Parker David: Taxation (International Investment and Remedial Matters) Bill — Third Reading 
Text is incorporated into the Bound Volume 
Parker David: Taxation (International Investment and Remedial Matters) Bill — Third Reading 
[Sitting date: 05 April 2012. Volume:679;Page:1760. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 Can I begin by responding to something that John Hayes said which was that the changes to the tax system made by National in its last term of Government made it fairer. Well the National Party has a different definition of fairness from this side of the House. 
Dr Russel Norman 
: The Tui billboard definition. 
Hon DAVID PARKER 
: Thank you Dr Norman. The Tui billboard response to that is “Yeah right!” because— 
Michael Woodhouse 
: You had the chance to campaign on reversing them. 
Hon DAVID PARKER 
: Well actually we did campaign on reversing some of them because they were so unfair: 40 percent of those income tax cuts went to the highest 10 percent of income earners in New Zealand. It was only— 
Paul Goldsmith 
: How does this relate to the bill? 
Hon DAVID PARKER 
: Well it actually relates to the comments that your own member unwisely made Mr Goldsmith in this debate. For him to say that that made the New Zealand tax system fairer does not stand scrutiny. 
In reality the only people who did substantially well out of the so-called tax switch were people who managed to switch their taxes by paying less while the overall proportion of taxation that was paid by the vast majority of New Zealanders went up: i.e. the proportion of total tax that was paid by the people who were already the wealthiest in New Zealand went down and the proportion of tax that was paid through GST and PAYE in respect of low and middle income earners—their proportion—went up. The relative position of high-income earners went up and everyone else relatively went backwards. So do not call those tax cuts fair please Mr Hayes because it does not stand scrutiny. 
There is another thing those tax cuts did as Dr Clark said—and we have had Russel Norman running this issue this week as well; thank you for doing that Dr Norman. We have had this fiction being run by National that the Budget deficit is not partially its own fault by having added to the deficit through its tax cuts which it pretends were broadly fiscally neutral by using a very loose definition of broad— 
Hon Member 
: And neutral. 
Hon DAVID PARKER 
: —that is right—and a very broad definition of neutral. The reality is that Treasury’s own forecasts in respect of the Budget package found that they were fiscally negative. The shame of it is that Treasury in New Zealand despite the fact that since then the deficit has got worse has not done any analysis as to why it is so much worse and how much of it relates to the tax package. Why is that? Well we actually do not know but the suspicion is that it is because on further analysis the National Party’s abuse of the English language as to “broad” is proven by the fact that the hole in the Government accounts is substantially caused by its so-called tax switch which was for the benefit of the top 10 percent of New Zealanders and under which everyone else went relatively backwards. 
I want to turn to another instance of tax unfairness and the lack of wisdom in the Government’s approach to tax legislation. Last year New Zealand had an $18 billion deficit. It was not all the Government’s fault; some of it was from tax changes but not all of it. This year it is about $12 billion and probably closer to $13 billion. We will know by the time we get to the Budget what the actual figure has been. Next year it will be about $6 billion and in the following year it will be gone to about zero. That is the case whether it is under National or Labour. We would have got back to Budget surplus at about the same time as well. 
But if you were running so close to the wind as the Government is and you had a deficit that large why would you be giving unfair and unnecessary tax breaks to foreign lenders into New Zealand? That is what this Taxation (International Investment and Remedial Matters) Bill does. The approved issuer levy is a substitute for paying tax. [ 
Interruption 
] It does Mr Bennett and if you do not understand that yet after having sat on the Finance and Expenditure Committee and heard all of the debates on this there is really not much hope for you. Perhaps you should give back your accounting certificate to the society because that is exactly what this bill does. If you do not understand that I am sorry but you were not listening to the submissions and you did not read the bill. 
What happens in New Zealand for some borrowers is that some lenders into New Zealand normally pay non-resident withholding tax so that when interest is paid to the lender to the New Zealand company to a New Zealand individual or to the New Zealand Government the interest that they earn incurs some tax. That tax rate is not set at the same rate that we pay on income tax on our income in New Zealand because overseas people do not get the benefits of everything under our tax system. They do not get a direct benefit from health services or education services they do not use our roads and they do not use the police. So they do not pay the full rate of tax in New Zealand just as in overseas countries New Zealanders do not normally pay the full rate of tax for income that they derive from those countries. But they do pay some tax because those overseas countries do gain some benefits from what Governments do in New Zealand. They get the benefit of an educated population they get the benefit of the enforcement of the rule of law and they get the benefit of a healthy population who can turn up to the workplaces that pay the people who work in the factories that pay the interest. So they do pay some tax and they pay it through non-resident withholding tax at a lower rate. 
There is another exception to that which we allow in New Zealand and have historically allowed in New Zealand. For some lenders into New Zealand instead of charging them non-resident withholding tax we charge them an approved issuer levy. That approved issuer levy is at an even lower rate than the non-resident withholding tax. It is not at a punitive rate now. What this legislation says is—look you can avoid that at the moment by legal means of tax avoidance for which loopholes have not been closed. So what does the Government do? Does the Government close the loophole and ensure that it has got a fair tax system with people who are receiving income from New Zealand paying some rate of tax albeit lower than the rate that is paid by a New Zealander? No the Government does not do that. Despite the fact that it is running probably a $13 billion deficit the Government says the answer is to take it to zero. It takes the approved issuer levy to zero. Well there will be no avoidance of that because there is nothing to avoid. 
This is absurd. We should not be reducing the tax paid on earnings by foreigners investing in New Zealand to zero. We should not be reducing it to zero. They do get the benefit of taxes that are paid in New Zealand by others. It is not going to increase in any material way the money that is flowing into New Zealand. If you were going to try to incentivise more money into New Zealand you actually would not do it by giving a tax break to these guys. You would do it by giving a tax break to someone who is going to be investing in a new company that brings new jobs. This part of the bill is just silly; it is just silly. Why would we give a tax break to these people taking their tax rate to zero? The National Party members are quiet because there is no answer to that. There is no answer to that; there is no logic to that. 
We would all love to have the benefit—well not all of us but lots of us would love to pay zero tax and have a bit more money in our pockets. We certainly need it because our wages are not going up at the same rate as they should be and a lot of people have not got jobs. But why give a zero tax rate to some lenders into New Zealand? And if we are giving it to those lenders why not give it to all of them? Where is the logic there? Why do we not give it to all of them? There is no logic to this part of the bill. It should be called what it is which is bad policy. It is another example of economic mismanagement by the Government. 
This is the same Government that this week blocked Treasury even being called to account for probably hundreds of millions of dollars of additional losses—additional losses—through the Crown Retail Deposit Guarantee Scheme. This Government pretends to be a good manager of the economy. Another example for you Mr Woodhouse—how about the Ministry of Foreign Affairs and Trade where $9.2 million was wasted— 
Michael Woodhouse 
: I’m trying to find it in the bill. 
Hon DAVID PARKER 
: —$9.2 million. Well it is actually another example of why there is such a hole in the Government’s accounts as to make it necessary that we have the Taxation (International Investment and Remedial Matters) Bill being passed in this House to improve our tax system when the economy is performing so poorly that the Government is not collecting enough tax to pay its bills.  
This legislation does have some good points. We have acknowledged that but that point in respect of the approved issuer levy is just nonsensical.