Taxation (International Taxation, Life Insurance, & Remedial Matters) Bill

Madam Speaker,

While there are some aspects of this Bill with which we have no problem, the Green Party is horrified by proposed changes affecting the offshore taxation regime for New Zealand companies, and we will oppose these moves - and vote against this Bill - every step of the way.

In exempting from tax active income earned offshore by a company where there is a New Zealand resident with a controlling interest, this Bill is a charter for exporting jobs and closing down our manufacturing sector.

The Government is acting as if the shape of the future is one in which we are nothing more than a head office and design centre for enterprises likely to be based mainly in Asia but in other parts of the world as well.

It’s insanity at a time when the impacts of climate change, peak oil and incipient global recession are beginning to kick in that our Parliament should be seriously considering legislation which provides major tax incentives to companies to take their production offshore.

I thought it was bad enough when I heard stories in years gone by - for example of the Swazi clothing company in Levin, who were told by Ministry of Economic Development officials that they would be best advised to shift their operations to China, no matter that this would mean the loss of around 90 jobs, with the resulting impact on the local economy, not to mention the workers involved.

I thought it was even worse when some in the Labour Government tried to tell us that Buy Kiwi Made should not only be about companies who make things in this country, but also about businesses like Icebreaker who had made the decision to take production offshore.

But the Bill in front of us tonight really takes the cake. It seems driven by a belief that we should actually incentivise people to close down their operations here, and that there is no future for manufacturing in New Zealand.

What a disaster. What a disaster after all the money, work and commitment that has gone into the Buy Kiwi Made programme on the part of manufacturers, Business New Zealand, retailers, unions - and the Ministry of Economic Development.

What a disaster after all the cross sectoral goodwill and work that went into the longrunning Manufacturing Plus project.

Why on earth does Labour want to motivate manufacturers to self destruct in this way? Was the Manufacturing Advisory Group that came out of Manufacturing Plus happy with these new tax proposals?

The justification given is in part around fostering so called ‘economic transformation.’ Transformation to what? Being a colony of Australia, South East Asia and China perhaps? Having an economy totally dependent on foreign imports, the price of which will keep going up as the price of freight increases exponentially alongside the price of fuel?

Treasury argues that the current rules create an incentive for companies to move completely offshore, head office and all, and that the point of the new rules will be to allow head offices to stay here while the manufacturing part of the business goes elsewhere. Reducing the tax costs for firms looking to expand offshore will, they appear to argue, make us more competitive and more compatible with the globalised market, above all with Australia.

Behind this sits the underlying assumption that we shouldn’t even bother manufacturing here because we can’t compete. It would appear it’s time for us to internationalise and globalise our jobs and our businesses out of business apart from a few head office staff in Auckland or Wellington.

Treasury also argues that the new tax exemption will make New Zealand more attractive for foreign investment and that the fact that headquarters will stay here will create work for headquarters-type people.

Even more bizarre is the fact that if this Bill goes through, a company manufacturing in New Zealand will still be taxed, while those offshore aren’t, so that in fact our loyal local companies will be at even more of a comparative tax disadvantage, as if the high dollar wasn’t enough to contend with.

The madness of all this takes me back to the early 1990s, a time many of us, including National, I imagine, might prefer to forget. That was a time when, for example, Finance Minister Ruth Richardson took pride in hosting a conference in Auckland aimed at marketing what was left of our assets to overseas companies, and the era in which the final sell off of rail by Jim Bolger meant one of the biggest ripoffs of taxpayers by foreign companies ever.

I do not understand Dr Cullen. On the one hand he and his Government have done a great thing, buying back and reinvesting in rail, biting the bullet on the cost because Labour does appear to understand on one level that climate change and peak oil mean we must rebuild our national passenger and freight infrastructure.

On the other hand, and simultaneously, he is presiding over the incongruous aberration in front of us tonight, aimed, it seems, at undermining any desire by New Zealand manufacturers to keep making things here.

And for a party which he proudly told this House recently is the party of workers, it is odd in the extreme that he doesn’t appear to care a fig for the hundreds of thousands of jobs that may well disappear as a result of the tax incentives contained in this Bill.

Where does he think the jobs to replace those lost are going to come from? I find it odd that once more I find myself giving Dr Cullen history lessons but again, does he not remember what happened when his own Government stripped out our manufacturing base once already in the 1980s? Can’t he remember the acres of empty factories and industrial zones, or what happened when tens of thousands of people in our cities and towns ended up jobless? Some people, and above all tangata whenua and Pacific peoples, are still reaping the consequences of those policies in places like South Auckland, Northland and Tairawhiti right now.

What the Government is proposing will give Icebreaker a tax cut for making lovely outdoor wear in China, but not Earth Sea Sky making lovely outdoor wear in Christchurch. Norsewear, that former iconic brand, will reap a financial benefit for having taken its jobs to Asia, while Swazi, staunchly staying local, will miss out.

This Bill will give tax cuts to large firms that send fish to China for filleting and packing, but not to small fishermen who process locally, and who create environmental and social benefits by not carting fish back and forth across the planet.

This Bill would give Fisher and Paykel a tax cut for the whitewear it makes in Mexico but not for the whitewear it makes in Auckland.

To all those companies, business organizations and trade unions who have been involved in Manufacturing Plus, Buy New Zealand Made and Buy Kiwi Made work and campaigns, I call on you to join the Green Party and any other parties who oppose this madness to help persuade Labour to change its mind on this one.

Globalisation does not have to be about giving up on our manufacturing sector. We simply cannot afford to lose our ability to make things here either for local use or for export; nor can we risk losing tens if not hundreds of thousands of jobs at a time of increasing global economic and environmental insecurity.

The other aspect of this Bill I feel constrained to address briefly tonight is that dealing with petroleum mining.

The first aspect of this is that the Bill prevents petroleum companies from deducting overseas expense from their New Zealand income, and thus ensures that New Zealand gets the tax benefit of mining here rather than having the profit hidden behind expenses incurred overseas. This is fine by the Greens.

However, looking beyond this, the Bill also ‘removes disincentives that may affect investment in oil and gas exploration and development in New Zealand’, adding up a huge tax cut over four years for the petroleum industry. The Green Party really questions why we are giving major tax cuts to these companies at a time when even those who would never normally follow the oil markets can see the profits being made.

The Bill somewhat disingenuously describes these changes, for example in allowing development costs to be amortised over the life of the mine, and repealing the current distinction between onshore and offshore development, as being necessary to safeguard tax revenue. However, in reality what the changes mean are less, not more. tax income from petroleum mining.

Secondly, through these measures the Government is manifestly encouraging more mine exploration and development with apparently no regard for the environmental and climate change impacts.

The parts of this huge Bill which deal with manufacturing and with the tax cuts for petroleum mining are sufficiently outrageous that from our point of view they totally negate other beneficial changes being promoted. The Green Party will therefore do everything we can to oppose this Bill and to warn people of the danger it presents to our economy, people and environment.