Nash StuartHon STUART NASH (Minister of Revenue): Some very important questions have been raised and I feel as if I should stand and answer them because you know it's important that we all understand this. It's a bit of a shame that after being on the select committee Mr Carter you maybe haven't got the knowledge of the answers but let me help you out. But first of all Mr Andrew Bayly. There's a reasonably—Andrew Bayly: I'm over here. Hon STUART NASH: —oh Andrew Bayly—famous case of those who were involved in this sort of business and it's Chevron Australia and the Australian Tax Office. What happened there was Chevron's parent company borrowed money at 2 percent and it lent it to Chevron Australia—its subsidiary—at 9 percent. So this went to court obviously and the court found that in fact there was a level of transfer of pricing and this was not fair. Now Australia provides a little bit of a different test than ours—theirs isn't as arbitrary as ours—but what we do know is the transfer pricing of this scale is the classic way to avoid paying your fair share so we do want to cut down on this. As you know the officials' initial recommendation was one notch below the global interest rate and after consultation and submissions and hearings they moved it down to two notches because they thought that was fairer. Now like any piece of tax legislation if it's not working at two notches—if we find that in fact there is a fairer way to address this or a more objective way to ensure that companies are allowed to borrow at whatever rate they can but however are not ripping off the system—then I'm sure that we will look to change this. You know with any tax legislation it's always quite fluid but we think we've got it right at this point in time. After consultation with the OECD and after submissions from the big end of town we think we've pretty much got it right but let's wait and see. The former speaker Mr Carter actually raised some very interesting points. Income year—now it was a good point. It does apply to income years after 1 July 2018 but a business with a 31 March balance date won't apply these rules until 1 April 2019. So we think that we actually have made it very easy to comply with and that's what it's about. What we don't want to do is put in place undue compliance for business but we also want to ensure—obviously what this bill's about is that they do pay their fair share of tax and we want to make it easy for them to pay their fair share of tax. The figure of $200 million per year—it is very hard to model what we will end up getting. I mean in terms of any tax it is very hard to model and let me give you an example. Last year when we put in the GST on online services inland revenue (IR) believed they were going to pull in about $40 million a year. In the first year it brought in $113 million a year. As mentioned IR are inherently conservative in their estimations and they probably should be and we don't mind that. So it may be $200 million. That is their best estimate using a whole lot of different models—well modelling this legislation. It could be more. But as mentioned the reason we came up with this and not the $500 million that you might've seen in the media is because IR undertakes a very high level of compliance already with large companies. In fact companies over a certain figure—and I think it might be $100 million in revenue—have their own individual agent who looks after their organisation. So IR understands and knows what is going on at the big end of town already. Mr Carter the other point you brought up about binding rulings from the commissioner—that isn't going to change at all. A company can no matter what their size—and we've made it easier for small to medium sized companies actually to seek a binding ruling. But a large company can still seek a binding ruling from the commissioner if they present to the commissioner any sorts of questions they may have around their tax obligations. So that isn't going to change in any way shape or form. In fact as the Minister of Revenue I would encourage companies that are unclear about their tax obligations to go to the commissioner and seek a binding ruling so that at least they know—Andrew Bayly: What's the difference? Hon STUART NASH: OK a binding ruling means it binds the IR. Now a large company doesn't have to follow that binding ruling but if they don't follow that binding ruling then they do so at their own peril. But it does bind the Commissioner of Inland Revenue. Also Mr Bayly you did talk about the taxpayer and whether there was any documentation around you know the global group. Well it is actually up to the taxpayer to prove that they are doing the right thing. Andrew Bayly: No but it's not the point. Hon STUART NASH: No it is the point. It is the point. The onus is always on the taxpayer to prove that they are complying with the rules and that won't change. Andrew Bayly: So if they don't have that in documentation what happens to the parentals? Hon STUART NASH: Well if IR assume or if IR believe that there is a level of avoidance going on then they will go to the New Zealand subsidiary and they will undertake an investigation. Within the bill it outlines how an investigation could take place who is liable for example—and there were some changes made at the select committee about this and I understand that. But if IR believes there is a level of avoidance going on then they will approach the taxpayer and it will be up to the taxpayer to prove that in fact they are complying with the law and that hasn't changed in any way shape or form. I think those are the main points that were brought up by Mr Bayly and Mr Carter. But one thing I will say around the compliance date is the implementation date was actually—and I've given credit to Judith Collins because she did bring this forward and it was passed by the previous Cabinet and we back it as well of course. The implementation date was actually prepared by the previous Government but we have no problem with that. Thank you very much.