This showed wonderful philosophical consistency in our arrangements as in much of the tax reform of that era. Unfortunately however in this area the rest of the world did not follow. So the active income exemption brings New Zealand’s tax rules into line with practice in other countries. It will help New Zealand - based businesses to compete more effectively in foreign markets by freeing them from a tax cost that similar companies in other countries do not face. For example a New Zealand - owned manufacturing plant in China will now generally face the same tax rate as other manufacturers operating in China.  
These changes will improve the competitiveness of New Zealand’s tax system and encourage businesses with international operations to remain establish and expand. Why is that important? Because we want New Zealand businesses to grow into international businesses based in New Zealand. That is how we build the economy and earn the money that we need to maintain our living standards. Our tax laws frequently made that unreasonably difficult in the past and in some instances added to the pressure for companies to leave New Zealand or more frequently just not to attempt international expansion. This bill will make it a lot easier to do that for the better of New Zealand.  
There are a number of worthy provisions in this bill showing that the Government has listened to the advice of the Capital Market Development Taskforce. In one the bill removes a tax barrier to non-resident investment in New Zealand corporate bonds. In 2009 the House might recall the Capital Market Development Taskforce recommended that the approved issuer levy be reduced from 2 percent to nil for some public issues of debt by New Zealand residents and this bill provides a zero rate of approved insurer levy for bonds that are traded in New Zealand. This is all about making it easier for New Zealand companies to get access to the credit at best possible rates and deepening New Zealand’s capital markets generally.  
Finally I am pleased that the Finance and Expenditure Committee adopted some of the suggestions that submitters made during the select committee hearings. These will simplify compliance for taxpayers using new rules. I particularly want to mention allowing taxpayers to apply the active business test using accounts prepared in accordance with the United States’ generally accepted accounting principles. That certainly makes it easier for New Zealand companies to jump through the hoops that are required by legislation and tax rules and I think that will be a great boost to New Zealand companies trying to expand internationally and grow this economy. Thank you very much.