Huo Raymond: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
Huo Raymond: Taxation (International Investment and Remedial Matters) Bill — Second Reading 
[Advance Copy - Subject to minor change before inclusion in Bound Volume.] 
RAYMOND HUO (Labour) 
: 
 I rise to take a call on the second reading of the Taxation (International Investment and Remedial Matters) Bill. Inadvertently I guess the bill was made famous on its first reading in November 2010. The bill although complex and a little bit dry in a technical sense made headlines and the  
National Business Review  
outlined it very well. I acknowledge the presence of Minister Jonathan Coleman. According to the  
National Business Review  
it is easy for MPs to become confused about tax legislation and none more so than Minister Jonathan Coleman. The unfortunate Dr Coleman the then Minister of Immigration and Minister of Broadcasting was given the task of introducing the first reading debate on this particular bill in the absence of the Minister of Revenue the Hon Peter Dunne who was responsible for introducing this bill. Obviously someone gave him the wrong bill and his speech focused primarily on another bill. If my memory serves me well it was the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. The famous bill got a nickname of the “Telephone Book Bill” because in its original form it contained more than 820 pages. 
We should not give too much of a hard time to Minister Coleman because the two bills are related. I feel sorry for him; I guess many of us would have been in a similar situation. The incident prompted me to thank the officials the submitters and the members of the then Finance and Expenditure Committee for the great work and efforts they made. 
It is an important bill that introduces significant changes to the tax treatment of inbound and outbound cross-border investments. Most of the changes are intended to take effect from the beginning of the 2012-13 tax year as I understand from reading various reports so this bill has been reintroduced in a timely manner. 
I certainly recall my contribution on the first reading debate; I borrowed part of the title of an article published by Deloitte to describe some of the aspects presented by the bill and the priorities taken by the Government which was “The Good the Bad and the Ugly”. The good is that the bill introduces some significant changes to the tax treatment of international investments. It is bad because we have concerns with regard to the removal of the approved issuer levy or AIL as it is commonly known. It is ugly that some of the important issues that are worth a cross-party bipartisan robust consideration and debate such as a capital gains tax have not received such an approach. 
The bill in the current form proposes changes to foreign investment fund or FIF rules. This bill means that New Zealanders holding stakes of 10 percent or more in offshore companies will now be subject to New Zealand tax on those interests unless the companies earn passive income such as interest royalties or rents. The bill replaces the exemption of non-portfolio foreign investment funds in the eight “grey list” countries—such as Australia UK US Canada France Germany and so on and so forth—with an exemption for non-portfolio foreign investment funds that are resident and subject to tax in Australia. 
 We do have concerns as raised by David Parker last night and Clayton Cosgrove just now on various grounds regarding the removal of the approved issuer levy. Firstly our concerns relate to a further erosion of the tax base associated with financial transactions at a time of falling Government revenue. Secondly we were advised by a number of submitters that the proposals outlined in the bill will not help increase the liquidity of the New Zealand corporate bond market. Thirdly and finally as pointed out by David Parker we have concerns that in some cases the current tax system— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: I am sorry to interrupt the honourable member; his time has expired.