Groser Tim: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — Second Reading In Committee 
Groser Tim: Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill — Second Reading In Committee 
[Volume:636;Page:7117] 
TIM GROSER (National) 
: 
 I will take just a brief call on Part 2. I will focus on a couple of aspects of interest to us in the National Party. 
First of all the key point I think is the one made by my colleague Dr the Hon Lockwood Smith. The changes to portfolio investment entity compliance are something that in principle we welcome but Dr Smith has asked a number of admittedly highly technical questions that are extremely important in terms of whether we can realise through the policy implementation the reasons for our moving in this direction in the first place. We look forward to the Minister of Revenue responding to Dr Smith’s invitation for him to take the call. 
The key point from our perspective is that these positive changes to portfolio investment entities could have been introduced with the Government staying away from the whole issue of the “grey list”. The Government lurched away from its initial proposal a crude but unrealised capital gains tax as submitters poured into the Finance and Expenditure Committee with their problems with this issue. Thank goodness the Government moved away from its initial proposal—we should be thankful for small mercies—but although the fix of the fair dividend rate that we have before us is certainly superior to the original proposal we can see all manner of unintended consequences that will have to be addressed in due course. 
We know what some of these consequences will be as the submitters have already drawn attention to some of the major policy issues that we will have to confront as this bill is implemented. There are issues to do with the huge portions of our workforce that are employed by multinationals and the fact they are locked into employee stock ownership options often for a number of years. These employees will not be in a position unless they want to leave the company to get out of the company and pay the tax bill. This is one of many problems that submitters have identified. 
Then there is the question about currency shift. This is at one level just a question of equity but at another level there will be some long-term effects from the way that the Government has approached this. If we are taxed on foreign investment earned obviously by definition we need to convert our earnings into New Zealand dollars to arrive at the assessable income required. This will involve an exchange rate and if the currency has fallen the assessable income will rise. Is that fair? And what are the economic implications? 
This raises—in my mind at least—some quite interesting questions about how we actually address tax policies and residency policies in the era of globalisation. This is something that we have had to look at in almost all aspects of policy making whether we are talking about trade or employment because we are operating in this country for all intents and purposes with global competition for skilled and semi-skilled labour. It is also necessary to look at the implications of this in terms of the legislation before the House tonight. 
So many of our policy models including tax models are based on the dominant model. That model is that let us say Mr John Smith and Ms Mary Smith live their lives in New Zealand earn their incomes in New Zealand travel to Fiji for their holidays—when it is not having a coup—and are New Zealanders in every sense. That is still by far the dominant policy model to which our policy structures have to accommodate. But it is being eaten away at the edges by a number of other issues that people have to have uppermost in their minds if New Zealand is going to survive and really place itself well in the forefront of small developed countries. 
Let me convert the John Smith analogy to Mr and Mrs Chen Wang. I am sure that the Minister being an aficionado of Taiwan knows that that is a common family name in Taiwan. Or I could use a Korean example Dr Che who is living amongst the I think 30000 Korean families that we talked to the Korean President about on Sunday during Mr Key’s courtesy call on him. How would those people sitting in Auckland react? Perhaps a large number of them still have very substantial assets deriving from their opportunities in Pusan or Seoul. Those assets will be converted into New Zealand dollar terms when the currency falls. Do members think that when the implications of this come home to roost those people will lift their glasses of soju and thank the Labour-led Government? I doubt it very much.