7. JOHN KEY (National—Helensville) Link to this
to the Minister of Finance
Does he stand by his statement, in relation to the proposed new tax on overseas investment, that “GPG is not registered in New Zealand, it’s registered in the United Kingdom and its call for a special exemption makes no sense in terms of tax policy or fairness”; if not, why not?
Why then, only 4 days after making that statement, did the Government announce it was creating a special exemption for companies that satisfy five criteria, the combination of which applies to only one company in the world: Guinness Peat Group?
Hon Dr MICHAEL CULLEN Link to this
Because we have been involved in discussions with Guinness Peat Group for some few weeks. Indeed, I offered to Mr Tony Gibbs that officials could talk to the company, some few weeks ago. We have arrived at a satisfactory outcome whereby, if the member cares to read what is proposed, he will find Guinness Peat Group has a transitional period to come within compliance with the new legislation. There is no permanent exemption from the proposals.
Why is he making legislation that favours investors in just one company in the world, when he has admitted it makes no sense and is unfair, and does he think tax experts will struggle to understand that, under his rules, the new definition of a “grey list” country is New Zealand, Australia, or Guinness Peat Group?
Hon Dr MICHAEL CULLEN Link to this
The member did not listen to the answer, but then he never listens to any answers in the House. He always thinks he knows everything. Guinness Peat Group has 5 years to come within the new rules. But if the member understood anything about that company, he would understand why it can, within 5 years, solve its problem with the British tax authorities.
Will the Government cave in to any other companies if they too start to take out full-page ads in the newspaper, and, in that case, which companies?
Hon Dr MICHAEL CULLEN Link to this
No. I see suggestions are made that those who set up UK investment trusts should have some kind of transitional exemption. Those trusts are set up deliberately as avoidance mechanisms using the “grey list”, and, as usual, the party that calls for tax cuts supports the avoidance of tax obligations, which raises tax for everybody else in the country.
Can the Minister confirm that under the proposed new tax rules, individual investors who hold shares costing over $50,000 in the UK, USA, and five other countries will have to pay an additional tax from 1 April next year and that that tax is a new capital gains tax, which will diminish the returns they make on their savings?
Hon Dr MICHAEL CULLEN Link to this
I can confirm that people who hold shares outside the “grey list” will, in fact, have a reduction in the existing capital gains tax, which is a 100 percent capital gains tax outside of the “grey list”. The “grey list”—
Madam SPEAKERThere is a point of order, but the Minister has not finished. As I heard the answer, he was going to get to the point that I think the member is about to raise: addressing the question.
I have asked the Minister that question on numerous occasions and every time he fails to answer it, either in answers to written questions addressed to him or in answers to my oral questions in the House. He fails to admit the obvious, which is that he is making changes to the “grey list” countries and that it is a new tax if an investor owns more than $50,000 in total in shares in those countries. Why can he not admit it is yet another tax grab or capital gains tax? It is not very hard to admit that is the truth.
That is not a point of order. Obviously, the Speaker cannot direct the answer that members want to be given, but I would like the Minister to please complete his answer in the light of the comments.
Hon Dr MICHAEL CULLEN Link to this
I was getting there. Just to excite the member, I was teasing him for a few seconds. A capital gains tax applies within the current overseas investment regime. The exemption from it for the “grey list” countries has been used as a means of tax avoidance. As a consequence, a unified regime will now be applied. That is supported, in some form or another, by almost every tax expert who has looked at that issue.
Does the Minister think that people who invest their savings for their retirement should be penalised for directly investing their savings outside the tiny sharemarkets of Australia, New Zealand, and Guinness Peat Group; and why is he on this crusade if it is not simply just to get additional taxes, which clearly he does not need?
Hon Dr MICHAEL CULLEN Link to this
The overseas investment part of this regime is assumed to be revenue neutral. The rest of the regime will cost some $113 million a year in lost tax revenue. That increases the return to savers overall. But it does deal with the issue of the deliberate creation of tax avoidance vehicles, which that member clearly supports.
Has he seen the letter dated 11 October 2005 from the Rt Hon Winston Peters to a constituent, in which he stated: “New Zealand First supports savings incentives and is opposed to new taxes.”, and has he seen a letter written on 2 December 2005 by the Hon Peter Dunne to a constituent, stating: “United Future opposes capital gains tax, and I am happy to assure you that as a party we will not support any moves in that direction. I certainly will not be promoting a capital gains tax.”; and, on the basis of that, is he worried about getting the numbers to pass the legislation?
Hon Dr MICHAEL CULLEN Link to this
No, no, and no. The only member of this House who I know has supported a general capital gains tax for many years—up to the point that he became a National Party MP—is Dr Donald T Brash.