McKelvie IanIAN McKELVIE (National—Rangitīkei): Madam Deputy Speaker—the member for Rangitīkei.DEPUTY SPEAKER: Goodness me! Ian McKelvie.IAN McKELVIE: Ha ha! I don't blame you at all Madam Deputy Speaker. You're not the first person who hasn't known who I am. Ha ha!DEPUTY SPEAKER: I do know who you are.IAN McKELVIE: Right I apologise.DEPUTY SPEAKER: I was stunned because you didn't look like Amy Adams.IAN McKELVIE: It gives me a great deal of—well I don't think you'd ever get pleasure speaking on a taxation bill but it does give me pleasure to get up and speak on the Taxation (Neutralising Base Erosion and Profit Shifting) Bill known affectionately—and I don't know whether anything could be known affectionately but it is known affectionately as the BEPS bill. I don't think a tax bill would be known affectionately either actually.It is an interesting piece of legislation initiated by that great revenue Minister in the last Government the Hon Judith Collins and certainly supported by the National Party in Opposition. It is one that we're obviously keen to—well I think as Paul Goldsmith said earlier taxation is really a bipartisan issue and it's something that all in the House should really I guess share support for bills of this nature. It's a very complicated bill and according to our Minister it has the potential to increase the tax take by up to $200 million per year which is a considerable amount. However it's worth making the point that many of our overseas companies do pay their way in New Zealand and are very good corporate citizens of this country. This bill's designed to I guess fix up those ones who are not necessarily good corporate citizens of this country.It is a corporate bill and one that takes a lot of getting one's head around in how it works and what it's to achieve and you know it's unlikely to be perfect—although obviously those people putting these bills together strive for perfection. I think the Finance and Expenditure Committee had the use of some great advice from an independent adviser in Therese Turner who did some very good work on it and gave us some very good advice too. I think the hard work by a number of officials from the IRD and indeed the members of the select committee themselves and also I think some very good submissions certainly gave the bill every chance to get—well it got through its committee stage no problem didn't it and now to the third reading. I think that hard work's paid off but we'll see I guess as the results of this bill become more apparent in years to come.One of the challenging matters that need significant consideration when introducing tax legislation is what direction tax advisers experts accountants and lawyers might take as a result of that legislation being introduced. Having access again to an adviser of the experience of Therese Turner certainly helped give Parliament the confidence that this legislation's fit for purpose and will achieve its stated intention of preventing multinational companies or businesses from shipping their profits from New Zealand via various means thus avoiding paying tax in this country.One of the other constant challenges we face as do other countries is to put in place legislation that protects our attractiveness as a spot or a destination for investment and at the same time protects our own citizens from I guess the mercenary tax habits of some of those companies—in other words tax erosion. It's interesting—this same thing applies to a lot of other issues we face in this country too. We have to make sure our country's attractive as a place to bring new products to and you've only got to look in the pharmaceutical sector or even the animal health sector. It's important that we have legislation that gives a good balance to whatever we do in the country and at the same time is attractive to other people to bring their products and their businesses to New Zealand.It is a very fine balancing act at times and one that's hard to get right every time. The simple example of this of course are things such as a tourism tax or a border charge for biosecurity where if it's set at the wrong rate or the wrong level it will be a disincentive for people to come to New Zealand just as this could be a disincentive for people to invest in New Zealand if it wasn't pitched in the right manner. So it's very important that we do this in a manner that keeps our place in the world and also enables people to come to this country and invest in us and put their products into this country in a manner that they can make money out of it and we also get fairly recompensed for what they do.We've got to keep our tax system simple because we don't have a large enough tax base to complicate the system. If we get it too complicated it means compliance is far too expensive for a small country and becomes inefficient so I think it's really important that we do at all times try to keep our tax base simple and efficient. Of course whilst this legislation might be complicated it doesn't affect a huge number of people or a huge number of multinationals either for that matter. It does affect some very big accounts however.The new measures put in place by this bill will ensure multinationals pay their fair share of tax in New Zealand by targeting a number of things which have been around since humans first came to light I imagine. Interest manipulation: there's a difference between interest manipulation at arm's length—in other words with an independent party—because you're not going to get a great deal of discount or unusual interest rates because the market effect will sort that out; interest manipulation between internal or like-minded companies or companies of the same family is much more likely and that's a way that's been used historically for shifting tax and liability from one place to the next.The next one is to stop the means or use other means to move profit around and this can be done through hybrid mismatches or where tax law in various countries can be effectively gamed I guess or played off—in other words it is advantageous to take your tax someone else rather than pay it in the country you operate in. We have to make sure that we don't get that balance wrong as well. So that's a pretty important issue.It makes it easier for the IRD to investigate uncooperative multinationals and that again is complicated—and I might go into that a little later if I get some time because there's plenty of things to talk about in this bill. Avoiding having a taxable presence in New Zealand or what we might know as a permanent establishment in New Zealand—which is very easy to do and many companies have done that in the past where they don't have an official New Zealand taxpaying entity so to speak and that means they don't pay any tax in this country; they take it all home.Then there's things like capitalisation rules where high levels of debt which could be held here and not in the parent company at home—in other words they push their debt offshore into a different entity and consequently they can run very high interest charges and things like that.So there are many methods that can be used to shift profit around the world basically and avoid paying tax in countries like New Zealand. Interestingly there've been times in New Zealand where the same methods were able to be used to move tax liabilities around New Zealand entities. This is no longer the case of course.Tax has become of much greater global interest in recent years and I've noticed a big change in people's attitude toward tax and to the avoidance of tax. I think it attracts much more commentary than previously and it's no longer socially acceptable for business to exploit a country and move on without paying their fair share. Paying one's way in the world is now part of one's licence to operate in the market place and we need to ensure these entities have sound guidance and legislation to ensure they're able to operate here as good corporate citizens. And I think that the ability to be able to operate in the market place doesn't just apply to paying tax; it's a very big issue with respect to environmental behaviour and on things that operate socially in our economy as well. I think it's really important that we ensure that people play their part in our community and in our society. And morally they have an obligation to do that. And this bill whilst it doesn't impose that moral obligation certainly ensures that those companies that are affected by it will play their part in it going forward.I briefly want to comment on a couple of measures contained in the bill to ensure the IRD has powers to investigate—and I touched on this earlier—and can do it relatively easily. These changes to information request powers—the original bill increased the information request powers of the IRD to request information concealed by any member of a large multinational group. And the revised bill requires that requested information relate to an investigation of a multinational group's tax position. This reduces privacy concerns because the bill as originally written could have requested information from an actual person such as a bank customer and so it would have affected the way we operate with our privacy laws in New Zealand. And I think from the Inland Revenue Department's point of view however they do this has got to be as simple as it possibly can.The bill had both criminal and civil penalties for failing to provide the requested information. And criminal penalties have been removed from the bill as it's not appropriate to apply a criminal conviction to a New Zealand person when the failure may have been caused by an associate or offshore group. Thank you Madam Deputy Speaker.