Bayly AndrewANDREW BAYLY (National—Hunua): Thank you Madam Assistant Speaker. It was good to see parts of that speech where Minister Stuart Nash showed some real interest in this topic.Hon Member: Bit of life.ANDREW BAYLY: A bit of life. As I was saying it is a pleasure to be talking on this second reading. Of course this follows a hard-working process where the Finance and Expenditure Committee has worked its way through a lot of this detail. You've got to ask yourself what this bill is actually about and I thought I just might summarise it very briefly. It's about the way multinationals manage their businesses in New Zealand and how they arrange their structures to minimise their tax. That's what base erosion and profit shifting is actually about.For corporates they have lots of choices. They can charge a high amount of interest on debt. They can in fact take on large amounts of debt which means that the profits of the New Zealand subsidiary or branch or whatever are lower than they would otherwise be and therefore the tax is less than what it might be. Or they might charge high management fees—again lowering the profit in there for the tax. Or they might set it up so that they can benefit from different tax treatments in different countries. So in one country it might be deductible for tax purposes; in another country they might be able to write it off and therefore they get a double whammy tax benefit.So what happened was New Zealand took a leading role along with the OECD to try and come up with complex rules to try and deal with these large multinationals who are very sophisticated in their approach. To give it a scale we're talking between US$100 billion and US$240 billion a year or between 4 and 10 percent of global income flows that are affected by these base erosion and profit shifting mechanisms. That's why it was so important that the National Government started this process but of course it is continuing under the auspices of that former speaker the Hon Stuart Nash.It has been a hard-working committee because we have made a number of changes to this bill. The Minister spoke briefly to some of those changes but I just want to highlight some of the more important ones. What we've done is we've looked at the issue of this artificially high interest rate. There were three tests and one of those tests related to a definition around EBITDA to interest costs—EBITDA being of course earnings before interest tax depreciation and amortisation. The officials had specified 3.3 times. We questioned that because we thought in some cases particularly with start-ups etc. that test would not be appropriate. So that was one of the tests that was removed.The second thing we did was we focused on this issue of using a credit rating because people were trying to be formulaic about the approach by saying that if a multinational had a certain credit grade which meant that was the borrowing costs they would incur borrowing it—its credit rating—then the New Zealand subsidiary could only be a maximum of one below that credit rating. We questioned that and through the committee we agreed that we would drop that by two notches.We've also imposed a de minimis rate of $10 million of tax and we've allowed for the provision where a third party has provided the interest rate or debt to the company in New Zealand—that interest cost should be the relevant test rather than reverting back to this convoluted credit rating test I spoke of before. That's one of the crucial bits.The other ones were around the time bar test. I think this is a crucial one because the officials and the IRD wanted to have the ability to be able to take seven years to look at a tax situation and assess it properly before—and that provided a lot longer than the original provision of four years. We said no. We said no as a committee. We said You must make sure that you have"—and I'm talking about the IRD—"told the company that it has an issue after four years and it has a further three years to take that issue through the courts." So that was an important balance between the rights of the IRD and also in terms of making sure that we got a good outcome in terms of collecting all the tax we wanted.There are other measures around how we get information flows from New Zealand companies about their parent particularly about their debt arrangements. As the Minister spoke of we talked about the issue of reducing it from criminal and civil liability for that New Zealand subsidiary or branch and making it only a civil liability. But there is still a strong requirement for New Zealand representatives to provide the requisite information to IRD.So a very complicated bill. There were actually other issues but I'm going to leave it to some of my colleagues to pick up on those. It's a good bill and I'd like to congratulate the members of the committee."